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Thursday, 20 September 2001
Page: 27575


Senator WATSON (5:20 PM) —When perusing recently the September edition of Charter, the journal of the Institute of Chartered Accountants, I was attracted by an article by Kurt Rendall. Kurt is a partner of the chartered accountants firm Rendall Kelly and a man who is well versed in his experience with small business. The tenor of the article suggests that small businesses are starting to feel a lot more comfortable now with tax reform and the GST. He said that they are feeling comfortable despite the media hype and, might I add, despite the strenuous efforts of the ALP. It is not only the media but the ALP along with the media who are leading this campaign about the alleged problems. But Kurt's view in this article, through his experience with hundreds of small businesses, was that they are becoming much more comfortable with the concept of tax reform and the GST.

No-one will honestly deny that there have been problems. Of course there will be when you tackle an issue of the enormity of tax reform and the GST changes. But do not forget that a lot of the changes were due to matters that were brought upon as a result of actions within the Senate. Mr Rendall concludes:

One year into it and it is beginning to work and, by a large, SMEs are now coping quite well.

I was interested in a number of the examples that were provided by the last speaker. I have to question a number of them. The comment was made that the lady who conducted the wedding business—and I presume she also provides food et cetera—had no input credits. Obviously, this lady is getting some very bad advice because, if she is not claiming any input credits, she is paying far too much tax. So rather than beat up this story, why not direct this lady to a proper accountant so that she pays the correct tax and not too much tax? I find it unbelievable that a person would be conducting a business of that nature and not be entitled, as was alleged here today, to any input credits.

Then she went to the taxi operator. Yes, there has been something of an exodus from the taxi industry, but what have we found? A lot of these people were part-time workers on social security. This has picked up on the black economy, because a lot of these people were working for cash and also often claiming social security. Now, of course, with better identification and business numbers, they have had to leave if they wished to retain their social security benefits. So, yes, there has been an exodus, but it is because this was part of the black economy that the GST has picked up on—people who should have paid tax but were not paying tax and people who were claiming social security and at the same time moonlighting.

Then she came to the potter. The potter was pretty smart, because he had a very small business. Actually, the complaints that I get are not from the potters of this world who have a low level of income derived from their business in crafts and hobbies and these sorts of things. We are told that they are competing very effectively. As she admitted, the potter changed from being a GST business to not paying GST. But at the same time, the potter will have to pay tax on inputs. As we all appreciate, most of the work of a potter is in the creative process and the time that they take. They are personal services, which the previous speaker admitted, and, because there is no GST added to those personal services, those sort of people are in a better competitive position compared to those whose businesses are much larger.

The position of the Labor Party is that we have got to have roll-back. If you ask the professions and the business community about roll-back, they are appalled. They say, `After all we have been through, we will have to start again and to change.' We have heard about l-a-w law under the Keating government. Will the state premiers, who get all this GST, allow a possible future Beazley government to roll back one of their most important sources of revenue? So, while Labor's intention might be to roll back the GST, what would be the reality? A number of state premiers have indicated their opposition to the concept of roll-back, particularly to the extent that has been suggested. The reality is that Labor would say, `We tried, but the state premiers would not agree.' Where would that leave the credibility of Mr Beazley? These are issues that we all have to be very much aware of.

When I looked at the Notice Paper today and saw this motion, I thought, `Senator Cook really must have an old gramophone, which he has got out, has wound up, and he has put on one of his favourite records—the GST,' because, after what I have just said about Kurt Rendall, it is out of date and repetitious. Given all the important issues that are facing Australia at the present time, we could have had a good debate on stranded passengers, Ansett problems, superannuation issues or the international scene. But, no, we go back and regurgitate issues of a couple of years ago that have really passed people by. People are now getting on with their lives.

The debate has failed to acknowledge the offsets. Labor has just looked at one part of the equation—the GST. There has been no talk about the other tax reforms: the fact that 80 per cent of Australians pay tax at the rate of 30 per cent or less—a terrific incentive to work—and the withdrawal of all those other taxes that had been built into the system. We have not heard about the success of the Australian economy and the success of our exports. Yes, part of that success is due to the low value of the Australian dollar, but the other factor that has to be recognised is the absence of all those escalated costs—government charges in the form of taxes—that were there previously but are no longer there. This amounts to hundreds of millions of dollars for exporting companies. So it is not surprising that Australian exporters are doing very well due to a combination of two issues: the low value of the dollar and the fact that there is no GST on exports. Seldom have we seen so many primary industries doing so well at the same time. The Australian economy is going along quite nicely.

Another thing I could not believe is that we are talking about all the problems with the GST and, in the same breath, we are talking about the problems that seem to be associated with it—One.Tel, HIH and Ansett. I could not quite see the connection there because I am sure the GST must have had a very insignificant impact on any of those issues. Perhaps that has got clouded in the overall debate but, in the way it has been presented as a GST related problem in the context of the motion before us, I find it extraordinary to start talking about those sorts of failures.

