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Tuesday, 26 May 1987
Page: 3320


Mr CARLTON(4.12) —Here we are once again increasing tax. Once every week during parliamentary sittings, I think since about 19 September 1985, it has been my melancholy duty to stand up here on behalf of the Opposition and comment on further tax measures put forward by this Government. It is extraordinary that since 19 September 1985, when the Treasurer (Mr Keating) announced what he was pleased to call his reform of the Australian taxation system, otherwise known as RATS, we have had an additional 800-odd pages of taxation legislation. We have had an increase of about 70 per cent in the volume of tax Acts and here today we have two additional increases in taxation.

There are two elements of this Sales Tax Laws Amendment Bill 1987. The first is the removal of sales tax exemptions from Telecom Australia, Australia Post and some other minor Commonwealth authorities. The second is further restrictions on duty free concessions for overseas travellers and migrants. Both these elements of the Bill are counter-productive, and I will indicate exactly why later in the debate. They take in a lot of revenue. They are revenue measures as part of the mini-Budget statement of 13 May.

The Opposition's overall position in relation to the mini-Budget is that, although we strongly disapprove of many of the measures taken in it, and we certainly strongly disapprove of these, we are in the position where, if we block revenue measures in the Senate, we will be expanding the Budget deficit. We have absolutely no power, as an Opposition, to initiate in either House legislation which would narrow the government deficit. So we are in the unfortunate position of having to decide whether to block revenue measures which are wholly objectionable and which as a result will increase the size of the Budget deficit-that in itself would be an appalling thing to do in the present economic climate-or alternatively we have the option of letting these measures through and causing grave harm to the Australian community.

On balance, after considerable thinking about this, we have decided that the overriding economic consideration, in view of the appalling economic mess that this Government has got us into, is that we simply must try to close the Budget deficit because that is the only way we can move towards lowering interest rates. Of course this has nothing to do with reducing tax. This Government has not come anywhere near cutting expenditures enough to reduce tax. In fact the whole history of this Government, as I have pointed out, has been to increase tax at every level. The Opposition will not be voting against this measure. However, on behalf of the Opposition I move the following second reading amendment:

That all words after `That' be omitted with a view to substituting the following words:

`whilst not declining to give the Bill a second reading, the House wishes to draw attention to-

(1) the adverse impact on ordinary families and on business and farm costs of increases in telephone and postal charges which will flow from the withdrawal of the sales tax exemption from Telecom and Australia Post, and

(2) the fact that the Government's decision to impose further restrictions on duty free passenger concessions:

(a) is contrary to the Industries Assistance Commission's recommendations contained in report No. 374 of 1985, and

(b) will result in further inconvenience to international travellers, divert the attention of Customs officers away from essential narcotics surveillance activities, impact adversely on the duty free industry in Australia and will damage the tourism industry generally'.

I think that will be seconded by the honourable member for Parkes (Mr Cobb).

Let me deal with the first section of this Bill, which is the proposal to remove the sales tax exemptions from Telecom and Australia Post. The Treasurer, in his mini-Budget, suggested to the Australian public-and he was certainly suggesting it to the financial markets which needed to be impressed-that he was going to reduce the Budget deficit by $4 billion. If we examine that statement closely we will find that there will not be a genuine reduction in expenditures. One billion dollars of it will come from the sale of assets, which would not have the economic effect of cutting expenditure, as my friend the honourable member for Charlton (Mr Robert Brown), who lectured students in economics, would well know. That is the first part that is deceptive.

The second part which is totally deceptive is that $400m of it is in fact an increase in taxes. So $1.4 billion of the $4 billion has nothing to do with a genuine cut in expenditure, and of the remaining $2.6 billion supposed expenditure cuts, we find that $1 billion has been unloaded on to the Premiers-and they have to bear the burden of that-and about $600m is from cuts in defence and in roads or in deferrals. The Treasurer reserved for himself the easy job of cutting $1 billion in expenditure out of the $4 billion and shuffled all of the other bits off into areas which were somebody else's problem or which would not have the same economic effect.


