Mr MURPHY (5:12 PM) —The Bills Digest No. 88 of 2000-01 states that the purpose of the Taxation Laws Amendment (Excise Arrangements) Bill 2000 is `to amend excise, customs and taxation legislation to give statutory recognition to the 1998-99 administrative changes that transferred the excise function of the Australian Customs Service to the Australian Taxation Office'. It is important to understand the history of this bill. I speak having a good awareness of the work of the ACS. The nature of my job during the time I worked with the Public Service and Merit Protection Commission often brought me into contact with officers of the Australian Customs Service. I am deeply concerned about the direction of this government in terms of the function of revenue collection and collection of duties for goods that enter or exit Australia's borders. I am particularly concerned about the demonstrated direction this government is taking in seeking to maximise profit at whatever expense to the fundamental duties the Commonwealth has towards the protection of its citizens.

What are those duties to which I refer? The staff of the ACS have a number of statutory functions where they act in agency for other government agencies. They are responsible for the collection of duties and excise; they physically administer border control of people and goods movements; they administer border control of Commonwealth environmental protection legislation, including the fulfilment of Australia's international obligations in various protocols and conventions relating to the prohibited import of proscribed goods, such as wildlife; they administer border control of medical goods, weapons, proscribed publications and other goods, including dangerous goods; and they are a critically important element in implementing Australia's border protection in the case of migration, and act as agency for the Department of Immigration and Multicultural Affairs. These are but some of the functions of the ACS. The level of skill that ACS officers require and the training they undertake is equivalent to that of police. They have specialised fraud, drug and other units and they participate in intelligence operations and work closely with other law enforcement agencies, such as the Australian Federal Police and state police agencies.

I raise this because the issue of excise is essentially a border management issue. It is not solely a revenue issue. To place this function in the hands of the Australian Taxation Office is a bloody-minded and short-sighted cost-cutting exercise by the government. So what is the basis of this allegation? The basis lies in the skills necessary for the adequate administration of excise collection in Australia. A fully trained Customs officer carries more expensive overheads than a taxation officer. It is well known that the ACS is the second largest revenue earner for the Commonwealth government, second only to income tax. Excise raises in the order of $6 billion per year to Commonwealth consolidated revenue.

In this government's wisdom, they have seen fit to consider the collection of excise duties as just another form of revenue collection—in other words, they see only the dollars. What they have forgotten is that excise is a highly specialised form of revenue that has peculiarities that distinguish it from other forms of revenue such as income tax. The fundamental difference is that excise is a tax that trammels international borders. It requires officers with specialised training, and infrastructure and operational parameters in which to fulfil all the public responsibilities they are charged with. These parameters include having adequate legal and structural powers in which to enforce their powers in the collection of public revenues.

The two key excises are on tobacco and petrol. As this government is now well aware, these two commodities are highly contentious issues because of, in the case of petrol, price sensitivity and, in the case of tobacco, the associated health factors and its sale, use and taxation. The Howard government has seen fit to simply transfer the revenue collection function of the collection of moneys on excise without fully accommodating the powers, infrastructure and other changes necessary to maintain the current level of vigilance in these two industries. We call this analysis of devolution of powers `gap analysis'. Gap analysis looks at the loss of administrative powers, infrastructure and amenity that is necessary to accommodate the necessary public interest obligations that the ACS, as an agency for the government, is required to fulfil to the Australian public.

This administrative change is yet another example of the government adopting selective amnesia in their application of reductionist reasoning to describe excise duty collection as merely a taxation function—which, in fact, it is not. It is much more than that, because it includes administrative issues of border protection, industry surveillance and, especially in the case of tobacco, criminal and health issues. Therefore, the government's policies are fundamentally flawed in attempting to go to any lengths to reduce costs. In doing so, the government are compromising border protection and risking loss of revenues by handing over the ACS functions to the ATO, which is not fully competent in its newfound role to accept those other functions that were the responsibility of the ACS.

