Senator CHAPMAN (3:35 PM) —This week the opposition really is becoming a cracked record. For the fourth day in a row we have heard them focusing questions on the GST. They have not laid one blow on the government or on the Assistant Treasurer in their attempts to do so. Today what have we heard them raise? The issue of the black or the cash economy. Again, by focusing on the GST they are ignoring, as Senator Ferguson said, the fact that we are for total tax reform. We are introducing a new tax system, not just changing one tax.

Senator O'Brien quoted an Austrian professor regarding the extent of the cash economy in some European countries. Well, come in spinner! Certainly those countries have a GST as part of their tax system but they do not have a world's best practice tax system and they do not have a world's best practice GST as will be part of the new tax system that this government is introducing. We are introducing a world's best practice tax system. In particular, those European countries applied differential rates and exemptions to food items. That is, of course, what some people and groups in Australia—drawing succour from the Labor Party's opposition to tax reform—want to have as part of our tax system. They want food exempted from the GST.

I remind the Senate that only yesterday none other than Mr Carmody, the Australian Commissioner for Taxation, emphasised the folly of eliminating food from the GST—of zero rating food. Mr Carmody is an expert in tax collection. He is an expert in dealing with compliance and with tax avoidance. He said only yesterday that not having a GST on food would be an absolute disaster; indeed, that eliminating a GST on food would result in widespread tax avoidance. That is why the black economy remains significant in those European countries that Senator O'Brien talked about—because they have a different rate for food, and they have zero rating for other items of food. As I said, that will not be part of this government's new tax system. The GST component of our new tax system will include food as an essential part of the GST package. So let us have none of this nonsense of quoting what happens in European countries as far as the cash economy is concerned.

The significant part of the new tax system is that businesses with turnovers in excess of $50,000 per year will have to register to obtain refund of the goods and services tax on their inputs, on those goods that they use as part of the process of their business.

Senator Sherry —What about New Zealand?

Senator CHAPMAN —Senator Sherry quoted New Zealand in his remarks earlier. The fact is that when New Zealand introduced what currently would rate as the world's best tax system as far as a GST is concerned, many more firms registered than was ever expected, Senator Sherry. That removed the activities of those firms from the cash economy and brought them into the legitimate economy and into the tax net.

Senator Mark Bishop —It did not eliminate it.

Senator CHAPMAN —This government has never claimed that the new tax system would eliminate the cash economy. What we have said is that it would make substantial inroads into the cash economy. And that is exactly what it will do—it will bring into the legitimate economy those businesses that are currently in the cash economy, because they will have to register. Even those few business operators that choose to remain outside the legitimate economy will be paying tax on their consumption. When they earn dollars, when they earn their income, when they consume, they will be paying tax on that consumption which they are currently avoiding. That is a second area where the cash economy will be eliminated. Those opposite ignore that as well. So there are two areas: firstly, those businesses that will be drawn into the legitimate economy that are currently in the cash economy and, secondly, even those that stay outside the legitimate economy will be taxed on their consumption.

The government has taken many initiatives already to deal with those who cheat on taxation. Apart from the overall package of tax reform, further initiatives against tax cheats are an important part of the reform process. An anti-avoidance measure will be introduced to apply pending the introduction of the entity tax regime. We will be modernising and broadening the general anti-avoidance measures to deal with existing and emerging risks, and reviewing specific anti-avoidance provisions. So there will be specific tax avoidance measures as part of this new tax system.

The DEPUTY PRESIDENT —Order! The time for the debate has expired.

Question resolved in the affirmative.