Mr Cobb —The thimble and pea trick.


Mr CARLTON —That is right. This measure is part of the extra $400m loaded on to Telecom's and Australia Post's charges. What was the reaction of Telecom and Australia Post? When they found that they would suddenly be lumbered with an additional bill of $400m they put up their charges. If there is one thing we do not want at this time in Australia's economic history it is increases in prices. Heaven forbid! The price of everything has been going up in Australia under this Government at about four times the rate of that of any other country. Inflation in Australia this year rose to almost 10 per cent, and it is still over 9 per cent. The Treasurer said that it was going to get down to 6 per cent, but we noted in the statement that he made two weeks ago that he had revised that estimate upwards to 7.25 per cent-still three or four times the inflation rate that is enjoyed in other competitive countries.

Australians are already fed up to the back teeth with rising prices. None of the buffoonery of the Minister Assisting the Treasurer on Prices (Mr Barry Jones), who was appointed to this position as a window dressing exercise a few weeks ago and from whom hardly anything has been heard since, no appointments of that sort and no window dressing exercise will disguise the fact that this Government, by its own actions, contributes to increases in prices. The direct effect of increases in telephone costs and postal charges is felt by every family in the country. In addition, they affect every business in the country. Businesses that have to compete internationally must put up their prices to cover these costs-or they try to, but they sell less-and people in the domestic markets push these increases in costs through to the customers and they finish up being reflected in the consumer price index. That is merely the fancy term for the figure which is published by the Australian Statistician to indicate that prices are going up, which is something that every housewife understands only too well.

Only a day or so after the Treasurer's announcement Telecom spilt the beans on the whole matter. The Chairman of Telecom, Mr Bob Brack, is the chairman of a public authority which comes within the general purview of the Minister for Communications (Mr Duffy). He is one of the heads of statutory authorities who have to report to the Minister for Communications. Presumably, he would have warned the Minister before this statement was put together what the outcome would be. I have here a copy of a Press statement which he issued and which appeared in an article in the Sydney Morning Herald on 15 May. It states:

Telecom will increase the price of local calls, rental and connection fees and cut staffing levels by as much as 3,000 in response to the mini-Budget.

Local phone calls will rise by 3c to 21c and STD charges will go up from October 1, after approval by the Prices Surveillance Authority and the Federal Government.

The Prices Surveillance Authority is the cream puff organisation that comes under the administration of the Minister for weeties or whatever he is called, the so-called Minister assisting the Treasurer to increase prices; that is his job. The article continues:

However, the Telecom chairman, Mr Bob Brack, warned that if the tariffs had not been approved by June 30, Telecom faced a cash outflow which would push prices higher.

He really spilt the beans on the Treasurer:

`We have been forced to take these measures because of the decisions made by the Government, which would cost Telecom nearly $500 million in 1987-88,' Mr Brack said.

He said the rise in charges was needed to cover the removal of Telecom's exemption from sales tax and Customs duty-

that is covered by another Bill which will be debated shortly-

and the now compulsory repayment of an $81 million government loan.

That is another little bit of the mini-Budget. So there we are. The article continues:

Other changes outlined by Telecom include . . .

And listen to these; they will hurt hard:

A $21 rise in the cost of basic rental to $120.

A $20 rise in the cost of connection fees to $210.

And what about the bush? The article continues:

Cutbacks on the Rural and Remote Areas Program--


Mr Cadman —That is $4 a week for a young married couple.


Mr CARLTON —That is exactly right. It is a lot of money. The article continues:

. . . which planned to provide telecommunications to rural areas by 1990.

So if people in the bush are expecting to get new telecommunications by 1990, they should forget it as a result of this mini-Budget. The article continues:

Scaling-down of plans to improve congestion in country areas and to modernise switching equipment in central business districts.

In other words, people in the bush will not be provided with plans to improve the congestion that they suffer and people in the central business districts-who are already finding it hard to get through by telephone, who are finding a lot of blockages and who need changes in the system-will find plans for improvements delayed. This will add further to industrial costs. The article continues:

Mr Brack said Telecom's ability to serve new customers would be affected in areas such as new housing estates and fringe urban areas.

