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Thursday, 25 November 1999
Page: 12628


Mr CREAN (11:01 AM) —It had been my intention to speak earlier in this debate but that was not possible because of events surrounding another series of bills before the House in relation to business tax measures. It was critically important to ensure that we obtained revenue neutrality in those business tax measures, essentially because the introduction of the GST required that condition. I will come to that a little later in the exercise but I thought that for the purposes of reporting back to the House, and also because these bills are to some extent linked, I would take the opportunity to report on where we are at in relation to business tax as well.

Yesterday, during the debate, the Treasurer indicated that he had responded to my offer and he had agreed to all points. On the basis of that, I indicated last night that we have an agreement and I sent this response to the Treasurer last night. I will read it into the Hansard. It says:

Dear Treasurer,

Thank you for your letter of 24 November 1999 in which you, on behalf of the government, accept all the conditions set by Labor for passage of the business tax legislation. As I spelled out in my letter to you in the House today, acceptance of these conditions is essential to the achievement of revenue neutrality, the key condition set by Labor for passage of these business tax proposals. I reiterate that Labor would not have designed the same tax package as the one before us and restate our concerns about individual elements of the package outlined in the recent report of the Senate inquiry into the business tax legislation.

Nevertheless, I welcome your personal guarantee that the government will deliver in full all the business tax changes announced, recognising that any slippage on these measures in the future could expose the government in terms of its commitment to maintaining the integrity of the tax system. I also note the detail you have provided on the measures not yet before the parliament and the significance of your statement in the House that these should be understood to constitute legislative drafting instructions.

Finally, I welcome your offer to bring forward an anti-avoidance measure that fully reflects the intention of the amendment moved by Labor earlier today. On the basis of these commitments from the government, Labor can support the business tax legislation in the House and the Senate.

When the measures not yet before the parliament are introduced as legislation, it is important that they include a certification by the Treasury or the Tax Office that the revenue generated by the measures is consistent with the estimates provided in your statement of 11 November.

I look forward to the introduction of a tax package which is both revenue neutral and preserves the integrity of the tax base.

That was the response which I sent. As a consequence of that, the legislation will pass, but I want to underpin the point that the revenue neutrality test was essential because of the GST being introduced and, quite frankly, until the discussions yesterday we had only dispositions from the Treasurer of an intention to do certain things.

This revenue neutrality aspect is best summed up in attachment O of the Treasurer's press release of 11 November where the revenue neutrality test is met—in fact, it is exceeded—if all the measures that the government say they will introduce are introduced. It was our concern that they would not be introduced and so we sought, importantly, two conditions: one, that they give us more detail; and, two, that they actually undertake to proceed with them and not deviate from them. The ultimate test of that is going to be against attachment O because, in attachment O, revenue from these measures is listed—the fiscal impact of the stage 2 measures is listed.

So the drafting instructions that have now been sent to the Parliamentary Counsel require that that which is returned for legislation and debate in the parliament reflects the calculations contained in that document. If it does not, if there is any watering down, if there is any attempt to walk away from any of the conditions and commitments, then that will be reflected in the figures and it will mean that the government has broken the deal—it has called the deal off. I also indicate that we believe it is the first time that the government has given such a strong commitment.

The Treasurer's letter back to me yesterday was on behalf of the government. He, as Treasurer, was saying that the government will introduce all the business tax changes announced in full and that, `Since the government has agreed to your three conditions'—that is, Labor's three conditions—`I look forward to written confirmation that the opposition will vote for the package in full.' That confirmation has been given, but I think it is important to place on the record the significance of that commitment from the Treasurer and the tests against which it will be judged. It will be a question of the detail of the legislation complying with the drafting instructions, because those drafting instructions are what Treasury have already calculated will be the fiscal impact and have included in attachment O. We will want to see that same sign-off by Treasury when the legislation comes back before us.

Ideally, it would have been better to have had the draft legislation. I accept the fact that that is not available, so judgments had to be made as to whether we should delay the whole package or whether we should take the government on trust. Given the spirit of the negotiations we are prepared to take them on trust—I hope it is not abused—but we have set down the tests against which it will have to be judged.

