Senator SHERRY (5:16 PM) —I want to follow on from the comments made by Senator Quirke, Senator Hogg and Senator Conroy last night. The Labor opposition has moved an amendment that has three points to it: firstly, the fundamental unfairness of the goods and services tax; secondly, the compliance burden faced by small business; and, thirdly, the compliance burden arising from the new pay-as-you-go and other tax related measures such as those under the business tax reform. That summarises the points that we have encompassed in our second reading amendment.

We are dealing with yet another piece of legislation on the so-called new tax system and on the GST in particular—yet another piece of legislation. An extraordinary amount of time has been spent in this chamber debating the GST, as it should be. It is a big new tax. What concerns me in terms of simplicity is that the tax code of this country—the various acts that are passed through the parliament—seems to be getting bigger and bigger. We have dealt with thousands of pages of tax legislation in respect of the government's tax package. One of the arguments of the Liberal Party in the lead-up to the last election was that the system would be made simpler and that we have too much tax legislation in this country. Yet we keep getting bill after bill to deal with the introduction of the government's allegedly new simplified tax system.

I have touched on the first point of our second reading amendment: the fundamental unfairness of the GST. Many aspects of this issue have been debated, but today I want to go to two specific matters that I would like a response to from the Assistant Treasurer. It is good to see him in the Senate listening to this debate. And I would like a response to the two particular examples that I outlined to the chamber. I have received representations from a Mr Bush, who comes from my home state of Tasmania. Mr Bush is a national office bearer of the Packaged Ice Association of Australasia, and he is located in Tasmania. He came to see me some weeks ago to outline what the association justifiably regard as the unfairness of the application of the GST to ice. He made the point that ice does not attract the wholesale sales tax—it was not included in the previous wholesale sales tax regime—and that the Australian Taxation Office had issued a ruling in respect of ice. That ruling is contained in a letter dated 21 December 1999. It was pointed out to me by Mr Bush and a number of other people who have contacted me about this issue that the government, in its gazetting of the schedules and the definition of food, did not include ice. Ice is therefore not exempt from the GST because, in the government's opinion, ice is not a food.

It is interesting to note in passing that water is exempt from a GST. There are some interesting issues to do with water that I will get to a little later. There is certainly good evidence that ice is a food. A code currently being reviewed by the Australia New Zealand Food Authority recommends that it is reasonable to assume that a packaged ice product is made by the freezing of water that is fit for human consumption. It may not be made—I will get to that point later. The labelling and appearance of a packaged ice product would indicate the value of a product. On page 17, the Review of the Food Standards Code1999 reads:

The ice association has worked extensively over a number of years to develop a nationally recognised code of practice.

Even though most people do not eat ice, it is added to other foods and also to beverages to keep them cool. It is very common that foods such as salads, fish products and many other dishes have ice added to them to keep them chilled—to keep their temperature down—and to keep them safe from bacteria. The ice comes into contact with these sorts of food; it becomes part of the food; it becomes an ingredient of the food. It therefore becomes a food in its own right.

What is interesting is that every food code in the states of Australia, I believe, defines ice as a food. In the code drafted by the National Food Authority, ice is specifically included in the definition of food. If the health authorities of this country accept, for very good reasons, that ice is a food, it stands to reason, I believe, that the government should have included ice within the regulations for the purposes of food. There are good reasons for including ice as a food in food standards in this country. It has to be handled and served with some care. There has to be some precaution in the way in which ice is used in foods. Apparently ice, like other foods, can go bad. Ice that is bad can make people sick. It can become contaminated if it is not kept clean and free of harmful bacteria. Scientific studies show that germs can grow on ice. Apparently ice is not a food substance that can be kept free of bacteria if it is not handled in the correct way. Bad water, which is the base product of ice, and improper handling in the serving of ice, such as with dirty hands or contaminated utensils, can have serious consequences for people's health. Fortunately in this country very few cases involving ice have led to food poisoning, but it has happened in some other countries with a quite serious impact on the health of people.

Turning to the fishing industry, fresh fish is packed in ice for transport to markets so it is kept in a safe and healthy condition. Another example that I have been given is that of broccoli, a well-known vegetable that has ice added to it when it is transported to market to maintain its colour and quality. That product is then onsold. The sellers of that product—in this case broccoli—cannot separate the ice from the broccoli. A significant proportion, if not all of it, will have melted by the time they sell the broccoli. There is a very compelling argument for ice to be treated in the same way as food. There is an interesting argument—it is not a semantic one—which is: at what point does water become ice? I would be interested to know from the minister whether there is a clear definition of what constitutes ice.

Senator George Campbell —More importantly, at what point does ice become water?

Senator SHERRY —Exactly, Senator Campbell; I was going to get to that point. At what point does ice become water? I would be interested to know whether there is a tax office definition of what constitutes ice and what constitutes water.

Senator Kemp —Hello, a roll-back!

Senator SHERRY —In this case we have a melt-back. If the ice becomes water it is not GSTable but, if it is ice, it is GSTable. Let me give you another example, Senator Kemp.

The ACTING DEPUTY PRESIDENT (Senator Knowles)—Order! This is not a football match.

