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Wednesday, 2 November 1983
Page: 2203


Mr DUFFY (Minister for Communications and Acting Minister Assisting the Minister for Industry and Commerce)(3.07) —Before moving to the positive elements of the Government's achievements in this area, I will deal with a few of the matters raised by the honourable member for Higgins (Mr Shipton).


Mr Peacock —It was a good speech.


Mr DUFFY —That is a matter of opinion. The honourable member started by attacking the Leader of the Government in the Senate, the Minister for Industry and Commerce, Senator Button, because of the views expressed by Senator Button in relation to the imposition of a capital gains tax. I would like to deal with that matter because the honourable member referred to Division 7 of the Income Tax Assessment Act. He referred to it somewhat loosely but that is what he was referring to. Senator Button would have expressed the need for a capital gains tax for two reasons. The first one is that this Government believes that Division 7 should be looked at from the point of view of small business. Clearly that should be done. It is something which honourable members opposite, after seven years of total inactivity in respect of that matter, now appear to agree with. Opposition members could have done plenty about the matter if they had wanted to. Unless one has strong provisions in respect of capital gains there is no way that one will be able to deal with the problems of Division 7 of the Income Tax Assessment Act. It ill behoves those opposite to start talking about capital gains taxes which were introduced--


Mr Peacock —You started talking about them.


Mr DUFFY —The honourable member started it. It ill behoves those opposite to start talking about capital gains taxes which were introduced in this country as long ago as about 1930. The capital gains tax worked well until the Fraser Government came into office and neither section 26 (a) nor section 26AAA of the Income Tax Assessment Act were enforced. We saw the greatest explosion of tax avoidance, through the capital gains tax, in the history of this country. Let us think about how this issue affected small business. Pay-as-you-earn taxpayers in this country were contributing 46 per cent of the total revenue received by the Government. Over 80 per cent of personal income tax came from the PAYE area. This was partly because the Government of the day, the Fraser Government-its remnants now sit opposite-did not have the guts to enforce section 26 (a) or, for that matter, section 26AAA. So honourable members opposite should not start talking about capital gains taxes. Those provisions were always there and they did not enforce them.

The next matter the honourable member for Higgins dealt with was withholding tax. Let us look at the question of withholding tax. Withholding tax is a system for the collection of tax by a deduction at the source from certain payments for work not subject to existing pay as you earn arrangements. The basic rate of deduction is ten per cent. It is limited to prescribed payments. An outline of that system-the system of withholding tax-was introduced by the previous Government and has been available since August 1982. Taxpayers were doing their best to comply with the system. Of course there will be administrative difficulties. We have admitted that. The Opposition, even in government, would have understood that, but because of a misunderstanding or an honest mistake, as stated by the Treasurer, (Mr Keating), people in this area will be given every assistance. The system will be monitored in six months' time to see how it is operating. But it is a tax evasion measure and demonstrates the determination of this Government to combat both tax evasion and tax avoidance. Australians on wages and salaries who pay tax through the pay as you earn system have been forced to bear a grossly inequitable burden which was inflicted on them by the previous Government. It is about time that we made quite clear that that is what it is about. That is what the previous Government knew it was about too, somewhat belatedly. After all, the outline of that system was introduced by the Fraser Government and was available from August 1982.

The other matter which the honourable member for Higgins raised was the proposal for a year of small business. I am aware of that proposal. The Government believes that it deserves to be examined. However, before any responsible government could indicate its support for such a proposal, it would need to have a firm estimate of the extent of the financial commitment being sought. The Minister for Industry and Commerce is writing to the Council of Small Business Organisations of Australia-the proponent of the idea-seeking more information on the type of activities envisaged and how these would be funded as between the Commonwealth, the States and industry.


Mr Peacock —The honourable member for Higgins was the first to propose it here.


Mr DUFFY —The Leader of the Opposition says it was the idea of the honourable member for Higgins. God help small business if the ideas are coming from him. My understanding of it was that it was the idea of the Council of Small Business Organisations of Australia.


Mr Shipton —What are you doing about it?


Mr DUFFY —I have just told the House. If the honourable member will listen, I will repeat it for him. The Minister for Industry and Commerce is seeking the views of the Council of Small Business Organisations of Australia-the proponent of this idea, not the honourable member-seeking more information on the type of activities envisaged and how they will be funded as between the Commonwealth, the States and industry. When that is ascertained, that matter will be looked at .

This Government recognises the crucial importance to Australia of maintaining a strong, viable and diverse small business sector. We are conscious of the role which small business plays in generating investment and employment opportunities . Ninety per cent of Australia's enterprises are small businesses. One out of every two people in private sector employment is employed in small business. Mr Gibbons, the President of the Council of Small Business Organisations of Australia, attended the last meeting of the Economic Planning Advisory Council as an observer. This Government has recognised the importance of small business. That has been demonstrated by the decision to include small business representation on our Economic Planning and Advisory Council. It is noticeable that the honourable member for Higgins did not bother to advert to the fact that that is a step taken by this Government. The Prime Minister (Mr Hawke) and other Ministers of this Government have met with the Australian Chamber of Commerce. That organisation-although the honourable member might not be aware of it-makes representations on behalf of both small and large businesses.