The importance of that package is this. It is a package that will now pay for itself and it is also a package that cannot be exploited by tax dodgers. It is that latter aspect that is the significance of the commitment we have—not just to amend part IVA but to introduce an effective anti-avoidance mechanism to catch those people who enter into schemes that convert income into capital gains for the purposes of avoiding tax. And that we have an agreement on. We have still got to finalise the words, but I think it is a very important achievement that we have, with this tax package, got bipartisan agreement on the integrity measures. Integrity, as far as the revenue base is concerned, is essential, Mr Deputy Speaker, as you would be aware, because it fundamentally determines where our fiscal stance ultimately will finish up.

In that regard I might say that there is a significant difference between the agreement we have reached with the government on business taxation and the agreement that the Democrats did with the government on the GST, because it was that Democrat deal that undermined the integrity of the budget. It was that Democrat deal that cost an additional $1.8 billion from next year's surplus, which is an interesting contrast with the $1.1 billion hit to that surplus next year that the Prime Minister has used to justify the tax increase through the Medicare levy to fund the troops in Timor.

We support our troops in Timor. That has been said many times in this place. And we will support initiatives that resource them properly. But let there be no mistake: the deal with the Democrats undermined the integrity of the budget and it is on evidence because of the events over the last two days. Within four months of that deal, they are back in here changing it. Within four months of a deal that the Treasurer hailed as the greatest tax reform of the decade, saying that we would not need significant tax reform for the next 50 years, they are back into this House introducing a new tax. Within four months—which is seven months, I might add, ahead of when this great new system is due to come in place.

The reason for that is because the package did not have regard to the integrity of the budget. It was prepared to buy the GST at any cost to save the Prime Minister's face. It was prepared to get a deal on the GST at any cost. Apart from the close to $20 billion cut in the surplus or the $20 billion out of the surplus over the next three years in terms of tax cuts, you had the $1.8 billion component that was the dirty deal done dirt cheap with the Democrats.

By contrast, the deal that the Labor Party did with the government yesterday when the government agreed to the conditions that Labor set down is that deal, in paying for itself, and also ensuring that the tax dodgers could not exploit it, was fundamentally about restoring integrity to the budget, to securing the revenue base into the future, to recognising that these changes did open up the potential for greater tax avoidance. They could be seen as a green light for people seeking to use arbitrage between the different rates—the lower capital gains tax rate and the higher marginal tax rates.

As I have said before, had Labor been in office making changes to the capital gains tax, which we promised to do, we would not have done it this way. We would have given far greater emphasis to encouraging and rewarding the high risk takers, particularly venture capital; to getting the new ideas into commercial activities into this country; and to driving the economy of an innovative, entrepreneurial nation. That is where we would have directed the changes in capital gains tax because we think that is in the national interest. It is about underpinning investment; it is about tackling our current account; it is about getting jobs for the Australian economy.

But if in fact the government was insisting on the across-the-board cut making no distinction between passive and active investments, it had to recognise the potential for tax avoidance that was being opened up. And you cannot introduce a mechanism that does that, that opens, which does not have the anti-avoidance mechanism put in its place.

We have this agreement now and we will ensure that the government honours it. We will ensure that, in bringing back the detail, the government demonstrates that the revenue claimed will be delivered. That will be an important process for all to watch in the coming months. Nevertheless, we have the basis for business tax reform, we have the basis for giving certainty against which businesses can make their investment decisions and, importantly, we have the basis for ensuring the integrity of the revenue base into the future.

John Ralph, who reported to the government on taxation reform, indicated in relation to the alienation of personal services income that, unless changes were made to stop continuing tax avoidance in this area, the loss to revenue could be up to $3 billion per year. That is not in relation to what is happening now; it is what will happen if nothing is done. Three billion dollars is a lot of schools and hospitals. It is certainly an aspect of our revenue base that we cannot allow to leach out. Therefore, this too is an important dimension of what the government has committed to introduce in full, just as it has undertaken not to water down—at least the Treasurer has—its announcement on trusts. The Treasurer has indicated that he has no intention of departing from that commitment—not one iota.

