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Tuesday, 26 May 1987
Page: 3296


Mr FREE —My question is directed to the Treasurer. What impact would a significant reduction in the top marginal tax rate, combined with income splitting and the abolition of all the Government's base broadening measures, have on the Budget deficit and fairness in the tax system?


Mr Spender —Madam Speaker, I raise a point of order. The Treasurer has been asked to conduct a forecasting exercise beyond the wit of any person in this House and certainly beyond the wit of the Treasury. Therefore, it is quite clearly a hypothetical question and should not be allowed.


Mr Young —I take a point of order, Madam Speaker. The honourable member for North Sydney keeps raising frivolous points of order. As you have not objected to any of the questions being asked, the honourable member for North Sydney is posing as a sort of pseudo-Speaker of the House in trying to raise objection on every occasion a question is asked. The question asked, as ruled by you, Madam Speaker, is quite legitimate. The trouble with the honourable member for North Sydney is that he cannot think up a question to ask himself.


Madam SPEAKER —The Chair finds the question in order.


Mr KEATING —A significant reduction in the top marginal tax rate combined with the splitting of incomes and the abolition of the bulk of the Government's tax reform base broadening measures would, of course, have a disastrous impact upon the Budget deficit and an even more disastrous impact upon fairness in the tax system. At a time when this country's national income was declining we would find the Commonwealth Parliament seeking to lift after tax incomes. In other words, it could be accomplished only by adding to the debt which is the very problem to begin with. It is interesting that we are seeking now from the Opposition a taxation policy which would do this. We have seen today another leak in the Melbourne Herald of the Opposition's policy which would--


Mr Spender —I raise a point of order, Madam Speaker. I go back to precisely the same point of order that I made before and which I understand that you upheld. The Treasurer has been asked a hypothetical question. He is now talking about so-called--


Madam SPEAKER —Order! The Chair ruled the question in order. The honourable member for North Sydney may dissent from the Chair's ruling but he may not criticise the Chair's ruling.


Mr Spender —I am not dissenting from that ruling, Madam Speaker. I am putting a separate and distinct point of order. That separate and distinct point of order is that it is not open to the Treasurer in answering a question which you have ruled to be in order to start saying what is or is not Opposition policy. He has no responsibility for Opposition policy as yet.


Madam SPEAKER —I thank the honourable member for North Sydney. I will listen carefully to the Treasurer.


Mr KEATING —The elements of this approach would be to introduce a 25 per cent tax rate on incomes between $5,400 and $25,000 and 30 per cent on incomes thereafter. What that would do on the costing admitted in the policy estimated by the Liberals themselves would be to add $6.7 billion per annum to the deficit-$5.7 billion in personal tax plus $1 billion for extra family allowances which is also included in the proposals. To that, in the abolition of the base broadening measures--


Mr Spender —Madam Speaker, I again raise a point of order. The Treasurer, in allegedly answering a question put to him about certain matters, is now saying what Liberal policy is and how much it would cost. That is clearly out of order.


Madam SPEAKER —The Treasurer will answer the question about what effect these policies would have on the Government's deficit.


Mr KEATING —That is right, Madam Speaker. This is the impact of such a proposal on the Budget. The abolition of the base broadening measures, fringe benefits tax, capital gains tax, entertainment tax, negative gearing and tax on superannuation lump sums would add $2 billion to that. An alignment of the company tax rate with the personal tax rate would cost a further two and a half--


Mr Spender —Madam Speaker,--


Mr KEATING —Is the honourable member running away from public debate? He is afraid of public debate.


Mr Spender —I raise a point of order, Madam Speaker. The Treasurer is doing precisely what he was told in effect not to do. He is stating what our policy allegedly is--


Madam SPEAKER —Order! The Treasurer will answer the question that was asked of him. He was asked to tell the House what the effect would be on the deficit if these cuts were introduced. The Treasurer is doing just that.


Mr Spender —Madam Speaker, the Treasurer was not asked to comment on what appeared in a newspaper. The Treasurer is now reading from a newspaper and commenting on what it contains. That is clearly out of order.


Madam SPEAKER —Order! The Chair has found the Treasurer to be in order in relation to the question asked of him. If the honourable member for North Sydney does not agree with that ruling, I suggest that he has procedures that he can take.


Mr Spender —I understand quite clearly what the procedures are. The Treasurer should keep to--


Madam SPEAKER —Order! The honourable member will resume his seat.


Mr KEATING —If we were to look at the impact on the Budget deficit of the alignment of the company tax rate with the top personal rate of about 35 per cent, we would find a further $2.5 billion added to that as well. On top of that measures to repeal, for instance, the assets test and to have a wage freeze would be added. We would be looking at about $14 billion in commitments and, if there was a commitment to wipe out the existing Budget deficit, we would be looking at roughly $16 billion. Of course, there is no proposal around for the introduction of a consumption tax. We find that public debate is now free of a proposal to introduce a consumption tax. The only thing we hear in the public debate is that such a proposal as I have just mentioned `would be funded primarily from expenditure cuts and to a lesser extent by minor changes in the tax mix'. So we have heard all this major debate about a consumption tax-but, presto, she has vanished! What a surprise! Of course, the public may ask about such an impact on the Budget deficit. But where would the money come from?


Mr Carlton —You aren't following standing orders.


Mr KEATING —Members opposite are running scared-and well they ought to be.


Madam SPEAKER —Order! The Treasurer will ignore interjections.


Mr KEATING —Well, they are getting a bit noisy, Madam Speaker. Look at old Rosie-he cannot help himself. To fund such an irresponsible policy one would have to ask how many schools and hospitals would have to be closed. Why would anyone want to give tax cuts to the rich at 35c-virtually nothing for the people who are poor but 35c in the dollar for the rich, who are already picking up the benefits of the stock market and massive increments to their wealth? No; the proposal is: Take the capital gains tax out and do not have a fair tax system.


Mr Spender —Madam Speaker, on a point of order: The Treasurer is now talking about massive increments to `your' wealth. How under any interpretation of relevance can that be relevant to the question that was put? This is not a debating session. It is meant to be an opportunity to seek information. That is what Standing Orders provide.


Madam SPEAKER —The Treasurer is answering the question. The Treasurer will resume.


Mr KEATING —It would be indefensible to reward groups in the community who have had the benefit of economic growth for four years, a massive increase in the profit share and the lift in the stock market by saying to them: `Not only will you not pay capital gains tax but you can have a 35 per cent tax rate'. That is indefensible. The $14 billion that it would cost to do this those opposite could get by smashing the health system, smashing health support, breaking down the social security system and cutting education funding in half. They are the issues of greed in the public debate. That is the way that such a tax proposal would need to be funded-through outlays cuts. Two weeks ago we had the May statement. The Government sat the test and passed it. But we have heard nothing from the Opposition about changes to outlays. In this country we have a hidden agenda about the outlays cuts to fund greedy tax promises-ones that would decimate the public good and would impact harshly on the poor-only so that they could appeal to people on high incomes.


Mr Tuckey —Madam Speaker, there are many standing orders relative to what the Treasurer is now doing. He is tempting me and others to break the rules, too. I warn him that, if he does not get back to the subject, I will fix him, too.


Mr KEATING —I conclude on this point: There would be a disastrous impact from such proposals on fiscal policy in the Budget deficit. There would also be a disastrous impact on fairness and social justice and equity, and the result would be a breaking of the nation's economic recovery, a pushing up of interest rates and no compensation for the loss of the terms of trade we are currently experiencing. In short, such a proposal would appeal to greed and be disastrous for the country.