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Tuesday, 15 August 2000
Page: 16393

Senator MURRAY (6:50 PM) —On 25 November 1998, the Senate referred issues relating to the GST and the proposed new tax system to a select committee and three Senate references committees. Four of our seven Democrat senators sat on those committees. By the time the final report came down five months later, in April 1999, these committees had produced five reports, totalling 1,508 pages, including the Democrats' minority reports. The main report lists the number of submissions received as 1,544, with 777 form letters and six petitions. Twenty-seven public hearings were held. A number of expert modellers and economists were used as consultants. Although I was the Democrat with principal portfolio responsibility for tax reform, all senators contributed. We were assisted by our very expert senior adviser, John Cherry. Senator Lees had oversight of the whole process. We largely wrote the terms of reference for the Senate committees. After five months of committee work, in April and May Senator Lees and I, along with our advisers, found ourselves negotiating with the Treasurer and the Prime Minister on the new tax system. Compromises were made, agreement was reached, and the modified new tax system came into being.

Why am I spelling this out? Firstly, to place firmly on the record the grave error on the part of those people who, with a grim determined perversity, still believe that the Democrats went to the October election in 1998 opposing a GST. The reverse is true. It was there in black and white, on radio and TV, debated and publicised throughout the 1998 election campaign. Our public 42-page tax reform paper in September 1998 became the Democrats' October 1998 tax reform platform. It outlined the basis on which the Democrats would accept a modified GST. We slogged through the detail of tax reform for more than a year, tracked by the professionals in the media. Sadly, however, a few media commentators still write as if we arrived at the negotiations with blank minds and blank pieces of paper.

So my second purpose is to reflect on some media people who simply did not do the hard yards on tax reform. That does not include journalists like Paul Cleary, then of the Herald and now of the Financial Review; Phil Hudson of the Age; Steve Lewis of the Financial Review; George Megalogenis of the Australian; Tim Colebatch of the Age, along with a number of other diligent journalists who did do the hard yards. They are the more credible for that effort.

Sadly, many of their colleagues did not do the hard yards, and to this day are unlikely to have read any of those submissions or reports. And who should blame them? However, when these journalists do make incorrect public comment, at least the record should be corrected.

I want to outline a consistent bias that I could never get corrected. This is quite simple really: it is about the design of a GST. It is a respectable and defendable position to argue that there should be no indirect tax at all, no consumption tax at all—and I stress `at all'—on the grounds that all indirect taxes are regressive. However, once you do decide to support indirect taxes, you can take only one of two positions: no exemptions or some exemptions. The Labor Party, the coalition and the Democrats all took the `some exemptions' route.

In the course of the debate, most tax experts and business organisations argued for either no exemptions or very few exemptions. The Labor Party wanted the most exemptions, with only goods taxed, not services, and then only at the wholesale level. The coalition and the Democrats wanted both goods and services taxed at the consumption level, but with exemptions. Nearly three-quarters of the countries of the world have GST systems. Nearly all of the systems feature major exemptions. Only four countries, one of them New Zealand, have broader based GST systems than ours. Regrettably, and most frustratingly, some ignore the fact that the coalition proposed extensive GST exemptions for dwelling rentals, health services, education, financial services and exports. The Democrats agreed with those exemptions and then broadened them to include basic and fresh food. We also negotiated extended exemptions to the health, education and charitable services sectors.

Here lies the myth propagated by a few editors and reporters, none of whom I can remember doing the hard yards on tax reform. The myth is that the coalition proposed no exemptions. This is a myth promoted by Alan Wood in the Australian on 4 February. He approvingly quotes John Howard saying:

I mean, our original idea was that you had it on virtually everything and then, because of the need to get the support of the Democrats, we had to agree to take out certain food items.

Hardly an honest appraisal by either. Alan Wood again, on 31 May:

There is no doubt the best design for a GST and the one that confers the most benefits is a single rate tax with virtually no exemptions. This was what the Howard Government originally proposed ...

Just a little reminder to Mr Wood that health alone is more than eight per cent of GDP, education nearly five per cent and financial services five per cent—and those are just three of the sectors in John Howard's original exemptions.

Stephen Koukoulas, in the Financial Review on 3 July, said:

Part of the attraction of the comprehensive goods and services tax regime originally proposed by the Howard Government was its relative simplicity; everything taxed at ten per cent.

Mr Koukoulas declined to mention the coalition's extensive exemptions covering well over 20 per cent of GDP.

I tried to respond to some articles I saw. My colleagues did similarly. My clipping service indicates the following papers did not print my letters which attempted to correct the record and spelt out the coalition's exemptions and the Democrats additions: the Courier-Mail, 3 February; the Australian, 4 February; the Australian, 31 May; the Daily Telegraph, 13 June; the Courier-Mail, 14 June; the West Australian, 16 June; the Financial Review, 3 July; and the Canberra Times, 3 July. The myth was allowed to stand. The Herald Sun was an exception and did print my letter on 16 June.

My favourites, though, were the editorial in the Adelaide Advertiser on 1 July and an article on 28 June which claimed that fresh food was exempted at the insistence of Labor and the Democrats. In fact, the Labor Party voted in the Senate to tax all food, not once but three times. Labor's influential Mr Della Bosca still advocates that position. The Advertiser did at least print my correcting letter a week later.

And now for a fascinating tailpiece. There were three submissions to the Senate select committee which deserve a mention in this story: No. 854 from John Fairfax Holdings Pty Ltd/West Australian Holdings Ltd, No. 1090 from News Limited, and No. 707 from Magazine Publishers of Australia. These submissions all asked for an exemption for newspapers from the GST. For the record, the Democrats declined to try to make the coalition exempt newspapers from the GST. I do not recall any articles in those newspapers I have mentioned on exemptions fessing up to their own pursuit of an exemption.

I have mentioned eight newspapers in this story about exemptions. The Daily Telegraph, the Herald Sun, the Courier-Mail, the Adelaide Advertiser and the Australian are all News Limited. The Canberra Times and the Financial Review are Fairfax. The West Australian is the eighth newspaper I have mentioned.