There are figures in this document which show what the fiscal impact will be if it is implemented in full. If there is any watering down, that figure will reduce. If there is any watering down of their intentions concerning the alienation of personal services income, that figure will reduce. That will be the basis upon which judgments can be made as to whether the government is honouring its promises. We have the lock-in by the government now to introduce these measures. We always said if those measures were committed to, if they were going to be done, if they could guarantee it satisfactorily to us, then this package will pay for itself and meets the revenue neutrality test. We are satisfied it does. We now want to see the government deliver on all aspects.

The issues directly before the House at the moment are related to further amendments to the GST. Earlier this week, I asked rhetorically: what would come first, the millennium or the 1,000th amendment to the GST? When we came back to the parliament this week, already it was indicated to us that there were going to be 151 amendments coming before the House. The legislation that was introduced earlier now has another 119 amendments added to it. So the Treasurer is the millennium man. He has beaten the millennium with his GST amendments.

This piece of legislation was supposed to be so simple, so easy to understand, yet seven months before it has even been introduced it has 1,000-plus amendments. That highlights what a dog's breakfast of a tax it was that the dirty deal with the Democrats produced. What sort of incompetence is it by a government that says it has been across all of the detail in working up this great new tax package for the new millennium, yet before the ink is dry it has introduced more than 1,000 amendments? I can guarantee you this: there will be more to come because this GST, foisted on this country by the government and the Democrats, is a nightmare. Not a day goes by now in which there are not consistently stories in newspapers about new problems associated with the GST, and this from a government which said that we have to approach the new millennium with this brave, new, simple tax. It's hogwash!

This is a ridiculous tax. That is why we fought so hard against it and why we will be debating it constantly in this chamber. The government will be forced to keep coming back in to try to fix up their own measures, not necessarily to make it easier on people, because this tax is a huge burden on the Australian public. They just have not properly thought through the implications of what they were telling the Australian public at the last election—that it was so simple, so easy to understand. They even say that this is an easy tax for small business to understand because all they have to do in registering their number and dealing with compliance is fill out a two-page document. What they did not tell you was that the instructions that go with that two-page document are at least 100 pages of complex calculations and draft suggestions as to what small business needs to do to comply with this tax. It is an administrative nightmare. And this government is going around saying rhetorically that it is a simple new system which is easy for people to deal with. That is a nonsense.

I know from my own constituency and from my colleagues on this side of the House—I am sure there are many on the other side of the House too; perhaps in your own constituency, Mr Deputy Speaker—that people are constantly raising the problems associated with the introduction of the GST and the inability to get accurate concise information. When they do get information it is always heavily qualified and when they get told that the simple new approach involves only two pages but—wait for it—`When you fill those out, you had better read the 100 pages of instructions,' they just say, `What is this government on about?' Anyway, time will tell and we will be making sure that the government has drawn to its attention the continuing problems associated with it.

So up until today we were dealing with the government's new set of amendments, that is, 907 amendments; we now have another 119. This Treasurer has passed the millennium well and truly. He has beaten 1 January 2000. He has more than his 1,000th amendment and there will be more to come. This is what the new, simple, streamlined system is supposed to be all about.

Remember that it was the Treasurer who told us how simple this new tax would be. He said that there would be only one rate and he was getting rid of seven—six as it turned out—rates of wholesale taxes applied under Labor. But the Treasurer has not told you that, with the ducking and weaving and compromises they have had to make on the GST, we have multiple rates for it now. We have a zero rate for the ones that are exempted, a five per cent rate for long-term residential accommodation, the standard rate of 10 per cent, a higher rate for the wine industry and a higher rate for luxury cars. In addition to those five rates, we have the input taxing rates for residential accommodation of around three per cent and for financial services of around four per cent. The government has replaced a seven staged wholesale sales tax with the so-called simple, single rate for the GST which itself has now effectively got seven rates. That is before we get to the differential treatment now associated with the Olympics tickets, which we know the Prime Minister gets very testy about every time he is asked about it in question times.

