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Wednesday, 18 February 1987
Page: 231


Mr ROCHER(11.44) —In the next financial year, 1987-88, the Taxation Laws Amendment Bill (No. 5) and the Income Tax Amendment Bill will see to it that there will be further impositions on businesses throughout Australia. That will be so because provisional tax was hitherto payable once a year on either 31 March or the date notified on an assessment, whichever was the later. From 1 July, it is to be collected four times a year by instalments. We have been told that the net effect of that will be to swell the Government's coffers by some $90m in 1987-88.

At first glance the claimed reduction of demand on taxpayers' funds of $90m might have some appeal. But, as is usual with this Government, there is more to it than first catches the eye. The first point which should be noted is that quarterly instalments of provisional tax will not yield new revenue, but merely bring forward collection of the tax. Whereas it could previously be argued that provisional tax collections gave individual taxpayers a three-month advantage over their pay as you earn counterparts, that is to be well and truly reversed by this legislation. However, it is not equality of that sort which motivates this Government. Of paramount importance to this grasping Government is not fairness but a single-minded obsession to crush every ounce of tax blood out of the ever-shrinking stone that is taxable income. Collecting another $90m next financial year will marginally alleviate the problem the Government has spent itself into over its four long years in office. Already it is confidently predicted that the next Budget deficit will be up to something around $9 billion; that is, we will be a further $9 billion in the red unless the Government reneges on its promised July income tax cuts, raises new taxes, or does both. There is, of course, the other possibility of reducing expenditure, but that seems to be out of the question entirely for this Government if its past record is anything to go by. In the context of another record Hawke Government deficit, the $90m we are talking about is pretty trivial bickies indeed.

Putting that aside for the moment, the comments by way of justification in the explanatory memorandum, which attempts to explain the financial impact of quarterly provisional tax instalments, stretch further the credibility of the Government. The once-off benefit to revenue next year is clear enough but the ongoing effect on business is simply not mentioned. That $90m-at best-comes out of the cash flow and therefore the traditional resources of provisional taxpayers. If those businesses are to operate at the same level with resources similar to those available in this and in previous years, they must find some very large sums indeed, on my reckoning, given that instalments are to commence on 1 September with a second on 1 December and so on, and remembering that previously there was only one payment, on 31 March.

The Hawke Government may think taking that sort of money out of the private sector for ever and a day can be justified in the interest of its own greed and extravagance, but what it will do in fact is impose even more costs on business, which will in turn be passed on to consumers, sooner or later, in the form of increased prices. This is just another in the long list of measures the Hawke Government has adopted which will further fuel inflation.

However, it is not just the $90m which will disappear into the Government's deep and seemingly bottomless pockets because neither the second reading speech of the Minister Assisting the Treasurer (Mr Hurford) nor the explanatory memorandum explains how a further $100m so-called expenditure savings next year and forever more are calculated, and because they fail to do that certain assumptions have to be made. The Minister and the explanatory memorandum each indicate the same things about alleged savings of $100m or thereabouts for next year and for all time to come. I will quote from the Minister's speech. He said:

Depending on interest rate assumptions, it is also estimated that annual expenditure savings of up to $100m will result from the need to issue fewer Treasury notes.

The first assumption one could make in the absence of any further explanation is that the Government would not have to borrow up to $100m or thereabouts, even though it is strangely described as expenditure savings. It seems that that assumption must be put to one side because even this Government would not be so deceitful as to describe obviating the need to issue treasury notes as expenditure savings. It is the interest the Government must pay on treasury notes it issues to finance its huge deficits which is expenditure to be saved in this context, by reducing the need to borrow, and that in turn is possible under these Bills because provisional tax is to be collected much sooner each year than previously.

