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Wednesday, 20 October 1999
Page: 11947

Mr BAIRD (12:15 PM) —It was interesting, but not terribly illuminating, to hear the member for Hotham's speech on the new tax system legislation. He mentioned Bruce Springsteen and the Treasurer. One of Bruce's songs was about a working-class man, and the honourable member makes pretensions of being the real working-class man, but it is this side of the House that is in fact looking after the working man, that is providing the tax cuts they are all applauding and that is changing our tax system to provide the reforms for an efficient economy and for a private sector which will be able to operate without the complexities of the wholesale sales tax.

The member for Hotham has the audacity to come into the House and criticise some changes we have made in response to the community. As concerns are raised and as issues need to be addressed, we are refining the taxation system. But the reality is that, if you look at the changes that were made to the wholesale sales tax, these changes were in fact minuscule in comparison. These address some of the valid concerns that have been brought to the Treasurer. I am sure that every member of the House would applaud the fact that the government is listening to those concerns and making the changes.

Questions were raised by the shadow Treasurer in relation to tax cascading and tax on tax. One of the great advantages of a GST is that you will remove the whole question of tax on taxes, which is one of the distorting factors in the current system. This is the system in which those provisions of tax on taxes will be removed. It is effective, and I am not quite sure what he is proposing. In his criticisms, he is saying, `We want to avoid any possibility that this could happen'—when clearly he is saying it will not—`by keeping this amazing system that we currently have, which is often a tax on a tax on a tax.' These proposals are very sensible and logical and will make the GST even more effective.

Criticisms were made of the changes. The opposition did have the opportunity to join with the government to make changes that they saw as necessary; instead it was the Democrats who took that opportunity. If they have criticisms now in terms of the arrangements that were made, it is a bit too late—the horse has bolted. They stand as an aside to the whole process; they are totally irrelevant and constantly criticising. All they can do is criticise. They have bagged the whole concept right from the start and they have criticised anything that has been put up.

It is very rare to hear the opposition support anything—everything is criticised because it goes to the whole crumbling edifice of saying that there is something wrong with the GST when the debate has moved on. The community has accepted it. Obviously there will be debate about various aspects of the implementation of it, and that is only appropriate when there are such significant and far-reaching reforms as we have seen. They are the most significant changes to the tax act for some 50 years, so it is appropriate that we make some minor changes to keep it in line with community expectations. These issues have been brought forward, and we believe the amendments are necessary.

As small business and community groups get to know the requirements of the exemptions and of bringing forward their suggestions, the great majority of small business will not have any problems complying with them—80 to 90 per cent of businesses will deal only with the basic provisions. The special provisions contained in this bill which have been designed to fit certain industries will not be hard for people operating in those industries to understand. Obviously, the amendments that are contained in this bill are appropriate to that particular sector.

A charity supplying accommodation will not be concerned with the wine equalisation tax. A car lessor will not be concerned with unprocessed cows milk being subject to a GST. But those people involved in the sectors for whose benefit these amendments have been brought do not find their particular section difficult to understand. Now that the Australian people have rejected Labor's outdated tax system, it is appropriate that they should focus on the aspects of the GST.

One of the important aspects mentioned in this bill is charities. There are some changes in terms of the way in which the ANTS bill will operate, and the bill also contains a number of provisions relating to charities. The bill identified which charities would be tax exempt and how they would apply for that status through the Australian business number registration system. So only those charities which are mentioned in the act will be subject to it. They have to apply for that registration, and then those donations will be tax deductible.

A charities consultative group, with the agreement of the Australian Democrats, has been set up to oversee the new taxation system and how it will affect the charities. It will make sure that charities are not disadvantaged overall. The Vos report, which looked hard at the general impact on charities, and the recommendations that were made by David Vos, who is a senior tax partner at PricewaterhouseCoopers, have been very much accepted by the charities operating in Australia.

In terms of the way in which the charities operate, part of the coalition's social policy is about contracting out, wherever possible, the requirements that government has undertaken in the past but which could be more appropriately handled by charities. They are very much part of the mainstream in terms of the administration of welfare across-the-board. The bill will extend the definition of non-commercial suppliers of residential accommodation by charities. For organisations providing emergency accommodation to receive a tax benefit, they need charge only 75 per cent of the market value. The government realised that a 50 per cent requirement was too restrictive and would rule out many worthwhile groups.