If the Prime Minister genuinely wanted to do something about taxing the wealthy, as he said was his justification regarding the elite tickets for the Olympics, why does he not put the GST on the high rollers in casinos? What did they do for the high rollers in casinos? They effectively moved a provision that exempted them. Labor moved an amendment that that exemption should not apply, and the government and the Democrats voted it down. When this bill is considered in detail, we will be putting that amendment up again because we want to expose the hypocrisy of the Prime Minister. He cannot have it both ways—railing against the wealthy when it comes to Olympic tickets but prepared to wash his hands when it comes to his high roller mates or the high roller mates of others in the government associated with the casinos. It is absolute hypocrisy and we will be interested to see how government members flinch when they have to make the decision about backing the Prime Minister's rationale on Olympics tickets but turning a blind eye to it when it comes to the high rollers in casinos.

The other amendment which we intend to move is to require that receipts indicate the level of GST paid. This is a government that told us you did not need to put it on receipts because it was a simple tax. I remember asking the Treasurer how much tax is paid on a grocery bill of $189.30. He of course said, correctly, `It is one-eleventh.' I said, `Well, tell me how much is the tax. Divide the one-eleventh now.' If the Treasurer of the nation cannot divide the one-eleventh quickly, what does he expect the ordinary punter to do when they get their shopping list? But of course that was before the deal done with the Democrats. We now have a situation in which the bill from the supermarket will contain GST on some items and not on others. So it is not as simple, even if you could do it, as the one-eleventh division. It is a much more complex thing. We say there is more urgency now to consider the requirement that, when people purchase, the receipt should show the amount of the GST. That is what we are arguing.

I must say we have to thank the Prime Minister for his decision on the Olympics tickets because what he did was to put the GST back on the front page of every newspaper in this country. He said, `My solution for dealing with problems is to fiddle with the GST. I am going to hit the rich. But I am not going to hit the high rollers; we will leave those alone.' It shows how flexible and how easy it is to make changes to who pays and who does not. It is an interesting opportunity for us who are arguing that we want to roll back the impact of the GST. The government, of course, want to roll on and roll up. They want to make sure that those exemptions disappear and they want to put up the rate. That is their long-term agenda.

Labor is saying that every time people make a purchase, whether it be for a good or a service, they should know that John Howard and Peter Costello have got their hands in their pockets taking out 10 per cent extra. Why should that not be on the receipt? What have they got to hide? They used to talk about Labor's hidden taxes and yet they have introduced their own hidden taxes—this great new tax that they are so proud of. Proud? They want to hide it. They do not want people to know it is being paid each time they purchase. Well, we will remind them and we will remind them often.

There are provisions in this bill which make some important changes which we essentially agree with. But I make the point that these amendments highlight the problem in a number of areas. We know that bank charges will go up as a result of the GST because the banks have said its introduction is going to cost them $430 million and they are going to pass it on. They are making billions of dollars of profit. Of course, they could not think of cutting their margins. They have quite blatantly said they are going to pass it on to consumers. What did the government say when it was announcing this package, going to the last election? It said banks would make savings and therefore the cost of banking should come down. The government on the one hand is saying the inflation impact on banks is less. The banks are saying they are going to pass it on. The ACCC has no power to stop them because if they can demonstrate that the increases are as a result of the GST impact it is quite legitimate for them to pass it on.

What these amendments do is to highlight again that the GST is going to result in higher bank charges, just as the GST is going to result in higher petrol prices, as the member for the Northern Territory indicated before. What they have done with petrol is to take 7c off the excise as the equivalence of the introduction of the GST. But understand this simple proposition. If the price of petrol is at 77c and you take 7c off and put 10 per cent back on, there is no difference—that is true. But what does that mean? Any time the price of petrol is over 77c, the GST is going to raise it. The GST is going to impact on the price of petrol.

Yet you had this government running around the country at the last election saying, `There will be no increase in the price of petrol as a result of the GST.' Let them come forward and tell us what the excise deduction is that is going to deliver that guarantee, because there are people sitting up in the gallery who know what the price of petrol is today—and it is well over 77c. That is before the price hikes occur. We also know that, in the regions, it is higher again. (Time expired)