Senator GIBSON (4:24 PM) —Having read the statement last night, I commend you for your statement, Madam President. Moving on to A New Tax System (Goods and Services Tax) Bill 1998 , Australia is a small country that trades 20 per cent of its GDP with a world which is becoming more and more competitive. Over the last two years, we have had nothing but turmoil with the economies to our north but, in spite of that, the Australian economy has gone on with great strength. Why is that? Because it is a recognition by the rest of the world and by Australians that we have had good economic management over the last three years since the Howard government came in. We have brought expenditure back within income. We are reducing government debt. Interest rates for housing are down from 17 per cent to six per cent. We have low inflation and we have locked in openness and transparency in government reporting with regard to its accounts, so we are well regarded by the rest of the world. What should we do now? Should we sit still and do nothing for Australia and for our children? No. We have to keep up with the reform process because, in economic terms, we are just a tiny island in comparison with the rest of the world.

The next big step is taxation. Australia needs tax reform desperately. There is a long history of this—the Asprey committee of 1975 and the Hawke government's option C in 1985. I will quote a few words from a former Treasurer, Mr Keating, from June 1985 on that issue:

For too long the politically unpalatable decisions have been put off in this country because our politicians have not had the strength of purpose to tackle the hard issues. When it comes to the crunch, short-term political interests have always come first.

Then we had Fightback in 1993. What this means is that both sides of politics here in the national parliament have shown by their words and by their deeds that Australia does need tax reform. Australian tax is far too complex. It is inefficient and it is unfair. As a little example, the income tax marginal rates impinge heavily on low- and medium-income people, destroying their incentives to work, to save and to do any overtime.

In August 1997 the Prime Minister announced that the government was going to tackle tax reform. I chaired a coalition tax task force soon after that. We received about 650 submissions and met with many groups. The task force inquired into what was wrong with the tax system and suggestions for change. Virtually everyone agreed that the system needed reform, that it was basically broken and must be fixed. There were many suggestions for change that were passed on to the government, so late last year the government put out its ANTS package. The A New Tax System package is comprehensive. It is integrated with income tax cuts and a reform of all the indirect taxes, with the GST replacing 10 indirect taxes.

We won the election in October with the weight of tax reform in our saddle. Since then the Senate committees were set up, with the main question—the considered question—out of the committee process which has gone on for the last five months being whether food should be in or out of the GST.

First of all, virtually all economic modellers of repute in Australia have recommended that food should stay in and should keep it simple. We had a visit just a few weeks ago from an international expert from Europe, Professor Cnossen, who said:

Research and experience in other countries proves that the best GST is a GST with a single rate applicable to all goods and services. A zero rate on food is largely ineffective in mitigating the GST burden on the poor. Zero rating food is like giving stones for bread to the poor . . .

Further, from the same person:

Studies in Canada and Ireland show that although the poor spend on average more of their income on food than the better off, the better off spend twice as much on food as the poor do.

. . . . . . . . .

This is also confirmed by a study in Sweden which shows that the main beneficiaries of a zero rate on food would be yuppies—single people with dual incomes living together. These people buy more expensive varieties of food, eat out more often, and tend to throw food away . . .

Paul Keating, again, in an interview with AAP on 13 June on the issue of whether food should be in or out, said:

At the moment we all have to buy the necessities; if you're not buying them you can't live. And you buy them now out of your after-tax income, after it has suffered these very high, oppressive marginal rates.

What we are saying is you buy the same necessities, but out of your relieved tax income.

. . . . . . . . .

. . . The best way of making these taxes operate effectively and efficiently is with minimum exemptions and with a single rate; that is the lesson which comes from all over the world. Once you have different rates all of these anomalies appear, and if you had exemptions, it means you have got a very complex administration.

The other key thing that came through in the inquiry was compliance costs. Late in the inquiry the Senate select committee received an excellent paper summarising compliance costs, done by Dr Jeff Pope from Curtin University in Western Australia. I will quote just a few words from his executive summary:

1 Food should be included in the GST base at the full 10% rate.

There is no evidence to show that zero-rating food, as in the UK and Canada, leads to lower compliance costs than in New Zealand, which includes food.

He also said:

On the basis of international and Australian compliance costs research, overall, the Government's estimates of gross and net compliance costs of the GST are reasonable.

It is time for the Labor Party to do the right thing by all Australians—to leave their rhetoric behind and to look for what is right for Australia, what is right for our children and our grandchildren, and to support tax reform. I think they do support it and they do not believe the rhetoric which they are saying. It is no wonder that the community gets very annoyed with politicians saying one thing but, underneath, believing something else.

In the past, when Labor were in power, the coalition supported the float of the dollar, freeing up the banking and finance industry, reducing tariffs, and competition policy. Why? Because it was good for Australia, and we have a better Australia for it. Now it is time to move on to tax reform. This is the best time for tax reform for Australia. It is time for Labor to back the government and pass the tax reform bills.