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Wednesday, 18 February 1987
Page: 279


Mr HAWKER(5.02) —In speaking in support of the amendment moved by my colleague, the honourable member for Mackellar (Mr Carlton), I take up a couple of points made by the previous speaker, the honourable member for Perth (Dr Charlesworth). The honourable member for Perth seemed to spend most of his time concentrating on what the Opposition is doing. I take that as a compliment-the Opposition is seen as the next government. Furthermore, the honourable member found it very difficult to justify what the Treasurer (Mr Keating) has been doing to this country, in particular what he has been doing with the Income Tax Assessment Act. As the honourable member for Mackellar said in his speech, what the Treasurer has done to the Income Tax Assessment Act is quite incredible.

When this Government came to power there were just over 1,200 pages in the Income Tax Assessment Act and after the Taxation Laws Amendment Bill (No. 5) 1986 is passed there will be over 1,900 pages in the Act-an increase of 60 per cent. That is some record when one compares the statement made by the Prime Minister (Mr Hawke) before the National Taxation Summit with what this tax and so many other taxes that have come out of the tax package have really shown and have done. Referring to the nine principles enunciated by the Prime Minister before the tax changes were announced, we find one which I would like to quote, which shows what a sham the Prime Minister is and what a fraud he was when he spoke about reform of taxation.


Madam DEPUTY SPEAKER (Mrs Darling) —Order! I ask the honourable member for Wannon to withdraw that reference to the Prime Minister.


Mr HAWKER —Which one, Madam Deputy Speaker?


Madam DEPUTY SPEAKER —The honourable member for Wannon just made a detrimental reference to the Prime Minister. That is against Standing Orders. He will withdraw it.


Mr HAWKER —I said that the reform is a sham, Madam Deputy Speaker. Is that what you mean?


Madam DEPUTY SPEAKER —No, I mean the personal reference to the Prime Minister.


Mr HAWKER —That his claims were fraudulent?


Madam DEPUTY SPEAKER —Not the claims; the honourable member put that description of the Prime Minister. I ask you to withdraw it.


Mr HAWKER —I will be happy to withdraw it.


Madam DEPUTY SPEAKER —Thank you.


Mr HAWKER —As I was trying to say, the claims by the Prime Minister that the reforms would be to the benefit of all Australians are in fact a sham. Referring to the fourth principle, one can see very clearly that it is in fact a sham, because he said:

. . . any reform must lead to a simpler system, which therefore all Australians can understand more easily . . .

If another 700 pages is to be added to the Income Tax Assessment Act, which most people cannot even understand and have extreme difficulty in reading, I do not think that that is making the tax system simpler and certainly it is not making it more easily understood for all Australians.

It was not surprising that the honourable member for Perth talked about the Opposition, because if he were to look at the record of his own Treasurer, he would see that it is very difficult to defend. As has been pointed out before, the Treasurer has an unenviable record in many areas. One area is particularly pertinent today, when we are talking about increasing taxation. The Treasurer is known as the highest taxing Treasurer in the peacetime history of this country. Some record! When we look at a fairer and simpler system that can be easily understood, we have seen such things as the fringe benefits tax, which is certainly more complicated and has put more pressure on businesses and added to their costs. We have seen the introduction of the capital gains tax and the assets test and the removal of income equalisation deposits. This Treasurer brought in a sales tax on things such as fruit boxes, flavoured milk and wine. Added to that, quarterly instalments will be introduced for the self-employed.

The honourable member for Perth talked about the value of the capital gains tax, implying that somehow it leads to more productive investment. I remind him that when we talk about the capital gains tax and couple that with the assets test, we find that the Government exempted the family home. So instead of directing investment into more productive areas, it is encouraging people to invest in the family home. As much as that might be a nice thing, I do not think that that is really what one could call a highly productive investment.

I refer to one section of the legislation-namely, the effect that this Income Tax Amendment Bill will have on taxpayers who will be forced to pay quarterly provisional tax and, in particular, some of the difficulties it will create for those who do not have a regular, reasonably predictable income. As the Treasurer outlined on 19 September 1985, in his desperation, this legislation is part of the package which was yet another way of trying to get more revenue out of an already highly taxed country. As I have said, the Treasurer has created the record of being the highest taxing Treasurer we have had in peacetime. By the time this Bill becomes law it will have taken 18 months since it was announced, which is quite unacceptable. Much of the legislation which was announced in September 1985 still has not become law.

Under the provisions of this Bill all taxpayers who pay over $2,000 a year in provisional tax will be caught. There will be a few exceptions, which I will come back to. Quarterly provisional tax will be paid on 1 September, 1 December, 1 March and 1 June, with some transitional arrangements in the first year, 1987-88. As the Treasurer announced, there will be a revenue gain of $100m a year, so it is a new tax, and there will be a further windfall gain of $90m in the first year. The Government is trying yet again to bring forward its revenue to hide the fact that it is still having problems with its Budget deficit. The Treasurer has admitted that the deficit is likely to blow out significantly this year.

As the honourable member for Perth and other speakers from the Government side have already mentioned, there will be an implied interest saving for the Government because it will be bringing forward the revenue. The other side of that is that if there is an implied saving in interest for the Government, obviously there will be an added cost. The added cost to business will be considerably greater than it will be to the Government. Everyone knows that the Government can issue Treasury notes at around 13 per cent per annum interest, but most businesses-particularly small businesses, which this legislation will affect-will have to borrow at interest rates of 18 to 20 per cent. That is considerably more than the interest rate the Government has to pay. This is an additional cost to business and Australians which the Government would not have had to fund fully.

