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Wednesday, 18 February 1987
Page: 272


Mr PRICE(4.14) —The Taxation Laws Amendment Bill (No. 5) will give effect to another of the measures in the Government's tax reform package by introducing an instalment system for the payment of provisional tax. It also contains several other measures. I think it is very important for the House to understand that the Government has been through a thoroughgoing process of taxation reform and this Bill is but one of a number of Bills of that package that have been before the House.

In listening to Opposition speakers, I have been struck by the constant argument that although pay as you earn taxpayers generally pay taxation instalments on a weekly basis-public servants, for example, pay it on a fortnightly basis-for other taxpayers who pay provisional tax to pay on a quarterly system is somehow terribly unfair or unethical. I do not understand that argument. Indeed, the first three instalments are based on one quarter of the previous year's income, so there should be no general hardship. It is not as though the amount is increased.

The honourable member for Dawson (Mr Braithwaite), who is not in the House, said that he would like to see all taxation Bills contain a compliance cost. That is not an unreasonable proposition. This Government is very sensitive to the cost to big and small business of government regulation. Indeed, the Minister for Industry, Technology and Commerce (Senator Button) is responsible for a complete review by the Government of this area which, I believe, was sadly neglected by the Opposition when it was in government. The amendment moved by the honourable member for Mackellar (Mr Carlton) said nothing about compliance costs. Its central feature reads:

deplores the creation of uncertainty and confusion among taxpayers and in the business community due to the failure of the Government to present these and other measures to the Parliament--

(Quorum formed) Before the time of the House was wasted by the Opposition, I was outlining the amendment moved by the honourable member for Mackellar. Its third point reads:

condemns the Government for imposing an excessive tax burden on business thus inhibiting new investment in productive enterprises.

What have we had from the Opposition by way of taxation reform for business? It has a new slogan, which I think is called `Incentivation'.


Mr Ronald Edwards —Inactivation.


Mr PRICE —Inactivation. Perhaps we ought to throw in another term for its taxation policies-creative inertia. That is what the Australian people are getting. This Government has introduced one of the major reforms that the business community has long sought from the Opposition and which it has consistently been denied.


Mr Ronald Edwards —What is it? The removal of double taxation of dividends.


Mr PRICE —The removal of the double taxation of dividends, as the honourable member for Stirling points out. The Opposition did not have the courage to do it. At a time when there is a lot of confusion about taxation reform, considering the process that the Government has gone through, never at any stage did the Opposition say: `Well, in the interests of big Australians, small Australians and ordinary Australians, this is an important national issue. We believe in taking a bipartisan approach'. To what extent did the Opposition assist the Australian people or the Government to arrive at the taxation proposal contained in this Bill? It did nothing. The only thing it did was to agree with the Government when there were proposals to reduce taxation, and to oppose the Government on proposals to increase revenue. If the Australian people are looking for a government that has the national interest at heart and which can identify problems and be above and beyond mere politics, they will not find one in the Opposition.

There has been a lot of discussion about flat taxes, average taxes and marginal rates of tax, and I want to go through a few of these terms. I seek leave of the House to incorporate in Hansard a tax table I have prepared. I have followed the usual courtesy of discussing it with the shadow Treasurer, the honourable member for Mackellar, and, subject to the normal rules, I seek leave to incorporate it.

Leave granted.

The table read as follows-

Tax scale

Marginal

rate

Taxable

income

Tax

paid

0- 5,100...

@0

5,100

0

5,101-12,600...

@24

7,499

1,799.76

12,601-19,500...

@29

6,899

2,000.71

19,501-35,000...

@40

15,499

6,199.60

35,000-...

@49

999

489.51

Totals...

36,000

10,499.58

Average Rate-29.14%.