Heaven forbid! Under this Government and with the interest rates we have, it is impossible to buy a house these days in one of the fringe urban areas or new housing estates referred to by the Chairman. They hardly exist. But when a person somehow manages, with interest rates at 15 1/2 per cent, to build a house in one of these areas, he cannot get a telephone installed. The article continues:

It is likely that the number of applicants (for new telephone services) experiencing serious delays will rise very significantly . . .

So people on a housing estate who are struggling to meet their mortgage repayments cannot ring their mum because they cannot even get a telephone installed. The same article reads:

A spokesman for Australia Post, which will suffer a similar fate to Telecom's, said that the authority was examining in depth the mini-Budget's impact.

A letter takes a little longer to arrive than a telephone call. It took another 10 days for Australia Post to make its announcement. Nonetheless, it was made eventually by Mr Bob Lansdown, the Chairman of Australia Post. A report of 25 May reads:

Australia Post has announced that it would apply to the Prices Surveillance Authority to lift postal charges by 1c from July 1. The price rise was a consequence of the Federal Government's decision in the mini-Budget to apply Customs duty and sales tax to Australia Post and direct it to repay $9 million in advances, the Chairman of the Australian Postal Commission, Mr Bob Landsdown said. `The moves would add some $40 million to Australia Post's outlays in 1987-88,' he said. In the absence of access to external borrowing facilities, Australia Post had no option but to apply for an early increase in charges, he said.

Here is the sting:

Rises in other postal charges in line with the 1c increase will also be sought.

So there we have it. The two principal communications authorities of the Commonwealth, reporting to the Minister for Communications one day and 10 days after the announcement by the Treasurer, indicated what a foolish decision it was for the Treasurer to increase taxes and charges paid by statutory authorities by $400m instead of making genuine cuts in Federal expenditures. The Treasurer quite deliberately, in order to make up the $4 billion cosmetic windowfront figure for his so-called cuts in government expenditure, has added to Australia's already high inflation rate. Prices in Australia, which are rising at four times the rate that they are rising in comparable overseas countries, will be given a further boost by this ridiculous proposal. If one adds to the tax burden of statutory authorities, of course, they either absorb the costs if they can, by cutting staff and services, or pass on these costs in the form of rising prices. It is quite clear that they have decided to do the latter.

What sort of a lead is this to the State Premiers? The Treasurer, in this chamber yesterday, at the Premiers Conference, offloaded the hardest part of the expenditure cuts to the States. He announced a $1 billion expenditure cut for the States and a cut of $1 billion in their borrowing limits. The States were asked to wear that. He then had the infernal hide to lecture the State Premiers not to increase State taxes and charges to make up this difference.


Mr Gear —And they won't.


Mr CARLTON —Listen, my friend, the Premier of New South Wales has already said that that is precisely what he will do. The honourable member had better read the Premier's statement. The New South Wales Labor Premier, Mr Unsworth, has already said that he will push up taxes and charges. Why would he not? The person who was lecturing Premier Unsworth in this chamber, telling him under no account to do that but to make genuine cuts in State services and expenditures had, by his very example, indicated the direction that Premier Unsworth ought to take. Of course, if the States raise taxes and charges instead of cutting expenditure, there will be a further boost to inflation. Australia's inflation rate, instead of being four times that of our competitors, will rise to five or six times that of our competitors. There will be no hope of interest rates coming down. Therefore, this is a counterproductive measure. It is a stupid measure and it is a measure of the weakness of the Treasurer and this Government in their failure to cut government spending at the Federal level to the extent necessary to reduce the deficit and interest rates.


Mr Gear —Are you going to oppose it?


Mr CARLTON —If my friend had been here earlier he would have heard what I had said. Since he has come in here he has not listened at all; he has talked continuously. Therefore, he should read Hansard tomorrow to find out what I said.

