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Wednesday, 21 April 1999
Page: 4014

Senator SANDY MACDONALD —I address my question to the Assistant Treasurer. Minister, the government has promised $13 billion worth of personal income tax cuts as part of its tax reform of Australia's outdated and unfair taxation system. Will you inform the Senate of alternative tax plans that have been released of late and could you also inform the Senate what would be the impact of such proposals?

Senator KEMP (Assistant Treasurer) —Thank you, Senator Macdonald, for that important question. Senator Macdonald often asks questions related to families and related to the tax system, and we appreciate your interest in this matter, Senator Macdonald. It is true that the wholesale sales tax was raised by the Labor Party when they were last in government, for which there was no compensation package. Those of us who were in this parliament in 1993 can recall the across-the-board rises in wholesale sales taxes and in excises. But I have to point out that no compensation package was offered; in fact, it was the reverse, because the l-a-w tax cuts were abandoned. Therefore, the stance of the Labor Party on the current taxation reform issue certainly smacks of gross hypocrisy.

Yesterday the Irish model of GST was proposed by the Australian Democrats. This model zero rates basic food, which I understand in this description includes meat, vegetables, fresh fruit, bread and, for example, could also include tinned caviar. The Democrats' model has generated confusion, as not only bread and bread with dried fruit are Democrats GST free, but what about wholemeal bread, garlic bread, herb bread, rye bread, sourdough—

Senator Robert Ray —What about waffles?

Senator KEMP —and, indeed, waffles? This is the sort of confusion which has become very clear in the 24 hours since this policy was released. The Democrats' model is highly complex. It would gut the government's plan to deliver major tax cuts to Australian families.

The government is offering arguably the largest income tax cuts in Australian history. How can delivering a tax cut in the top marginal rate to some 95 per cent of taxpayers be bad for families? Of course, it is not bad; it is great news for families. The bad news for families is that the Labor Party is attempting to stand in the way of these major tax cuts. As I said in the Senate yesterday, Australian families deserve a tax cut, and the government wants to give them a tax cut in the order of $13 billion. When you relate what we are proposing to do to the policy that was released yesterday by Senator Meg Lees, you see that the Lees model excludes certain products and will cost another $5 billion in compensation.

Senator Robert Ray —Who costed that? Who did it?

The PRESIDENT —Order! Senator, there is an appropriate time to ask questions.

Senator KEMP —Such a huge cost to the budget would impose very substantial strains and place enormous pressures on interest rates and risk the future prospects of this economy, which has been performing so well.

In the government's view the Democrats' Irish model taxes the less fortunate in our community proportionately more than it taxes the rich. For example, the bottom quintile of income earners spends nearly twice as much of their total income on meals in pubs, clubs and hotels than those in higher income groups. The truth of the matter is that what we are seeing, unfortunately, is a policy which favours the rich at the expense of those in the lower income groups. The government is not persuaded by the position that the Democrats put forward yesterday.