I thought I would go back a little bit in history, so I went back to 1998 preparatory to the GST. A lot of people were in favour of it and we heard about the conditions that were going to be put down for tax reform and how different organisations were going to judge the government on the basis of whether it was fair, just and delivered. People spoke about making the system fairer and more competitive—fair enough. They spoke about the tax system making victims of low and middle income earners. I will tell you about the impact because these really are the big winners. There was a worry that it would destroy jobs. There were all the sorts of things that the Labor Party are regurgitating now. But the reality is that all these concerns have dissipated in light of the way the government has responded with its GST. Another concern was that the states and territories would be starved of revenue. What did our government do? They made sure that all the GST, to the last cent, went to the states and the territories. Again, that worry has dissipated.

There were allegedly five foundation principles for the introduction of a better taxation system. One was the elimination of as many existing indirect taxes as possible. That elimination list is really quite formidable and I think we all know them. There was the wholesale sales tax, BAD and FID. We are all familiar with those. That was the first principle. Full marks on the first of the five foundation principles for a better tax system.

The next principle was the introduction of a national tax on consumption set at rates between 10 and 12.5 per cent on as broad a base as was practical. We introduced it at the lower limit of what was required—10 per cent—and no increase. That was going to be vetoed by all the state premiers. The third principle was a remodelling of federal and state financial relations to ensure the states and territories had access to sufficient sources of revenue to facilitate the rationalisation of their existing indirect taxes. Delivered 100 per cent—100 per cent of the revenue goes to the states. Full marks on point 3 to the Howard government.

The fourth principle was a reduction in rates of tax on income and simplification of business arrangements. What has happened to tax? At the corporate level, it has gone from 36 per cent to 34 per cent to 30 per cent. Delivered in full. What has happened at the private level? As I mentioned before, 80 per cent of Australians are paying tax at the rate of 30c or less. Marvellous! Full marks on that. The fifth principle was a reworking of the interplay between tax and the social security system to reduce the poverty trap confronted by low and middle income earners. If you are honest and look at people in the social welfare area, you will see we have done a great deal to remove poverty traps. We will never remove them all, but if we have not got close to full marks on that we are pretty close. Ask ACOSS and all those sorts of organisations whether the government has made a genuine attempt to remove these poverty traps and it will rank very highly.

Out of these five foundation principles, the Howard government has performed exceedingly well since 1998. I thank Senator Cook for moving this motion, because this is probably an appropriate forum in which to use these measurements that were laid down well before the GST came in as to what society really required of tax reform. We would have to be in the high 90s on all of those, if not at 100 per cent on some of them. Helen Clark, the Prime Minister of New Zealand, believes the tax has been very well accepted and that no-one seriously thinks it will ever be changed. She was asked in an interview: `Does it apply to things like tampons, for example, and, if so, have you ever thought of lifting the tax on items like that? Helen Clark said no. I think it is true to say that, once you start differentiating between classes of goods, you get into anomalies which can be a bit hard to explain. So why don't you listen to your sister across the Tasman?

The Institute of Accountants says that the more products that are GST free adds to the complexity and that the poor shopkeeper who is selling a mix is going to find things more difficult. Whether you ask university people, whether you ask the Small Grocers Association or whether you ask the local accountant, according to Mike Bannon, who reports in Sunday's Canberra Times, more exemptions, as envisaged by Mr Beazley, will produce more uncertainty and disputes between the ATO and taxpayers, and self-interest groups will be relentless in their claims for more exemptions. And so the problem goes on.

Let us look at the situation when the Labor government was under the leadership of Paul Keating and even in the lead-up to the change of government, when there was still a Labor government. What did we find? A very perceptive Asian, former Singaporean Prime Minister Lee Kwan Yew, spoke quite often about what he called the `white trash of Asia'. But what about Lee's successor? We have now come to a new generation, a new Prime Minister and a Liberal-National coalition, and the position has really changed. There are different aspects. In many parts of Asia we are concentrating on fast growth, but in terms of forgetting the fundamentals he says, `Australia didn't; they are winning the race.' In fact, now that Asian values like cronyism have gone out of fashion, Australian regulators have lent expertise to Taiwan, Indonesia, the Philippines, Vietnam and Hong Kong to help local authorities develop better regulatory and statistical services. In other words, in terms of winning the economic region's race, Australia is right up there, according to the Singaporeans— and so we are.

We overcame the problem of the Asian crisis and we were referred to then as a `miracle economy'. It is true that the world has a lot of problems, but we are fairing much better than others. Why are we fairing so much better? We have got rid of a lot of government debt, and we have good economic management. We have repaid $50 million and that money has been going to health, education and other areas. Where would we be in the future in terms of the needs of a growing elderly population if we did not have a strong indirect tax base? But we have it. We could not go on just slugging the workers with higher and higher rates of tax.

Under 13 years of Labor government there were problems. The perception of Australia was not good. The perception of Australia in terms of productivity was slipping, and that has been reversed under our government. We have an efficient form of taxation, we have a very fair taxation system as far as families are concerned and as far as business is concerned, and Australia is well positioned to meet the challenges of the 21st century.