Senator McLUCAS (5:00 PM) —I am pleased to join the debate on the motion by Senator Cook here today. Essentially, the motion we have before us contains three issues. The first issue is the breaking of a promise. We all remember that it was the Prime Minister of this country who said and promised to the community of Australia that he would never, ever introduce a GST. The second issue goes to the impact of the GST on small business, on low and middle income earners and on families— something that I think the previous speaker knows little of. The third issue in the motion is about the botched implementation of the GST.

It is some months ago that the Labor Party, in this place, undertook to establish a full Senate inquiry into the operations of the GST. I think that was an eminently sensible thing to do at the time. There are good reasons to have an inquiry at the moment into the GST and into its impact and its implementation. The GST, as we know, is the most radical change ever to the tax system of this country. It is now more than 12 months since the introduction of the GST, and I believe it would be good public policy—in fact, it is good business practice in any operation—to undertake a review when major changes have been implemented. I think, 12 months down the track, 12 months after such a radical and enormous change to the taxation system, there should have been a full Senate inquiry into the impacts of the GST and its implementation.

However, the Senate, and I believe the community of Australia, is aware that coalition senators in this place, along with the Democrats and other senators, did not want to open the GST and its implementation to scrutiny by the Australian public. I understand that. I understand that, for political reasons, the Liberals, the Nationals and the Democrats would not want scrutiny of their GST and its implementation. But I cannot understand that, for good, sound public policy reasons, these parties would not have wanted the Senate to do its job—that is, to review the implementation of government policy. It was an appropriate time to undertake a proper review to find out what has happened in the last 14 to 15 months and to find out if there was a way to make it better.

And so it was left to the Labor Party to fill the void and to conduct its own investigation into the promises that the government made about the GST, about its implementation and about its impact on the community. The Labor Party, over the last few months, has conducted an inquiry in over 30 centres across the country. I was part of the inquiry in the centres of Cairns and Townsville in North Queensland, and it was very beneficial to me to meet with a range of people—businesspeople, pensioners, students—who came to that inquiry. I would like to take this opportunity to thank those people for their participation, for their submissions and, most importantly, for their honesty and, in many cases, in opening up the books of their businesses to scrutiny. Thank you to those people.

The first issue that came to mind when going through the inquiry and the first promise that people talked about was that `everyone's a winner with the GST'. You will remember that Mr Costello, in answer to a question on notice in May 2000, said:

Unfortunately, we did not get a lot of evidence to support that contention. There was a small cafe operator in Cairns who came to the inquiry—a blue-collar cafe in a working-class area—and he certainly did not welcome the GST. He talked about the increased paperwork. He talked about the fact that his stock prices had risen 35 per cent to 40 per cent. Importantly, he talked about the impact on disposable income in the community and that, as a result, he had completely lost all his pensioner business as those people had less income to purchase his product.

But the most interesting observation that he gave to the committee was the story that he told about Mr Warren Entsch. He told us that Mr Entsch, the member for Leichhardt, came to his cafe before July last year. The cafe operator complained to him about the GST and what he thought would happen to his business as a result. Mr Entsch, at that time, bet him $100 that his small business would not be worse off 12 months after the introduction of the GST. The small business person took that bet, and we heard how, some 12 months later, Mr Entsch returned to the cafe, admitted that he had lost the bet and paid his $100. Through his actions, Mr Entsch has admitted that small business people, in particular this cafe, were worse off under the GST. He puts a lie to Mr Costello's statement that `all Australians will be better off under the new tax system'.

To return to the actions of Mr Entsch: what did he do? He paid up on a bet. That is all he did. He has not done anything else in the parliament to assist this small business person or, in fact, all the small business people in the electorate of Leichhardt. In fact, at the time of the GST inquiry, one of the Howard government's ministers, Mr Tony Abbott, was in Cairns. We heard him on local radio saying how well he thought that small business was coping with the GST. Certainly, this cafe operator did not agree with that. It is a shame, I think, that Mr Abbott and Mr Entsch did not take the opportunity to talk with people who are grappling with this new tax system and its implementation.

We also heard from a woman who has established a small business as a wedding coordinator. It had been operating for 15 months prior to the implementation of the GST and we heard from her 14 months post. Prior to the GST she had arranged six Australian weddings—she does a lot of overseas weddings as well, but we will talk about the Australian experience—since the GST she has only arranged two, and one of those was booked prior to the introduction of the GST and without the knowledge of those people that a GST was charged. She was angry because it is a tax, she believes, on her service. There are no input tax credits that she can claim back. It is a tax on her ability to do her job. She believes that now that people have less disposable income they are undertaking to arrange their weddings themselves.

The second promise we canvassed in the inquiry was that no small business would go under because of the GST. We had some very sad evidence from Mr Brian Proudman, a bookstore owner from Cairns. Proudman's bookstore has been operating in Cairns for nearly 20 years. He warned prior to the introduction of the GST that there would be a problem. He said that there was confusion at start up and that there was no information from publishers. Prices increased. Paperbacks went from $13.95 to $16.95, hardbacks from $35 to $49. He said that as a result people were choosing to purchase their paperbacks, in particular, from supermarkets. He had completely lost what he called his cash business, the money that kept his family going.

Mr Proudman was a bookseller who took a lot of pride in ensuring that he had a wide range of books for the Cairns community. His business has closed down. He had a turnover of over $750,000. We are not talking about a small operation here. He lost 50 per cent of his turnover and now this business is not in operation. That family planned to sell their business, probably a few years down the track, as a going concern and that that money would be for their retirement. They were proud businesspeople; they are now looking to the old age pension to keep them in their retirement.

