Senator O'CHEE —My question is addressed to the Leader of the Government in the Senate, Senator Hill. Minister, under the coalition government's plans for a new tax system, Australian taxpayers will receive $13 billion in personal income tax cuts. My question is, however: is the minister aware of any threats to the efficiency of the new tax system? If so, can the minister advise the Senate what impact this will have on both Australian taxpayers and Australian businesses?

Senator HILL (Environment and Heritage) —I thank the honourable senator for the question. It is true that the new tax system that we are seeking to introduce in this country will give back to Australian taxpayers $13 billion in taxation reductions, and it is not surprising that the Labor Party opposes tax cuts of $13 billion to the Australian people. Why is it not surprising? Because they have form on this issue. Labor stands for high taxes; the coalition stands for lower taxes. Labor in government promises tax cuts but does not deliver. No Australian will forget what happened to the l-a-w tax cuts promised by the Labor government. They were never delivered. So it is not surprising that Labor opposes the coalition's $13 billion of tax cuts because, when in government, although they promised tax cuts, they never delivered.

As well as giving back so much money to Australian taxpayers, there are other benefits in the new taxation system when it is introduced, and it is worth reminding the Australian people of those benefits. The abolition of nine state taxes and charges will be welcomed by everyone. The fact that the states will receive the GST so that they can properly and adequately pay for their service responsibilities is welcomed not only by the states but also by the recipients of those benefits. The fact that all exports will be GST free will mean a major boost to exporters—and that has to be a benefit to all Australians.

Senator Cook —Nonsense. You don't understand basic economics.

Senator HILL —If businesses grow, they provide more jobs, Senator Cook, and that is a benefit to all Australians. Cheaper transport of goods must be a benefit within rural and regional Australia and must help businesses in rural and regional Australia, and a 30 per cent personal income tax rate for 80 per cent of all Australian taxpayers will be a wonderful achievement and widely applauded. So it is amazing that in those circumstances Labor opposes the new tax system, a new tax system that brings so many obvious benefits.

But there are also other concerns, and the latest concern is the exemption of food and the consequence if food is taken out, as is being advocated by the Australian Democrats and presumably will in the end be supported by the ALP. I previously said that the Australian Society of Certified Practising Accountants believes that such a move would add at least $100 million to compliance costs. It would hit small business hardest.

Now we have the Commissioner of Taxation, Michael Carmody, as the latest to voice his concerns on the exclusion of food from the GST. He labelled it a `recipe for disputes'. He estimates that up to 370,000 businesses would be affected by the move to exempt food, potentially sidetracked by expensive and time consuming attempts to determine which food is subject to GST and which is not. In Mr Carmody's words:

Any attempt to draw a line around food will lead to costly disputation and greatly increased costs for the community in administering the GST.

Mr Carmody uses one of the absurdities of the current system to warn against the dangers of exempting food from the GST. He said it took five years of legal action and court battles to determine that frozen yoghurt is tax free under the current tax system, but frozen yoghurt that tastes like ice-cream is taxable. Those absurdities must be avoided and the costs associated with them. (Time expired)

Senator O'CHEE —Madam President, I ask a supplementary question. I note with interest Mr Carmody's comments on the absurdity of the taxation of frozen yoghurt in Australia. Did he have any comments to make on equivalent tax regimes overseas, for example, where some food is GST free and some food is taxed?

Senator HILL (Environment and Heritage) —As a matter of interest he did, because he saw how it is being applied overseas and pointed out the dangers of going down the same path in this country. That is why he would argue that food should be included. In the UK, for example, he said a meat pie sold in a bakery before 3 p.m. is taxable as a snack food but, if it is sold after 3 p.m., it becomes a grocery and is therefore tax free. It is that sort of nonsense that the Australian Democrats wish to impose upon this major taxation reform that has been proposed by the Howard government.

If we can have this package in full we can bring in all the benefits that I have detailed: $13 billion of tax cuts, adequate finance for the states to meet their service requirements, a new boost to export business to grow and to employ Australians—all of those benefits that can only be of benefit to all Australians and which they can get so easily if only the ALP will vote for the new system.