All businesses, regardless of size, have to cope with the depressed level of economic activity which has intensified competition and reduced profitability. All around this country it is true to say-it is certainly true when one talks to people in the area we are now discussing, that of small business-that the last three months is the best three months, as far as future prospects are concerned, that small businesses have had for two years as a result of policies implemented by this Government. Confidence is starting to come back. They are now starting to look forward to the future with some hope, something that they were unable to do under seven years of government by those now sitting where they ought to be sitting-on the Opposition benches. The growing indications of economic revival are therefore good news for small business. It is about time that those opposite understood that. Decisions announced in the 1983-84 Budget reflect the determination of this Government to establish a solid base for the establishment and growth of small business in the emerging recovery phase. The program encompasses initiatives in the areas of finance, taxation, education and training, information and research, competition and government purchasing. Access to finance has always been of critical importance to small business. Numbers of recent studies have highlighted the problems faced by small business. particularly as regards access to equity and venture capital.

I want to deal with the question of venture capital. In September, this Government announced details of a scheme to encourage the development of a substantial venture capital market in Australia, something that did not occur to or cross the minds of those opposite-despite all their bleatings today-in the seven years that they were in office. Under this scheme, investors in licensed management and investment companies will be able to claim a 100 per cent deduction in the year of subscription. The establishment of mature industrialised companies will, in turn, lead to some $40m being available for investment and high risk industry ventures. The scheme will contain criteria designed to limit its application to smaller companies with high growth potential. We have heard plenty from those opposite about what is needed for small business. Not one positive contribution came from the honourable member for Higgins, other than the inane criticisms which were directed at the Minister for Industry and Commerce. The honourable member should have a think about that venture capital and see where that gets him.

The terms of reference of the review of the Australian financial system announced by the Treasurer in May contain specific reference to the need for an adequate supply of finance at reasonable cost for the small business sector, that is-the honourable member for Higgins ought to take note of this-there is a specific term of reference in that inquiry. That specific term of reference is to inquire into the financial requirements of small businesses. That review will clear the way for consideration of further initiatives in the small business finance area. We believe that the Commonwealth Development Bank's close relationship with the banking system and its experience in handling development proposals for small business will make it the ideal instrument for a broader role in the area of small business finance. We have already freed the Commonwealth Development Bank's borrowing program from Loan Council control so that its borrowing entitlements can be widened more easily. We will be looking at the question of allowing the Commonwealth Development Bank to provide equity as well as debt finance. As a further move to increase the flow of equity finance to small businesses, we are investigating the establishment of an over- the-counter market in unlisted shares in small public companies. We have announced positive steps to encourage the development of a venture capital market as I indicated before. I want to come back to this point because I think it is of tremendous significance. That venture capital market will be enlarged by providing 100 per cent tax deductibility for shareholders in management and investment companies. This will be of particular significance to the people the Opposition claims to be concerned about. It will be of particular significance to small firms which play a major role in developing and diffusing new technologies and innovations, a matter, again, which did not occur to any of the members of the Opposition when they were in a position in government to do something.

Small and medium firms will benefit from decisions announced in the Budget and those made more recently concerning the Australian Industries Development Corporation. These include-the honourable member raised this a moment ago, so let him listen to them-a capital injection of $12.5m; an increase in the Corporation's gearing ratio from 8:1 to 15:1; provision of a formal Commonwealth guarantee for the Corporation's borrowings and increasing the Corporation's statutory capital from $100m to $150m. The growth and development of technology- orientated small firms will also be enhanced by the support provided in the Budget for research and development, including technology transfer, productivity improvement and innovation. It is widely recognised that the lack of management expertise is probably the single most important cause of small business failure. We have therefore decided in this Budget to enable upgrading of proposals specifically directed towards small business management, education and training. Funds provided in this year's Budget will enable the Department of Industry and Commerce to expand the range of business publications, management training courses, films and audio-visual productions. It should also be noted by honourable members opposite that the Minister has approved the continuation of the highly successful small business awards program. In the current financial year we will be consulting with the States and small business representatives on proposals to expand further extension services for small business.

More and better information on the small business sector is essential for the identification of problems and the development of appropriate policies. The Government will act to upgrade official statistics and encourage more research into small business. Work has commenced on the form of an annual report which will focus on the prospects and performance of the sector. As a start in implementing this program, funds have been provided in the Budget to expand departmental resources. A small business council will be established to advise the Minister on small business issues, including needs and priorities from program development.

This Government believes that small businesses are inadequately protected from abuse of economic power by big businesses under the present Trade Practices Act, a matter which again the honourable member for Higgins did not bother to mention during his speech. We are examining many ways of strengthening the Trade Practices Act so that it can provide a more effective means of dealing with unfair competition. This Government is investigating other aspects of competitive behaviour, including the need for legislation governing franchising and the desirability of standardised lease agreements for tenants in shopping centres. Not one positive contribution was put forward by the previous speaker.


Mr DEPUTY SPEAKER (Hon. Les Johnson) —Order! the Minister's time has expired.