Mr COX (10:21 PM) —It is an absolute disgrace that the Minister for Revenue and Assistant Treasurer in the Senate, when she was confronted by the fact that the minor parties and the Labor Party were going to pass this amendment, turned around and said, `Well, the rest of the bill won't go through.' There are four other schedules to this bill and the House ought to be aware, and the parliamentary secretary at the table who is handling it ought to be very aware, that one of those schedules relates to a tax exemption for Defence Force compensation when the deployment allowance is not paid. That is, if somebody who is serving in Iraq at the moment is injured, is repatriated to Australia and ceases to be eligible for the deployment allowance because they are no longer deployed, they will be eligible for a compensation payment in lieu of that deployment allowance but that compensation payment will be taxable.

They will have been injured in a war, serving their country, and the government's compensation to them in lieu of the deployment allowance will be taxed. That is the decision that the revenue minister took this evening in the Senate when she decided that, if she could not have all of this bill, she was not going to have any of it. I think that she will stand condemned if there is an unfortunate eventuality and one of our troops serving in Iraq is injured.

There are some other schedules attached to this bill which will also not pass if the government uses its numbers in this place to stop the amendment and stop the bill passing. They are a tax exemption for the Commonwealth Games Federation for the 2006 Commonwealth Games in Melbourne. They are adjustments to deductibility for amounts repaid for income that was received in previous years, which will cause some grief for people who had been paid income, were taxed on it in previous years, had to repay the money and now find that the repayments are not deductible against their income this year. They are not able to get adjustments to their previous tax returns to compensate them for the fact that they were, therefore, overtaxed in those years.

The government is also forgoing the revenue it would take from increasing the medical expenses offset threshold from $1,250 to $1,500. That is $54 million over the next three years—$18 million a year—off the budget bottom line. The opposition were perfectly prepared to accept that; in fact, we were prepared to not only increase it but index it so that it would continue to protect the revenue and protect the budget bottom line. The revenue minister did not want that. The only advantage I can see to this bill not passing is that we will protect the revenue to the tune of another $40 million or $50 million a year, because these tax concessions will not be available to foreign expatriates.

I listened to Senator Murray's, the Democrats's spokesman on taxation matters, speech in the other place. He took exactly the same view as the Labor Party on foreign expatriates' tax concessions: that they are something that should be dealt with in the context of the review of international tax arrangements. They are contained in, I think, chapter 5 of the discussion paper that was put out by Treasury, which the tax board has been consulting with tax professionals and industry on. They all believed that they were part of the review of international tax arrangements. I had a meeting with the Business Coalition for Tax Reform, that group of peak industry bodies that has been so helpful to the government in recent years in pursuing some aspects of its tax reform agenda, particularly the goods and services tax. I had a meeting with them two weeks ago, and they were stressing their interest in this measure. They were certainly stressing it in the context of the review of international tax arrangements. As I said earlier in the day, all of the major reform aspects of the review of international tax arrangements are going to cost money. There are not too many offsets in that group of measures. Because there are not any offsets, it is entirely appropriate that they all get considered together.

This government has been running a very slack fiscal policy. It has dissipated the large prospective surpluses that it always reports in every budget in the outyears. It spends them, it pork-barrels and it gives in to whatever political pressures that it faces. At the end of the day, we find that it cannot actually afford to do two things. One of them is to provide an internationally competitive tax system. One of the big discussions I had with the Business Coalition for Tax Reform established that the biggest impediment to international tax competitiveness in this country is the spending habits of the government, because it makes international tax competitiveness unaffordable. This government has already increased the total tax take as a proportion of GDP from 23 per cent to 24.9 per cent—two per cent of GDP.

I know precisely what the parliamentary secretary at the table is going to say. He is going to present another set of figures that does not include the GST. The fact is that, when the Labor government left office in 1996, it used only 23 per cent of GDP to do two things: Commonwealth own purpose outlays and payments to the states. It now takes 24.9 per cent of GDP to do those two things. The IMF, the ABS and the Auditor-General all take the view that the GST is a Commonwealth tax. It is not a state tax. It is one of the great deceits of Treasurer Costello that he pretends that it is not a Commonwealth tax but a state tax. The Commonwealth has total discretion about the rate at which it is collected; it does the collections. And it has total discretion about how that money is distributed. That is why the IMF, the ABS and the Auditor-General all believe that the GST is properly classified as a Commonwealth tax, and that is why the total tax taken as a proportion of GDP under this government has gone up from 23 per cent to 24.9 per cent.

The DEPUTY SPEAKER (Hon. I.R. Causley)—The member for Kingston is now ranging fairly widely, too, on the amendments.

Mr COX —This is the highest taxing government we have ever had in this country, and now we have a situation where the revenue minister has taken a decision that if she cannot have the whole of this bill then she wants none of it. (Extension of time granted) She is leaving a situation where, if our troops serving in Iraq—who are in a very dangerous war and who are facing enormous risks—are injured in that war and repatriated to Australia, they will cease getting the tax exempt deployment allowance. They will receive compensation for not getting that deployment allowance for the period in which they would have been deployed overseas, but that compensation will be taxed. It is an absolute disgrace that the revenue minister has decided that she will forgo this measure because a majority of the members of the Senate have decided that they will not pass one other aspect of this bill.