Senator CORMANN (9:24 PM) —I have a couple of observations. My second observation will be in response to some of the remarks made by Senator Xenophon, but firstly I want to talk about the arrogance of this government and the arrogance of this minister in not being prepared to answer legitimate questions put to him by a senator representing the state of Queensland, the state that this tax hike is supposed to be for. These are legitimate questions being put by Senator Macdonald, a senator representing the state of Queensland, and the minister just sits there, refuses to get up and refuses to provide answers to the questions that are being put to him.

It is always easy to whack another tax on people right across Australia. Every Australian earning more than $50,000 will be asked to pay this tax—an increase in their income tax. Whatever cuddly name you want to give it, Minister, this is an increase in the income tax rates of all Australians earning more than $50,000, and it will no doubt get through this chamber with the support of Senator Xenophon. Minister, I urge you to just reflect on your attitude in this chamber in not answering legitimate questions that are being put to you by a senator representing the state that this tax is supposed to help fund the reconstruction effort for.

My ears pricked up when I heard Senator Xenophon try to answer a question that Senator Macdonald had put to the minister about the reason why this tax is exclusively imposed on individuals and not on others. Senator Xenophon put it in these words: that he had been told that it was administratively—

Senator Xenophon —No, I didn’t say I was told that. That is my understanding.

Senator CORMANN —So it is your understanding that intrinsically comes to you; it is not something that in the course of your negotiations the government has put to you? I find the proposition that we impose a new tax on all Australians earning more than $50,000—just because it is administratively convenient to whack every Australian earning more than $50,000—to be quite a bad way for us to go.

We are here in a circumstance where the government wants to raise $1.8 billion out of a budget of $350 billion. This is money the government should be able to find by reprioritising its excessive and wasteful spending across this budget. This tax is supposed to come into effect on 1 July 2011. That is after the next budget. We will have a budget in May, when this issue—the funding required for the reconstruction effort—can be dealt with. There is absolutely no need to deal with this now. The reason we are dealing with this now is that the Prime Minister, Julia Gillard, wanted to strike while the iron was hot and get a tax through the parliament while she thought that she could get away with it politically in the court of public opinion. She knows that tax hikes like this are unpopular, so she always is on the lookout for a political strategy to get away with a tax. She is always focused on the spin and the politics rather than on what is good public policy.

This flood tax, this increase in the income tax—to be passed by this parliament less than two months before the budget comes down—is not good public policy. It is not good public policy to set up a tax, supposedly for a one-year period, to raise $1.8 billion when, quite frankly, there would be an opportunity in less than two months to reprioritise our spending commitments in the context of the revised revenue estimates that will be before us at that point of time.

Senator Xenophon interjecting—

Senator CORMANN —I know that Senator Xenophon well knows this, but Senator Xenophon—and I admire him for it—identified a public policy issue in relation to the state Labor government in Queensland not taking out proper insurance, and he saw an opportunity to leverage his vote to get a good public policy outcome on one side. Of course, the thing that he had to bargain with was his vote. If he did not bargain with his vote, then Senator Xenophon would not be able to force the Labor government in Canberra to force their mates in Queensland to do the right thing in the future. He has done that, and I understand where he is coming from, but the outcome is still an increase in the income tax for all Australians earning more than $50,000, unless they are in one of the exempted areas.

Senator Macdonald raised the issue of how the determinations are made in relation to those exemptions. Initially, all people who were impacted by a natural disaster that was a flood event were to be exempted. I asked questions about this in Senate estimates. Senator Macdonald, I am sure you would be quite interested in this. I asked: ‘What about the people in Kelmscott who were impacted by the bushfires?’ The secretary of Finance and, later, officials from Treasury told us: ‘No. People who are impacted by bushfires are not going to be exempt. They will have to pay the tax, because only those that were subject to a natural disaster that is a flood event will be exempt from this.’

1367There were quite a lot of people who were quite concerned about this. In fact, the West Australian was about to write a story about it. The West Australian went to the Prime Minister’s office and asked: ‘What about the people who are impacted by bushfires? It is a natural disaster that is not a flood event but a bushfire. Why do they have to pay this tax?’ On the spot, the Prime Minister made policy on the run. She changed her mind and said, ‘These people are going to be exempt as well.’ Just like that. Of course, the story in the paper the next day, on the back of a quick policy decision by the Prime Minister on legislation that had not even gone through the parliament, was that they were going to exempt those people as well.

The problem was that when we started debating this legislation all of the fact sheets from Treasury and all of the official advice on the Prime Minister’s website were out of date because they still said that only those people who had been subject to a flood event were going to be exempt. There was no mention of the people who had been subject to bushfires and the like. So there is a lack of clarity, Minister, around how the exemptions are going to be handled if the Prime Minister can change it at the stroke of a pen when asked a difficult question by a newspaper out of Western Australia.

This government does not normally care about what people in Western Australia think. This government is a very eastern-state-centric government. I dare say that it is a government very much centred on New South Wales and Victoria. There is not much that they focus on outside of New South Wales and Victoria, but they took notice of a newspaper from Western Australia and—on the run—they put an exemption like this in. Of course, we welcome the fact that the people in Kelmscott will not have to pay this tax. We think that no-one across Australia should have to pay this tax. We think that all of the Australian people should be exempt from this tax.

I am sure that, as Senator Macdonald said, the minister would not be so bold as to exempt people based on political affiliation, but it would be possible under this legislation. Of course, that would be highly inappropriate. What other exemptions do the government currently have under consideration that go beyond what we have been told so far? Have other categories for exemptions been raised, Minister? I would be very interested in you answering this question.

Can you confirm, given that the fact sheets from Treasury have not been updated yet, the advice that was put to a journalist at the West Australian, through a spokesman of the Prime Minister’s office, that the people in Western Australia who have been subject to bushfires will be exempt from this flood tax? What about people who have been impacted by droughts? Droughts are natural disasters. Will people who have been impacted by droughts be exempt from this flood tax? What other natural disasters will fall within the category of exempt?

It is no longer just a flood event—we have established that, unless the spokesperson from the Prime Minister’s office was not telling the truth. If we can believe the spokesman from the Prime Minister’s office who was quoted in the West Australian as saying that the people of Kelmscott who were subject to bushfires would be exempt from paying the flood tax, what other people who have been subject to other categories of natural disasters will be exempt from this tax? You could argue that it is a disaster being governed by this minority Labor government, so maybe we should all be exempt because we are all subject to this natural disaster. You could argue that there should be a catch-all category of exemption here.

On a more serious note, it is a very serious question. A spokesman from the Prime Minister’s office told the West Australian, contrary to what was said by the Secretary of the Department of Finance and Deregulation and contrary to what was said by Treasury officials at estimates and contrary to what is written in relevant Treasury fact sheets, that the victims of bushfires in Western Australia would be exempt from paying the flood tax. Can you confirm that on the record for the benefit of the Senate? Or is that just going to be another broken promise that was made under the pressure of the 24-hour news cycle?