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Thursday, 17 November 1983
Page: 2886


Mr HOWARD(5.58) —The Opposition will support the amendment that has been inserted in the Income Tax Assessment Bill (No. 4) 1983 in another place. The Opposition welcomes the fact that the Government has partially corrected the mistake that we believe it made in the Budget in deciding to phase out the tax exemption applying to service pay for members of the Reserve. I have to say in all charity to the Government that this decision, which has only been partially corrected by the amendment now before the Committee, is a very good example of those foolish, unpopular, mean unproductive decisions that most governments on occasions make. I have to say to the Government that it is really building up a fairly impressive record of hostility towards members of the services in this country.

In that context I take this opportunity of referring to an article in the November 1983 edition of the Pacific Defence Reporter under the heading ' Government in a mess over Service pay'. That particular article cites three areas where the Government has incurred the hostility of the services: Firstly, the reversal of its previously enunciated policy on reserve forces payments not being liable for tax-that is being partially corrected by the measure now before the Committee; secondly, the review of the Defence Force retirement and death benefits scheme only six weeks after it gave a clear undertaking that it would not do so; and, thirdly, it has treated the permanent forces grossly inequitably by setting the minimum age limit for partial exemption for the lump sum superannuation penalty tax at 55 years.

All of us will remember that two or three years ago, when the former Government was endeavouring to encourage enlistment in the Reserve, to his credit the Prime Minister (Mr Hawke), then the President of the Australian Council of Trade Unions, joined with the former Minister for Defence, Sir James Killen, in some joint advertisements encouraging Australians to join the Reserve. Those advertisements won very wide acclaim. They addressed the call to the young men and women of Australia. The thrust of those advertisements was: 'We would like you to do something extra for the defence of your country'. There was an implied covenant in those advertisements in which both Sir James Killen and the then President of the ACTU, the present Prime Minister, joined. The implied covenant was that if a person did his bit the Government would continue to do its bit. Part of the Government doing its bit was to maintain completely the tax exemption for Reserve pay. Therefore I think the Government's action has led to some disappointment and attracted proper criticism from the Opposition and other sections of the community. The Government must be becoming aware of the fact that there is great scepticism and hostility even towards it amongst Reserve personnel and amongst service personnel generally because of its apparently indefinite attitudes and willingness to make the first cut in the defence area, if it has to make cuts. All those matters taken together are not only putting the Government, as the article says, in a mess over service pay but also generally building up a climate of hostility towards the Government from those in our community who are concerned about the nation's defence and about the morale of those who serve in the nation's defence.

We must be grateful for small mercies. The Opposition welcomes the Government's partial backdown. It would have been more intelligent of the Government to have gone the whole hog and admit that the proposal was a foolish idea and to have recanted in full. Partial repentance, whilst better than continuing sin, is inadequate for the task on this occasion. It will not secure the salvation that the Government would want.

The effect of this proposal will take to at least $100m the cost to revenue of backdowns by the Government. I do not think this backdown will have much effect in the 1983-84 Budget but it will have an effect of $5m in the 1984-85 Budget. I refer also to other backdowns that have occurred, the fuel excise, the tax on grape spirit, the modifications to sales tax on swimming pools and, most recently, the decision not to sell 49 per cent of the Government's equity in Aussat Pty Ltd. Those decisions, taken together, this year will cost the Budget $100m. I am not saying that $100m in an overall budget of $45,000m or whatever it is, is a large amount. It clearly is not. But what it does do is give the lie to the argument that has been used by the Treasurer (Mr Keating) and the Prime Minister that because the Senate a few weeks ago rejected some quite unfair, unjust and inequitable taxation legislation it is necessary for the Government to increase the taxation burden on the ordinary taxpayer. The Government has thrown away more revenue by its own decisions than the rejection by the Senate of that measure. The total amount involved this year by the Senate's rejection of the legislation was only about $60m whereas the Government's measures total $ 100m. That simple comparison alone gives the lie to what the Government and the Prime Minister have been saying. They have said: 'Because the terrible people in the Senate rejected a quite outrageous piece of legislation' as the Treasurer and the Minister Assisting the Treasurer (Mr Hurford) know 'we are going to have to put overburdening and terrible taxes on ordinary, decent, honest taxpaying Australians'. That is a nonsense. It is demonstrated to be a nonsense because the Government has thrown away an additional $40m revenue by these measures.

The Opposition welcomes the partial repentance of the Government over this matter. I am sorry it brought it in in the first place; it was a silly measure. It is storing up a lot of hostility amongst service personnel around Australia. Heaven knows people make enormous sacrifices to serve in the Reserve. Young men and women give up enormous amounts of their spare time. They do it out of a sense of duty and service. I know there is no economic justification in a pure sense. It was put to me when I was Treasurer that this exemption was unjustifiable according to the purity of taxation principles. Of course it is. However, one must take more things into account than just the purity of the system. Apart from economic considerations other considerations are involved, as I am sure the Treasurer knows and is willing to apply in other areas. I am only sorry that he has gone half of the way and not the whole of the way. I hope that even at this late hour the Government will recognise that this is a silly measure. It has only half abated the problem. If the Government were willing to change its mind it would get the gratitude of the service personnel and it would receive the uncritical support of the Opposition. The change would not break the bank; in fact, it would not cost the Budget anything this year and a total of only $5m next year. The Government cannot be totally outraged by the principle because it is still allowing a 50 per cent tax exemption. Overall, it is a very great disappointment that the measure was brought in in the first place. However , having been brought in it is a great disapointment that the Government has not totally recanted. However, as I have said, we are grateful for small mercies. We are very happy to wish the measure a very speedy passage.