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Thursday, 1 September 1994
Page: 791

Senator KERNOT —My question is directed to the Minister representing the Treasurer. Yesterday the Treasurer announced he was considering tax incentives to encourage savings if they passed one commonsense test that any resulting increase in national savings was greater than the cost to government revenue of providing the incentive. That is a long overdue move and I welcome it. But is it not true that two existing government tax measures—namely, the $1.6 billion tax concession for full dividend imputation and the proposed imposition of the FBT on employee share plans—actually fail already the Treasurer's own savings test and in fact contribute to reduced national savings? I have brought these measures to the government's attention before. Is it possible for the government to review them and apply the same commonsense test now?

Senator COOK —I think the Treasurer said what Senator Kernot has said he said about national savings. He certainly made a remark of that character in a speech he delivered to the Life Insurance Federation of Australia last May. The main strategy for dealing with national savings that the government identifies is the medium term deficit reduction strategy. That strategy is continuing on track. It is the key device by which we believe the issues of national savings can be addressed. But in the FitzGerald report on national savings, it was suggested that a vehicle of this character—a national savings vehicle—be developed by the government.

  The government has in mind how it will respond to that. I understand we are looking at overseas experience with savings schemes, in particular focusing on the extent to which such schemes add to national savings or whether they simply change the composition of savings both between the private and public sectors and between the different forms of investment. We want to be sure that this is not just moving around the pieces on the plate and that it in fact contributes directly to improved national savings

  The other criteria that we have set for this is the need for any additional concessions to savings not to undermine the government's policy objectives in respect of superannuation and retirement incomes. Senator Kernot would be aware that one of the real forms of promoting national savings is the inducements that we as a government have given to superannuation in Australia—and that is indeed one of the biggest growth areas for national savings—as well as incentives for home purchasing in Australia, which is another. We want to make sure that tax concessions do not undermine those objectives. The third criteria is the equity of such schemes in terms of their effect on the progressivity of the tax system. Senator Kernot has asked me whether we will include in that full dividend imputation and FBT—

Senator Kernot —I said they fail the Treasurer's test now.

Senator COOK —Not in the government's view. We have had this debate. It is true that Senator Kernot has raised this question several times. It is also true that we have replied to this question several times. We are coming to the point at which maybe we call this `debate by numbers'—Senator Kernot can stand up and say, `Today it is these issues,' we say, `The answers are the same as yesterday,' and we cite the same cases. We may have got to that level of stylised interchange. The answer to Senator Kernot's question is no, the government does not believe those measures contribute to national dissavings or undermine the objectives of what the Treasurer has cited.

  In relation to the last-mentioned measure—FBT tax on employee share acquisition schemes—what is quite clear is that the government is addressing issues of tax avoidance in its review of those settings. It is proposing to put in place an incentive for those schemes to apply not simply to the senior executives in companies but to all employees in companies so that they actually address the issue of increased productivity and create a greater sense of ownership by the employees of companies, and are not simply regarded as a payout to senior executives.

Senator KERNOT —Mr President, I ask a supplementary question. The minister said that the deficit reduction strategy is the vehicle and that the government is looking at overseas examples. But we have looked at these examples already. The Democrats have given the government costed options; the opposition is talking about these options in its directions statement. Does the minister not think there is a bit of urgency and some merit in the Treasurer chairing some sort of cross-party committee to get something in place by the end of this year, instead of waiting until next year's budget and beyond that—and beyond that?

Senator COOK —I can appreciate the frustration about not being in government but wanting, nonetheless, to run the economy that often comes from the Democrats. Having said that, I might say that many of the suggestions Senator Kernot makes are indeed very useful and do help.

  The government has said, through the Treasurer, that we are addressing this issue—and we are addressing this issue. It is part of the reason why we commissioned, in the first place, the FitzGerald report on national savings. It is healthy that we have a strong debate about this. But it is not intended that the Treasurer invoke a national savings summit and chair it or engage in cross-party seminar-holding on this subject. We will consider what we do in due course and announce that. Obviously then we will hear the debate on our proposals, refine those proposals and put them forward, if we believe that they can meet the test that has been set down. (Time expired)