We heard also from a bookshop owner in Townsville, who said, `It is a tax against employment.' She said that there was no cash flow to pay the wages of her staff. The costs were increasing so much that she was unable to employ more people even though in her case turnover had increased. We heard also from a person who providesYellow Pages services in the north. She said that, of her 400 clients, many more two-person businesses simply did not answer her call when she rang to re-establish their bookings in the Yellow Pages. They were not there. We then move to the third promise that small business red tape will be slashed by the GST. We remember Mr Reith saying in 1998:

The taxi owner that we heard from in Cairns does not agree. He told the inquiry that he knew from personal experience that Mr Howard had broken his promise that everyone would be a winner and that the GST would slash red tape. He said that the GST had impacted on both his tourism business and the other major part of his business, which is pensioners who use taxis to get around. Since the GST, his business is down between 10 and 13 per cent from the year previous. On top of that, he complained of the paperwork. His drivers do a statement once every month, so he has to provide those figures for his drivers. He also has to do quarterly reports and he does four investment activity statements on top of his usual business and personal tax returns. He has gone from a situation where he had one form of compliance to some enormous number, when you add all of those up. Now he is faced with the Ansett debacle where he knows that the 40 per cent of his business that is tourist related will be significantly hurt. He also talked about the impact of the GST on petrol prices. No wonder taxi drivers are leaving the industry in droves.

We also heard from the operator of a quite significant guest house offering mid-range and backpacker accommodation. He has six full-time and five casual staff. It cost $4,500 for his start-up computer costs. His wife is a fully qualified accountant and she estimated that it took her 200 hours just to establish the system so that they could comply with the GST. Now she takes half a day to complete the BAS. Remember, we heard from the Treasurer that it was going to be a half-hour job. He also has problems with invoices and the itemising of the GST. He explained that every time he receives an invoice the GST has to be calculated on every single item, and he suggested that there may be another way that invoices are provided.

Senator Patterson —There is. Go and do a little accounting course and you might understand.

Senator McLUCAS —I might take that interjection. His invoices have GST inclusive and GST non-inclusive products, and the GST is placed on the bottom. He has to then transfer that GST cost to every single item, and that takes him time. That was part of the conversation about how you fix the GST—

Senator Patterson —And you are going to roll it back. That is what we are trying to explain to you.

The ACTING DEPUTY PRESIDENT (Senator Calvert)—Senator Patterson, stop interjecting. Senator McLucas, address your remarks through the chair, please.

Senator McLUCAS —a conversation that I suggest people on the other side of this chamber have not bothered to engage in. He has had a business downturn, partly because of the Olympics but now as a result of the Ansett debacle he reports today that his business is down to 40 per cent.

We also spoke to a professional potter in Townsville. He described the GST as a tax on his kudos, a tax on his skills and a tax on his artistic talent. He initially registered with the Australian Taxation Office but found that the paperwork was so burdensome that he was doing more paperwork than potting. He has now deregistered himself from the ATO. The word to describe his attitude to the new taxation system is, I think, `furious'. He was so angry and annoyed about what it had done to his operations that he was almost shaking.

The fourth promise that we looked at was that the GST would create more jobs. In August 1998 we heard Mr Costello say:

We heard from a small business called Aussie Bush Hats operating in Cairns that is basically reliant on the tourism trade. They employed 9½ staff and, as good small business people, they knew that they would have to use computers to operate their business after the GST. They installed a new computer and some new software. To this day they are still paying $60 an hour for a technician to come and talk to them about how they can fix this computer and its software. The proprietor of that business complained that the government had provided her with very little advice and support about how best to purchase the computer systems and software that would assist her. Her partner works in the shop of an evening and she tells us that she spends until 11.30 every night correcting the computer and that, while she runs a computerised system, she does the whole thing by hand as well because she has no confidence in it. We also heard from a small business operator in Townsville who was told by the tax office that she was behind and would have to wait to receive the form to comply with the BAS. In fact, she said that they had to wait seven weeks. She made the interesting observation that in her business she finds that she cannot be seven weeks behind in the payment of bills and is surprised that the Australian Taxation Office can be.

The next promise was that the GST would not be a tax on a tax. The Townsville City Council told us that in fact it is. While they do not charge tax on their basic rates, the costs of compliance have led to an increase in the rates they have had to charge. They have had to pass on those costs to the community. We also heard from the Endeavour Foundation in Queensland. They talked about compliance costs too. They said that, as a large organisation, they have had the capacity to deal with the GST, although it has meant increasing compliance staff and fewer staff for their welfare services. But they made the very significant point that those very small charities with one or two employees that are essentially run by volunteers are really at risk and that they have had to pick up the slack of those organisations, which simply cannot do the work. We were told that a lot of organisations find it very difficult nowadays to attract someone to take up the position of Treasurer because of the responsibilities of that position and the potential liability that position has.

Senator Jacinta Collins —And complexity.

Senator McLUCAS —And complexity, you are quite right. Finally, we heard from a student who talked about the impact of the GST on students. He said that he was very angry because the government had promised that the GST would not be a tax on education. He said that students do pay GST on textbooks and that everything has increased, from accommodation through to medical costs. He said that the GST is discouraging people from full-time education and that low income students—which most are—find it easier to just go and get a job and leave university. He also said that the GST is working against the long-term national interest.

I note that Senator Chapman said earlier that it would be simple to just remove the GST. That shows how out of touch this government is with the community. We have gone through a process of engagement with the community and, while everyone recognises that the GST is an unfair tax—it is a tax on distance and a tax that disadvantages those people who are less well-off—the cost to the community to change it again and go back to another system or find another system would in fact be too great to bear. All the small businesses that we spoke to said that the GST had been a nightmare, but they did not want enormous change. (Time expired)