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Tuesday, 6 September 1983
Page: 373


Mr HOWARD —I address a question to the Treasurer. I refer the honourable gentleman to a section of the prices and incomes accord with the Australian trade union movement which reads:

. . . the Government will endeavour to reduce the relative incidence of indirect taxation because of its regressive and inflationary nature.

How does the honourable gentleman reconcile this statement with remarks he made last week to the effect that the regressive label attached to all indirect taxes had been oversimplified and had limited the Australian Labor Party's view of this form of taxation, and that a full examination of the regressive versus progressive tax argument could lead to a different view being taken on the traditional labels? That is a view, incidentally, with which I totally agree. How does the honourable gentleman reconcile the statement in the accord with the remarks attributed to him? Does it mean that the Government's attitude towards direct versus indirect tax has undergone a significant change over the past few months?


Mr KEATING —The first point I should like to make is that the Australian Council of Trade Unions welcomes the Budget in broad, overall terms, including the increases in indirect taxation. Referring more generally to the question of indirect taxes, the Government chose in the Budget to change the basis of the anomalies in the indirect tax base in respect of excises and, as I indicated, increased in a discretionary sense at least one tax; that was the increased tax on petrol of 1 1/2c. The increase in respect of the crude oil levy due to the increased raisings out of Bass Strait was not the consequence of any change in rate but, rather, uplift. Were it not for the fact that the Government included in the Budget a contingent measure to deal with underlifting, the revenue assumptions could quite easily have been mere assumptions.

What the Deputy Leader of the Opposition implies in his question is that the Government can do nothing about the indirect excise base. I reject that absolutely. In the Budget the Government stayed away from the easy option of indirect taxes which we saw the Government to which the honourable member belonged resort to in the middle 1970s when, despite prognostications to the contrary, indexation was holding together. The Fraser Government found it easy to resort to the soft tax option of the crude oil levy. There was a rapid increase in the oil price from $2-odd a barrel to the world price overnight. The Fraser Government resorted to the curious policy of financing supposedly anti- inflationary Budgets with inflationary taxes and charges. That was very much a hallmark of the revenue policies of that Government. Of course what it did finally was destroy indexation. It then tried the so-called market-place basis of wage determination which the Deputy Leader of the Opposition prefers and which, amongst other things, has got us into the position in which we are in terms of inflation today. In general terms, the Government stayed away from discretionary measures in excises. Indeed, the increases on tobacco, beer and other commodities were essentially the result of the indexation procedure rather than the express result of a decision, for instance, to increase the price of cigarettes, which is an option available to the Government. Seeing that some States had increased the excise on cigarettes in recent times, we deliberately stayed away from that. I reject the proposition, which I think is implied in the question, that in some way the movement of the excise base, the removal of anomalies and the discretionary increase in petrol prices were a turning away from the general policy we have fostered. In that respect we have the accord very much in mind.

As to the other element of the honourable member's question in respect of the neutrality or otherwise of indirect taxation, there have been a number of publications in recent years in respect of some indirect taxes, particularly from the Organisation for Economic Co-operation and Development, which imply that at the worst some of these taxes are neutral. Last week the Prime Minister and I indicated that the tax base will be under review throughout this year. Those considerations will weigh upon the Government and we will, of course, be making our own judgments about those claims.