Mr PRICE —What is a marginal rate of taxation? It is the percentage of an extra dollar of increase paid in tax. An average rate of taxation is the tax payable divided by the taxable income expressed as a percentage. For example, if someone is on a salary of $36,000 and if he has a marginal rate, as we often call it, and if the Government is going to bring the marginal rate down in July from the Howard rate of 60c in the dollar to 49c in the dollar, does that mean that that person pays 49c in tax for every dollar earned? No, it does not. In fact, for the first $5,100 of income that person pays no tax. For the next $7,499 he pays 24c in the dollar, which is $1,799. For the next $6,899 earned he pays 29c in the dollar. For the next $15,499 of income he pays 40c in the dollar, which is $6,199.60, and he pays 49c in the dollar for the last $999 of income, which amounts to $489.51. This means that his taxable income was $36,000. I have chosen that example because it takes us through all the tax scales of our proposed additional taxation reforms that have already been passed and will be introduced on 1 July. That person pays a total tax of $10,499.58.

The marginal rate was 49c in the dollar. What is the average rate of taxation that this person is paying? It is not the Howard 60c, it is not 49c, or 40c; in fact, it is 29.14c. I think it is very important for people to understand clearly the difference between their marginal rate of taxation and their average rate of taxation, because their average rate is always considerably less.

To understand and explain flat rate taxation, I seek leave to incorporate a table in Hansard, which appeared in the National Times on Sunday of 15 February. I also saw the shadow Treasurer about this.

Leave granted.

The table read as follows-

CHANGE IN TAX PAYABLE DUE TO A 25 PER CENT FLAT TAX WITH DIFFERENT TAX-FREE THRESHOLDS

Taxable income

Tax

Payable

(1.7.87

rate

scale)

Tax-free Threshold

$0

$1,000

$2,000

$3,000

$4,000

$5,100

$pw

$pw

Change in tax payable $pw

50...

0.00

12.50

7.71

2.91

0.00

0.00

0.00

75...

0.00

18.75

13.96

9.16

4.37

0.00

0.00

100...

0.52

24.48

19.68

14.89

10.09

5.30

0.02

150...

12.52

24.90

20.18

15.39

10.59

5.80

0.52

200...

24.52

25.48

20.68

15.89

11.09

6.30

1.02

250...

36.94

25.56

20.76

15.97

11.17

6.38

1.10

300...

51.44

23.56

18.76

13.97

9.17

4.38

-0.90

350...

65.94

21.56

16.76

11.97

7.17

2.38

-2.90

400...

83.30

16.70

11.90

7.11

2.31

-2.48

-7.76

450...

103.30

9.20

4.40

-0.39

-5.19

-9.98

-15.26

500...

123.30

1.70

-3.10

-7.89

-12.69

-17.48

-22.76

600...

163.30

-13.30

-18.10

-22.89

-27.69

-32.48

-37.76

700...

205.89

-30.89

-35.68

-40.48

-45.27

-50.07

-55.34

800...

254.09

-54.89

-59.68

-64.48

-69.27

-74.07

-79.34

900...

303.89

-78.89

-83.68

-88.48

-93.27

-98.07

-103.34

1000...

352.89

-102.89

-107.68

-112.48

-117.27

-122.07

-127.34

Revenue Gain ($bn) ...

5.38

3.27

1.22

0.79

-2.75

-4.8


Mr PRICE —It is very important for people to understand what flat rate taxation proposals mean. They mean that we do not have a marginal rate or a tax-free threshold; we just get taxed at a flat rate of 25 per cent of every dollar earned. That is what a pure flat rate taxation system is all about, and that is what I understand Sir Joh Bjelke-Petersen, the Premier of Queensland, is advocating. The important thing that honourable members have to remember is that this proposal, when looking at its total impact, would not provide tax cuts for the Australian people. It would raise an additional $5.38 billion. In other words, more Australians would be paying tax under that system than the number receiving benefits. In fact, 80 per cent of all Australians would be paying additional tax.

Let us take a couple of examples. Firstly, under the flat tax proposal, what would happen to someone under 18 years of age earning $50 a week? Under our proposals, that person would not pay any tax, but under the flat tax proposal of Sir Joh he would be paying $12.50 a week. A single pensioner earning $106.20 a week would be paying, under this flat tax proposal, $24.48 a week. So we can see that what I say is correct. A flat tax proposal would in fact reward the super wealthy. They would be getting the most benefit, and 80 per cent of all Australians would be paying more. The tax bill of the pensioners in Chifley, who are tremendous people, will escalate enormously.