Let me go to the second part of this Bill. The second part is a monumental stupidity. The Treasurer wants to bring in an extra $20m or $21m the following year in revenue by abolishing or reducing duty free concessions for travellers. It is an additional tax of $20m or $21m. Let us examine the chaos that will result from this particular measure. It is chaos that we can look at very clearly, because we happen to have had a full public inquiry into this business, the results of which I have here. The Industries Assistance Commission of the Commonwealth was asked to report on passengers' duty free concessions at airports and other ports. I have with me its recommendations and its report of 6 November 1985. It received evidence from just about everybody, particularly from officers of the Australian Customs Service, who made a very useful input into the inquiry. It received input from the people in the duty free areas, from the Department of Immigration and Ethnic Affairs, the Department of the Treasury, the Department of Territories and Local Government, and from people from the travel industry who have a very definite interest in the way passengers come through Customs and whether they are received nicely or are held up.

The general burden of this report was that there was a need to do something about duty free concessions at airports. Most people do not get an enormous amount of duty free goods through. Under the existing arrangements one could bring in personal effects-I will come back to that in a minute-$200 worth of goods duty free and goods to the value of $180 above that at a duty rate of 20 per cent. There were some rorts in the personal effects area. Some people were bringing in extremely expensive equipment, such as camera and video equipment and that sort of thing, under the personal effects section. The report basically said that this was developing into a bit of a rort and that there was a case for doing something about it. Some very wise considerations were taken into account by the Industries Assistance Commission. I will quote from the summary and conclusions of its report. It said:

In the era of mass air transport, there is a need for people to move smoothly and quickly through the barrier. Long delays are not only costly to the community in terms of the value of time and the frustration to which passengers are exposed, but may also impose additional administrative costs. There is a trade-off between minute examination of passenger baggage and enforcement of tariff and tax laws on the one hand, and passenger facilitation on the other.

That is perfectly reasonable. Further on the Commission said:

All goods (except those duty free goods purchased prior to departure) taken out of the country by Australian travellers should be eligible for concessional entry when they have been re-imported . . . On their trips, most travellers make modest purchases which they bring home-travel requisites, souvenirs, gifts etc. The value of such imports by most travellers is so small that the costs of assessing and collecting duty and sales tax would be greater than the revenue received.

. . . .

Concessional entry should therefore remain for such articles. The Commission is concerned to recommend changes to the passengers concessions which achieve the facilitation objective and allow free importation of re-imports, goods to be re-exported, goods covered by treaty obligations and a reasonable value of general imports. This will involve removing the open-endedness of some of the existing concessions, simplifying the concessions so that they could be more readily understood by the travelling public, and removing those concessions which do not make a significant contribution towards the general objectives. . . . It recommends that if the Government wishes to achieve, on average, an unimpeded flow of 90% of Australian residents through the Customs barrier, together with a restriction on usage (once every three months) and a review at lengthy intervals (say every 5 years), the limit be set at $1,000.

That is what the IAC said in its report. It went on:

If the Government wishes the concessions to be available on each and every occasion of travel, a limit of $750 may be more appropriate.

That is what this expensive Government inquiry recommended after a wide-ranging set of hearings and submissions from all sorts of people. When it put out its draft report it was given a response by the Australian Customs Service, which after all has the job of policing these things. The Customs Service said:

ACS considers that the proposed concessional limit of $1,000 is the lowest practical amount and ensures a reduction of the existing concessions in real terms.

In other words, Customs said that that limit would ensure a closing off of the rorts. The House will note that Customs said that $1,000 was the `lowest practical amount'. It also said that it saw no reason for imposing a limit on the imports of wine. It considered that there should be no restrictions on the numbers of times the general concession can be utilised in any one year. In other words, the Customs Service does not want to keep a record of whether people come in every three months or so, that not enough people do that to make it important. From its experience of processing these people every day it quite sensibly has said that a $1,000 general limit is the minimum practical to ensure a flow of people through airports. This is of immense importance to us in tourism alone. Who the devil, after looking at a Hogan advertisement in the United States of America, wants to spend all his money in getting a tourist package to come to Australia and take two hours trying to get through Customs? When the Customs people who have the problem of dealing with that have told us that $1,000 is the minimum practical amount, what has the Treasurer put in this Bill? Four hundred lousy dollars. It is only about half what the IAC suggested if there were no restrictions, 40 per cent of what the IAC suggested as its preferred option, and 40 per cent of the very minimum practical amount put forward by the Customs Serivce. I have not seen anything so stupid in all my life-except, of course, the other 800 pages of tax legislation that this Treasurer has brought in since September 1985. If I had not read all that, I would be surprised.