The second reason why I find this legislation so objectionable is that it will affect small businesses which are already hard pressed for their cash flow, particularly those which in many cases will be taxed before they receive that income. Because of the way in which the quarterly instalments are structured, quite a few people who receive income on an irregular basis will pay tax on that income before they receive it. The third reason why I find this legislation so objectionable is that it is yet another impost on business, both in time and money, to comply with this tax; and it is what we would call, on a normal business basis, unproductive time which will further impede business getting on with what it should be doing, and that is making a profit. The fourth reason why I find this tax fairly objectionable is that there is a penalty for underestimating if one is out by more than 10 per cent. That is a pretty small latitude, particularly in the agricultural business I have known where there are violent fluctuations in income and that income can be so unpredictable that one day it looks as though it will be here next week but because of seasonal factors, market factors, market crashes or a storm which destroys a crop-or for whatever reason-all estimates just go out the window.

This is a typical example of a tax measure that has not been properly thought out. I know there are some provisions in the legislation for farmers-I will come back to them-but there will still be considerable problems. If one happens to make an estimate and be out by more than 10 per cent, a fine of 20 per cent per annum of the amount involved is applied. The fifth reason why I find the legislation objectionable and which I find aggravating is that provisional tax assumes that everyone's income will increase by 11 per cent per annum. I daresay that many people would love to have that happen but in many cases it does not. Generally, the extra tax will have to be paid.

In discussing this particular alteration to the Income Tax Assessment Act, I find one exception particularly difficult-the Government still has not come to grips with it-and that is the fact that taxpayers who derive more than 75 per cent of their income after 1 December will be allowed to pay in two instalments, on 1 February and 1 June. That may sound like a concession to farmers and those who have seasonal and fluctuating incomes but in fact enormous problems will be created by this. For example, a fat lamb producer sells the bulk of his lambs around December. What happens when one year he sells in late December and in the following year he happens to sell in October or November? The question then arises as to which category this taxpayer falls into. If he happens to fall into the category where he is expected to pay four times a year he has already missed the first instalment. What happens then? Is there a penalty? I hope that the Treasurer will answer this question because the problem is a real one. This is only part of the problem.

When we go into this further we will see that decisions on marketing will be very much influenced by what will happen in relation to tax. So a person may well find that what should be a normal business decision will be influenced more by the effect of the provisional tax than by good business principles. If a tax has that influence on a business, it should be re-examined. This is one case where the Treasurer has not thought it through properly and I think he ought to re-examine the whole proposal regarding what he will do in the case of people who have seasonal incomes which are highly fluctuating. Obviously this will be complex; it will be costly; and it will be difficult for people to comply with. They will spend a lot of unproductive time looking into ways and means of ensuring that they will not be hit by the Australian Taxation Office for making a mistake in their assessment. The reason that the Opposition is so against this, and the reason the honourable member for Mackellar has moved his very sensible amendment, is that the Government has not thought through the effect of this legislation. It will affect small businessmen, mostly self-employed; those who are single operators and who, in many cases, are already flat out trying to make a quid. To find extra time for unproductive form filling just to comply with an effort by the Treasurer to bring forward his revenue is penny-pinching of the worst kind.

If we look further we will see that another problem could be created for the primary producer or, in some cases, the sportsmen and sportswomen who are now able to average their income. Under averaging, the amount of tax paid is the average over a number of years. This in fact means that those people who have fluctuating incomes end up paying the same amount of tax as a person who has a reasonably steady income. They do not pay any less, but if they were not allowed to average they would, in many cases, pay more tax than a person earning a constant or relatively constant income. Persons in that situation will have enormous problems trying to work out what sort of assessment is reasonable and fair as they go through each quarter. To start with, they may not even know what their income is because they may not have got that particular instalment. Then they have to make an assessment of whether they are eligible to pay provisional tax. The only way they will be able to do it will be to employ a computer expert with a spread sheet. Again, this is an additional cost on business which in many cases it can ill afford.

The honourable member for Mackellar has already outlined the business reasons why we are against this particular amendment to the tax Act. I have tried to outline further details on some of the specific cases where I think it will cause considerable burdens, hardship and, in many cases, a lot of worry to people who are already flatstrap just trying to make a living. The Government ought to reconsider what is yet another unproductive use of time which it is imposing on people who are trying to make a living as self-employed businessmen.

I would like to reiterate a point made by the honourable member for Moreton (Mr Donald Cameron). To the pensioner who will be hit by quarterly provisional instalments-as we all know, pensioners find it hard enough now to comply with all the regulations of government-it is yet another regulation, yet another thing to confuse them and another thing to send them to an early grave. The Government ought to look at that effect too because in some cases it could be extremely serious. The honourable member for Mackellar intends to move at the Committee stage a specific amendment which will deal specifically with one problem I have raised, namely, the difficulties faced by people who employ averaging over their incomes. In the meantime the Treasurer should re-examine this proposal. It is yet another example of where the Prime Minister has failed, and failed dismally, in his undertaking to the Australian public when he said in his great spiel prior to the National Taxation Summit that, whatever else, any reform must lead to a simpler system which therefore all Australians can understand more easily. On that criteria this so-called reform, or what is a method of extracting yet further tax revenue out of Australians, has failed and has failed dismally.