The measure only applies to non-commercial supply of residential accommodation by charities, because the client income base contributions associated with residential accommodation are often only marginally above the current 50 per cent market value test. To not meet this test would make the supplier's input taxed as residential rents or taxable as commercial accommodation for some boarding houses, which would significantly increase compliance costs. This is an important measure which will reduce compliance costs while maintaining the principle that all commercial supplies should be subject to GST. The 50 per cent market value test remains for other non-commercial supplies.

The next aspect I want to refer to is the question of preventing unfair price rises. Of course, part of the legislation provides the ACCC with the ability to review prices across-the-board and to impose significant penalties where it is clear that the implementation of the GST is being used by companies, both large and small, to exploit the opportunities for price rises that are not justified in terms of the introduction of the GST. Penalties of up to $10 million are provided for those who are clearly rorting the system and misusing the introduction of the GST for an increase in profitability of their operation.

Under the ANTS legislation, the ACCC can take action, and undoubtedly will take action in the future. The government has done its utmost through seminars across Australia and through booklets, ATO visits and support to ensure that there is little confusion in the community as to how the GST should be implemented. Those who deliberately try to profiteer will be penalised as a result of actions taken. The ACCC can issue a notice asking a company to explain their pricing policies under section 75AX. The commission can specify the maximum price the business can charge, but it will be up to the Federal Court to issue a penalty of up to $10 million for corporations or $500,000 for individuals who abuse the system.

Some concerns have been expressed, in this period before the GST is implemented, about signs going up saying that, due to the introduction of the GST, prices will go up as of 1 November—by seven per cent, 10 per cent or whatever. Clearly, that is not justified on any basis. It is about exploiting that opportunity to increase their profit base. This is unacceptable to the government, it is unacceptable to the community, and appropriate penalties will be introduced. To put the issue beyond any doubt, the government will amend the Trade Practices Act to ensure that the ACCC, in addition to its post 1 July 2000 powers, will have powers to take immediate action in respect of any unreasonable price rises before 1 July 2000. So companies are very much put on notice that there is to be no price gouging, and this will certainly be of great benefit to the Australian consumer.

The next important aspect is helping business—particularly small business—operate with a mixture of tax systems. For small businesses that have some items which attract a GST and others that are GST-free, the problems of compliance will add to the difficulties of their operating. Therefore, the government will provide special rules so that the Commissioner of Taxation will be able to determine alternative, simpler methods of calculating GST liability for retailers selling such goods. For example, we know that the average corner store has a mixture of goods—whether it is sandwiches, which attract the GST, or fruit and vegetables, which do not, or confectionery, which does, or whatever. This is about providing an easy away of determining the general GST liability. I think that is appropriate. It will simplify the system. It will enable the average small retailer to go about their business without undue burden from compliance.

There is also a clarification in this bill of the definition of wine products so that the wine equalisation tax extends, as was intended, to fruit or vegetable wines and grape products such as wine cocktails, flavoured wines and a range of cream drinks. Of course, the wine equalisation tax amendments ensure that there is no windfall gain to suddenly increase the consumption of alcohol in Australia through wine being given special assistance in these measures.

There are a range of sensible measures in this bill which indicate that the government is listening to the community and which are in line with the overhaul of the taxation system. Several things are very clear. The first is that the government is listening to the community and making these changes. The second is that, at the end of the day, we will have an efficient tax system which will provide the most significant reforms in taxation that this country has ever seen, and will receive community support. Not only will it provide for a new way of taxing, which will include in the net the service area; it will also provide significant reductions for exporters. It will provide significant reductions in the cost of cars, for example, which, for the average household, are a major expenditure. It will provide real incentives to employees by way of tax cuts and tax changes so that 80 per cent of the community will pay no more than a 30c tax rate. It will abolish some of the inefficient taxes such as BAD and FID and the bed tax.

These tax changes will be welcomed in the Australian community and in the business community. They will do much to stimulate economic growth and development in this country for the longer term. They will provide the basis to service the social security needs in this country. They will provide a system that is more easily understood which will not provide the distortions of the current system and of the wholesale sales tax system, with its many variations, inequities and unfairness. I support the provisions in this bill. They indicate a government that is concerned about economic efficiency and a better tax system and also one that responds to the needs of the community.