It is very hard to keep up with the latest twists and turns of the non-released Opposition taxation policy. Although the honourable member for Mackellar spoke in the debate today, he did not announce that the Opposition had as yet come to a taxation reform package. We have not had a taxation package from the wets, or from the dries, from the Sinclair nationalists or from the Bjelke-Petersen nationalists. It is about time they came good.

Let us look at the Liberal Party system which was announced in the Sydney Daily Telegraph on 6 January, which has subsequently changed. There are so many twists and turns that I have to confess I am finding it very difficult to keep up. Basically, this proposal was that there would be a tax-free threshold to $15,000, and from $15,000 to $17,000 there would be a tax of 15c in the dollar, and from $17,000 above there would be a tax of 25c in the dollar. The important thing about this proposal is that its cost to revenue would be about $19.4 billion. It is very hard to understand, but that is the sort of cost which would be involved. The constituents in my electorate are talking about a university, which they ultimately hope to have built at a cost of $600m. We can imagine how many universities could be established with $19.4 billion. But in order to pay for this the Liberal Party would have to implement a 25 per cent consumption tax. The inflation effect of this would be 17 per cent. We have heard Opposition spokesmen say that inflation is too high. Whatever the rate is today, if one added to it 17 per cent or whatever amount cannot be quarantined, it would be absolutely astronomical.


Dr Charlesworth —Horrendous.


Mr PRICE —It would be horrendous.


Mr Ian Cameron —That is why I am opposed to it.


Mr PRICE —I can understand the honourable member saying that he is opposed to it but, if the Opposition wants any credibility on the issue, it has to show how it will pay for it. I will quote the words of the Leader of the Opposition.


Mr Lloyd —I take a point of order, Madam Deputy Speaker. We are debating certain amendments to present taxation laws. I do not think that proposal has anything to do with the debate in question.


Madam DEPUTY SPEAKER (Mrs Darling) —There is no point of order, on the basis that I delineated before. As long as people are keeping to the general concept of the legislation and the amendment-we are debating both-it is quite all right to have a little flexibility. I will keep an eye on the matter on both sides to ensure that the Standing Orders are not offended against.


Mr Lloyd —In that case, Madam Deputy Speaker, I draw your attention to the state of the House. (Quorum formed)


Mr PRICE —I can understand the sensitivity of members of the Opposition. All I was trying to do was to quote the words of their coalition leader; that is, if they are still in a coalition. I think it was Mr Howard at the time. On 17 February 1987, on the steps of Parliament, he said:

I haven't seen exactly what Mr Sinclair has said but my own views on the need to consider, as an option, broadening of the indirect tax base as part of a trade-off for lower income tax has not altered and cannot alter because I am not prepared like some people including the Premier of Queensland to suspend the laws of arithmetic.

I do not know what is so embarrassing about that that made the Opposition call for a quorum. But I do understand that some Opposition members would not like us to talk about the faceless men behind the National Party Premier of Queensland, the $23m soft shoe brigade. Only a couple of them have come forward. When people are dealing with the Government, they know what our objectives are-fairness and equity-and they know what we are trying to do. But what is the Opposition trying to do? What do the faceless men who are funding the National Party Premier with his tax offensive want out of it? As the honourable member for Dunkley (Mr Chynoweth) suggested, what do they want out of it?


Madam DEPUTY SPEAKER —Order! the honourable member's time has elapsed. Before I call the honourable member for Moreton, I point out that the Chair is trying to maintain a balance in the debate in this House, as is usual from the Chair. When the honourable member for Murray did not have a point of order upheld, there appeared to be an implication that, because of that, he would call a quorum. I hope that that is not the case because, were that so, it would be an abuse of the Standing Orders. I bring his attention to that.