Again in the absence of any reasonable explanation of how these expenditure savings of in the vicinity of $100m each year are to be obtained, a second assumption must be made-that the estimated saving is largely, or totally, interest payable on treasury notes. The current interest rate on these notes is around 13 per cent. I use round figures for ease of calculation. An interest saving of $100m, if the rate is 13 per cent, indicates that the principal, or borrowings in the form of treasury notes, is a massive $770m per year. If that was all there was to it we could all be somewhat relieved; however, that $770m has to come from somewhere. If in the future the Government does not have to borrow this not inconsiderable sum, because the collection of taxes is once again brought forward, it becomes obvious that the bunny will have to be found yet again in the private sector. It transpires that something approaching $800m is to be ripped out of businesses to save the Government $100m in interest on borrowings. While the Government can borrow at 13 per cent, businesses which will have to borrow to meet this impost will pay interest at rates ranging from something like 18.5 per cent to over 20 per cent. It should be painfully obvious that if businesses around Australia have to find an additional $770m to pay taxes out of resources that have previously been at their disposal, some significant adjustments to their operations will have to be made. Because few businesses will be able to raise equity capital to fund this impost, several alternatives will have to be considered. These include, but are not necessarily limited to, increasing prices for goods and services provided, reducing inventories or the levels of work in progress and shedding labour and borrowing. None of those natural reactions, or any combination of them, is good news for either inflation or higher employment.

Having already mentioned the lack of detail from the Government which would have revealed the effect of bringing forward the collection of provisional taxes, it seems appropriate to dwell on something else the Minister had to say. The estimated $100m expenditure saving, assumed to be interest on treasury borrowings, is quite properly qualified by the Minister when he says that the actual saving will vary from year to year `depending on interest rate assumptions'. It is not hard to understand the need for such a qualification. Under the Hawke Government we have witnessed the highest levels of interest, in real terms, in the history of our nation. The Government has shown neither the will nor the ability to influence interest rates downward, and in fact the opposite is patently true. The diabolical balance of payments fiasco this Government has overseen makes it imperative that interest rates remain sky high now and for the foreseeable future. The high interest policies under which householders and businesses alike have to survive now are here to stay, unfortunately, until there is a change of government. The Minister was quite right to indicate that he and his Government do not know what interest rates will be next year because they cannot credibly say what the levels will be at the end of this week, let alone next month, next year or at any time in the future.

There is another element to the claimed expenditure savings of $100m in years to come. As already indicated, the estimated saving is probably the interest that would have to be paid if the $770m were borrowed by the Government, if it were not to fleece provisional taxpayers in the way that is now proposed. There is a certain strange logic to that proposition. The Government is forced to borrow because it cannot or will not bring down a balanced Budget. Because it wantonly spends more revenue than it can raise, we have record deficits and record interest payments upon debts incurred by this, the biggest borrowing Government in Australia's history. The Government, having deliberately spent us into that predicament, claims that a major justification for bringing forward the collection of provisional tax is that it will save interest on borrowings that the Government's very own deliberate acts of financial irresponsibility have generated. Whilst expenditure savings of $100m may be there in strict terms, to describe them as a benefit when talking about the financial impact of this legislation opens up a whole new line of Hawkespeak.

What is being said in reality is that because the Government does not deign to bring down a balanced Budget or to keep its expenditure below the amount of revenue it gets from all sources, any measure which reduces its own deficit saves money. That is strictly true, of course. Think of the possibilities, Madam Deputy Speaker. Provided a government-any government-spends more money than it has it will have to borrow the approximate shortfall. It can then, using the logic being employed by the Hawke Government on this occasion, say that any revenue raising measure saves it interest on borrowings it will not then have to make. Some might say that it is a bit devious, nevertheless it is literally correct. To those who might be tempted to say that, let me put this proposition: The same logic must be applied to any new spending legislation. The cost impact then is not all that is measured in the normal way. There must be added an estimate of the interest on additional borrowings needed to finance it.