What will this do to small business in the duty free shops? Heaven forbid, an enormous amount of their business is in Australians buying goods from Australian businesses, taking them overseas and bringing them back under the duty free concessions. That has meant that an enormous amount of money stays in this country which would otherwise be saved up and spent at duty free places overseas. So this legislation will have a bad effect on small business in the duty free shops. It will reduce sales in the duty free shops and it will reduce their capacity to service overseas customers with a wide range of goods. Obviously, they can expand their range of goods if they have enough domestic business. Therefore, the base business that we can offer these businesses, through the sale of opals and the like to Japanese tourists, will be cut back by this ridiculous measure.

The Customs people say that this legislation will have a severe effect on their capacity to police narcotics. Customs people are not there to rifle through people's handbags. It is not their job to look into small suitcases. They are going around with sniffer dogs to see whether drugs such as heroin and hashish are coming in. They say quite clearly that if they are required to police these sorts of limits their capacity to do their real task of stopping deadly drug runners coming into this country with their poisonous baggage will be dramatically reduced. That is an absolute scandal. I simply cannot understand why, for a miserable $20m in additional revenue, the Treasurer would put at risk our surveillance of incoming narcotics.

But that is not enough. What else does he put at risk? We have an improvement of over $2 billion to our current account with the rest of the world because of inward tourism. This Government has talked no end about how much it has been promoting tourism overseas with Paul Hogan and God knows what. The Minister skites about this every day. We go all around the world spending taxpayers' money through the Australian Tourist Commission and inviting people to come to this country. Qantas releases advertisements in the United States to encourage people to come here; it does a wonderful job. However, when these people get to Sydney Airport or Melbourne Airport they join a queue and have Customs officers look through their bags to see whether they have in their possession more than $400 in duty free goods.


Mr Rocher —Preposterous!


Mr CARLTON —It is preposterous, as my friend the honourable member for Curtin correctly says. This will happen in all Australian international airports. Of course, it will hurt not only the duty free shops themselves but also Australian artisans, jewellers and people who make things for this trade whose main points of sale are the duty free shops which have grown up. I think there are now about 130 of them. According to an Industries Assistance Commission report, in 1985 they transacted more than $100m in business and that figure is rising. That is of enormous importance to our economy. Basically, this stupid restriction ignores the sensible recommendations of the Customs Service on two grounds: First, it stops it doing its narcotics surveillance job properly; and, secondly, it involves the Customs Service in additional processing and delays and of course additional administrative costs which will desperately hurt our foreign tourism industry. It will also impede the progress of foreign businessmen who come to this country wanting to buy our goods, indirectly hurting our export trade in that sense as well. It will also cause immense human frustration as more people of modest means travel overseas; and all this for a lousy $20m. Is this cost-benefit? Where did this sneak in? Was this at the fag end of the Cabinet meeting which considered the mini-Budget? It must have been.

I suggest that the Government should withdraw this measure, which will make it a laughing stock. The Government should withdraw it and cut $20m in some other area but not through a tax increase. This Bill increases telephone costs and postal charges and makes absurd changes to the concessions for incoming travellers, which will damage the tourist industry and the duty free shop industry. It will also increase administrative costs and, more seriously, prevent adequate surveillance of incoming narcotics. On all those grounds I suggest that the Government should withdraw the measure.


Mr DEPUTY SPEAKER (Mr Blanchard) —Order! The honourable member's time has expired.


Mr Cobb —I second the motion and reserve my right to speak.