The ACS is a sadly neglected service in the Commonwealth Public Service. Indeed, this government has progressively whittled away the staffing and other financial commitments to the Australian Customs Service in its manifold functions. I must include in this observation the plight of the Australian Quarantine Service (AQIS) as I make these points. The Australian people are highly sensitive to the necessity for adequate border protection in an environment of increasing border violations. This bill is yet another example of this government breaking down the ACS and its statutory powers and responsibilities. In the process, it is making it harder and harder for the ACS to perform its several administrative responsibilities that include the critically important role of border protection. I urge the government to support and enhance the staffing of the ACS. The direction of this bill is seen to do much good, but actually does much evil.

I support the shadow Treasurer—I hope, soon to be, by the end of this year, Treasurer—in the foreshadowed amendment to this bill. He notes, firstly, that the Howard government has failed to acknowledge and act on community demands to forgo the February excise increase; secondly, that numerous coalition backbenchers have failed to act in the House in accordance with their public statements declaring their interest in seeing a reduction in fuel prices; and, thirdly, that the Howard government has comprehensively failed to keep its promise that petrol prices would not rise as a result of the GST. The shadow Treasurer then calls on the coalition members to vote with Labor to remove the February excise increase.

I now turn to the operational aspects of the excise itself and the impact of the goods and services tax on that excise. I refer to the interim report titled `Petrol price inquiry'—I have it with me in the chamber tonight—by the federal parliamentary Labor Party caucus committee dated 19 January 2001. The committee was chaired by Senator Peter Cook; and Dr Craig Emerson, Senator Sue Mackay, Joel Fitzgibbon, Senator Nick Sherry and David Cox all contributed to this very important document. The report explains:

The report notes:

From the outset, I have questioned in this House the wisdom of the GST on one basic issue. That issue has been the fundamental one of what policy on revenue collection this government is going to pursue. To make it simple for the government, there are two choices: either you have a taxation system that is primarily based on direct taxation or you have a system that is primarily based on indirect taxation.

When the new taxation system amendments were announced, there were in the order of 40 amending pieces of legislation to make the administrative changes necessary to accommodate the new tax system into the existing legislative scheme. The member for Rankin, who sits immediately behind me, came in here on many occasions to show that the amendments just got thicker and thicker.

We all complained about the Income Tax Assessment Act and supporting legislation. In revenue terms, that legislation is leaking like a sieve. In operational terms, the Income Tax Assessment Act is a 1948 parcel of legislation that has many difficulties. As a result, it is and remains a progressively decaying parcel of legislation requiring frequent amendment. Of more concern was the fact that revenue from that legislation was declining in line with cuts to administrative staff within the ATO itself, the introduction of self-assessment in order to cut costs, outright tax cuts and a general denial of administrative responsibilities on the part of the Treasurer to collect revenues.

The result was a drop in revenues and the government decided to shift the primary connection point from a direct taxation system, that is, income tax, to an indirect taxation system, that is, the GST. What they promised to implement was actually a substitution of a series of indirect taxes such as wholesale sales tax, fringe benefits tax and the like, with this goods and services tax. However, they kept the income tax regime largely intact. I believe this is a fatal error. The fact is, the taxation burden of both direct and indirect taxation falls disproportionately on different segments of society. In short, the benefits of tax cuts in direct taxation are financially too small for low income earners for them to really enjoy the benefits of those cuts, whereas high income earners enjoy a financially lucrative tax cut windfall.

With indirect taxation, the incidence and burden of taxation fall on different persons. In the case of the GST, prior reports and warnings have been realised that low income earners pay a higher percentage of their disposable income on the GST as a tax than their high income counterparts. To put it bluntly, the effects of the GST have not been evenly distributed. The GST, being an indirect tax, is indiscriminate in who it impacts on. It affects us all.

Earlier today and in various prior speeches, I referred to the utilitarian principles that drive this government. I am in my third parliamentary year and, during this time, I have heard this government repeatedly berate the opposition for failing to make policies. Let me say that if this utilitarian ethic is what you call policy, then you are fooling yourselves. The impact of an ethic which parades a belief in the `greatest good for the greatest number' or `what is most useful' by destroying the means of an equitable distribution of income tax, thus affecting the weakest and most vulnerable, is criminal. I seek leave to continue my remarks at a later date.

Leave granted; debate adjourned.