That is plainly ridiculous even though it is a natural corollary of the line being peddled in the explanatory memorandum. I hope that the Minister and the Government take pains to see that that argument is never advanced as an example of a beneficial effect of the cost impact of legislation before this chamber. It is instructive to look at the demands placed on business administrators, who must file a whole raft of tax remittances, reports and returns. This measure adds another three logs to that raft by introducing another three reporting and remitting dates. Those demands have increased enormously during the terms of this Government. The Confederation of Western Australian Industry--


Mr Braithwaite —A good organisation, too.


Mr ROCHER —It is a fine organisation. The Confederation of Western Australian Industry highlighted the magnitude of the administrative imposts in a calendar for 1987 which it had printed. At a quick glance, it tells some of the story. It deals essentially with Commonwealth taxes and returns. The demands of State and local government tax laws are separate altogether and part of an additional burden. It could be said that this Government has 12 tax commandments which the business sector is now obliged to follow. The 12 commandments are broken up into monthly, quarterly and annual obligations. When one remembers that these obligations are only Commonwealth requirements and not State or local government, one soon comes to the conclusion that there are not many days left in the working week for accountants to meet their obligations to other than the Commonwealth.

The monthly requirements placed on business include: On the seventh day of each month the business must report and remit group tax reductions; on the fourteenth day of each month it must report and remit prescribed payments tax; on the twenty-first day of each month it must report and remit withholding tax; if it is in the wholesaling business as well, on the twenty-first day of the month it must report and remit sales tax. The quarterly obligations include-this is what we are talking about today-provisional tax because now, as distinct from previously when 31 March was the appropriate date, the business must report and remit provisional tax on 1 March, 1 June, 1 September and 1 December. That is on top of an existing quarterly obligation to remit company tax instalments on 15 August, 15 November and 15 February and the final instalment of company tax which must be made in accordance with normal final assessment requirements. Businesses must make their returns and pay company tax either in instalments or in a final payment.

Businesses have to deal with the fringe benefits tax every quarter; on 28 January, 28 April, 28 July and 28 October each year they have to report and remit fringe benefits tax. On top of that, businesses have the usual annual imposts. On 1 July business men and women around Australia have to collate, reconcile and balance group tax returns and tax sheets. A couple of weeks later, 14 July is the last day on which businesses may lodge tax stamp sheets. It is also the last day on which they may issue group certificates to their employees. Only a month later, 14 August, is the last day on which they may lodge group certificates and returns with the Australian Taxation Office. Of course, 31 August is the last day on which business people, along with other private income earners, may lodge their individual tax returns.

This is a measure of the burden which is placed already on businesses. I repeat, they are obligations applicable to only Commonwealth requirements. They are indicative, along with the factors that were mentioned by the honourable member for Mackellar (Mr Carlton), of the uncertainty and impositions that businesses have to face in this country and how they are expanding under this Government.

Mr Deputy Speaker, when this socialist Government first came to office Australia was on the brink of an economic abyss. Since then it has taken a giant step forward. Measures such as these and the uncertainty to which my friend and colleague, the honourable member for Mackellar, has referred have added to that circumstance. There is no prospect in sight-it seems to us on this side, certainly when we read the rhetoric of honourable members opposite-that any relief will be available from these uncertainties for as long as this Government continues in office. But unless there is some certainty-because certainty after all is the foundation of confidence-and ensuing confidence, this country will continue to waver. It will continue to stagnate at the bottom of that abyss. Unless we can convince the Government to allow the private sector to know and work under the rules-and to leave them alone for a couple of years at least and not change them-and not to add imposts on the private sector, it is difficult to see that we will ever get a restoration of that confidence which we so badly need in the wealth generating sector.

While the massive uncertainty we have witnessed continues one can be sure that business people will not make the investment decisions we need in this country. They will not commit the capital or other resources to new ventures while there are unknowns, while they are not clear on what the Government's intentions are. They will tend to sit on their hands, and as long as they do we will find it difficult to get out of the problems that we have seen develop under the Hawke Government. Mr Deputy Speaker, I support the amendments moved by the honourable member for Mackellar.