The ACTING DEPUTY PRESID-ENT —Order! Senator Conroy, I have called the Senate to order.

Senator SHERRY —I would point out to you, Madam Acting Deputy President, and the chamber, that this is a very serious issue for the Packaged Ice Association of Australasia. Senator Kemp should not treat this it lightly. They have made submissions to me through their national representative who lives in Tasmania. They consider this is a very serious issue. Ice does not have a wholesale sales tax applied to it. That is another compelling example of the unfairness of the GST.

Coming back to ice as a product, what do you do if you have a mixed product which contains water and ice? What proportion of that product is GSTable? We know that water is not GSTable, but what about the ice content in the water? How would you determine what you pay the GST on? Would you take a container of water and ice, separate it and attempt to determine the proportion, presumably by volume? It is interesting because ice changes in volume once it melts: it is smaller than the volume of ice. But that is another serious problem you have. Putting aside the physics of ice, how do you determine what proportion of a water drink with ice is GSTable or not? How do you measure that? Even if you bother to measure it, by the time you get the water into the container and the ice out of the container, part of the ice has already melted. It has now turned to water, which is not GSTable, so you would have to transfer it to the other container. We have literally got a melting GST. This is an important issue for the Packaged Ice Association of Australasia and it highlights an absurd approach by the government towards this product.

There was a ruling given by the Australian Taxation Office. I do not blame the tax office because, when you look at the communication from the tax office, they are obviously basing their view on the regulations that the government drew up on what constitutes a food. As it turned out, I think it was a mistaken schedule. I do not know what the Australian Democrats were doing, why they did not give any consideration to ice and the complexity and the problems that ice causes if it is not included as a food. Most ice in this country is manufactured, but there are areas of Australia where water is ice naturally. It is not converted to ice in a manufactured process.

Senator George Campbell —Particularly on the west coast of Tasmania.

Senator SHERRY —I will take that interjection and I will rebut it because Tasmania has a very cool temperate climate. We do not find too much ice occurring naturally in Tasmania. I am thinking more of the practical example of the snowfields: in the middle of winter, someone up there has a glass of water; they come back to it and it has turned to ice, and they have to pay a GST. It might sound a far-fetched example but it does highlight the absurdity.

Senator SHERRY —We had the thermometers in the chickens; we are going to have to have thermometers in the water to determine whether or not it is ice and whether it has to attract GST. So it is an important issue for the Packaged Ice Association of Australasia. I would like to hear Senator Kemp's response on the rationale of why ice is not a food, despite the fact that the food codes in this country determine that ice is a food product. As I have mentioned, it is also important for the safety of food. You cannot in a practical way separate out the ice from the food that it is mixed with. So you have to pay GST on the ice but no GST on many of the food products that it is mixed with.

There is one other point about ice that is interesting. In some parts of Australia, for safety reasons groups of workers in hot climates are provided with ice. This is actually a provision of their industrial awards and agreements when working in a hot climate. Again, it seems to me that reinforces the arguments that I put earlier about the nature of ice and the fact that it should not attract a GST.

Having dealt with ice for a few minutes, I would now like to melt away to water, because I have had some issues that highlight the difficulties for water carriers. I would like Senator Kemp to respond to this as well. My understanding is that water is exempt from a GST. So for those of us who live in mainly an urban environment where we have water on tap, there is no GST payable. But I would like to put to Senator Kemp: what will happen with water carriers in rural and regional areas who purchase water and then on-sell it to people who are unfortunate enough not to have or be connected to water systems? Will water carriers who retail water to customers in rural and regional areas who put that water into tanks for consumption have to pay a GST on the water? I think that is a very important issue for people who live in rural and regional Australia.

It seems to me that, if you have to pay a GST on water cartage where people are not connected to a water main system, that is discrimination against those people who live in rural and regional areas. To anticipate one possible argument the minister might put—that is, the water delivered by water carriers is not necessarily for human consumption—I think a person living in a rural and regional area that is very dry or in drought would find it a very expensive proposition to buy enormous quantities of water delivered by a carrier for anything other than personal use. This is an important issue. There must be hundreds of thousands of people in this country whose properties are not attached to water mains. As I say, if you are attached to a water main, you do not pay GST on water; but what is the situation in respect to carriage of water in tankers for human consumption? I also think there would be a significant problem in how you define wastage in those circumstances—a significant amount of the water would evaporate; a significant amount of it would be spilt—and how that would be treated in terms of GST that is payable by water carriers. They are two issues that I have touched on in the debate today. My time has almost ended.

Senator SHERRY —Yes, my time has almost evaporated. I think the two examples that I have touched on serve to highlight one of the points we made in our second reading amendment—the fundamental unfairness of a goods and service tax. We were supposed to get a simpler system, and yet the Labor opposition has been highlighting not just the two matters I raised today but many other examples of the particular practical problems in the introduction of a goods and services tax in this country. We believe the GST is bad for Australia and that it will not do anything to make the system fairer; it will make it more complicated. We are going to have over two million mainly small businesses collecting a tax. They are becoming tax collectors for the first time. (Time expired)