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Tuesday, 26 May 1987
Page: 3327


Mr COBB(5.04) —The Sales Tax Laws Amendment Bill has two sections, the first of which gives effect to the May 1987 mini-Budget statement of the Treasurer (Mr Keating) that sales tax exemptions will be withdrawn from certain Commonwealth authorities which carry on commercial functions. Also, any Commonwealth authorities that may be established in future would be denied exemption from having to pay sales tax unless they belonged to already exempt categories. Commonwealth bodies like Telecom Australia do not have to pay sales tax when they buy equipment. Of course, this gives them an advantage over private operators who are sometimes allowed to compete with them. Commonwealth authorities that will now cease to be exempt from sales tax include Australia Post and Telecom as well as the Army and Air Force Canteen Service, the Australian Capital Territory Gaming and Liquor Authority, the Superannuation Fund Investment Trust and the Housing Loans Insurance Corporation. The Government says that this will provide another $310m of indirect tax revenue 1987-88 and $395m in the following year, 1988-89. This Bill is all about increasing tax revenue for the present Government.

However, where Telecom's total payment of sales tax and Customs duty in 1987-88 exceeds $360m, the amount of excess will be refunded to Telecom, up to a refund ceiling of $100m. While the National Party of Australia opposes the manner and timing of this action, it supports the principle that these Commonwealth authorities should not be exempt from paying sales tax on their purchases. The decision will put them on the same sales tax footing as private sector commercial authorities and, to that extent, will bring bodies like Telecom and Australia Post one step closer to operating in a real world situation. It is, I suppose, one of the essential first steps that have to be taken in the process of privatising these bodies.

On that point it is worth remembering the vehement criticism which the Government heaped on the Opposition when it suggested such steps some 12 months or so ago. Of course, the Government is taking this step not because of any sound reason, such as it would increase the efficiency of these bodies, but because it is broke. The current account deficit is running at record levels and the overseas debt has tripled in the past four years to in excess of $105 billion. When the Government came to office in 1983 the overseas debt was only about $30 billion. It had taken 83 years since Federation to get to that level and, in the last four years, it has more than tripled to $105 billion. The Australian people should never be allowed to forget that fact. Government spending has reached heights undreamed of in this country and, as a consequence of this record spending, tax collections, despite being at the record highs they are in Australia, are falling further and further behind, chasing the spending gap and creating larger deficits. As the Government clearly refuses to cut expenditure, the pressure for more and more tax collections increases. Hence, we have this Bill before us today.

This is an area where, I guess it has been pointed out to the Government, it can in effect increase its tax collections by about $400m per annum-but it can do so by the back door. That is $400m extra in the Government's coffers without its receiving the odium associated with that collection, because Telecom and Australia Post will have to raise their charges to their customers to recoup the money. Telecom and Australia Post are being forced to collect the tax for the Government to the tune of $400m. Naturally, Telecom and Australia Post cannot pluck these extra dollars out of the air. Telecom is already talking about sacking 3,000 staff. The Chairman of Telecom, Mr Brack, had already issued a statement to that effect. I would like to see Telecom undertaking radical surgery on many of its outrageous work practices which have been built up over the years by the unions exploiting the monopoly situation of Telecom. However, in typical Telecom fashion, the Chairman has announced that, as well as sacking staff, it will jack up its prices. We have heard from the honourable member for Mackellar (Mr Carlton) that the price of a local call will rise by 3c and that the charges for rent and for connection fees will rise by about $20 in each case.

In addition, the remote areas program, whereby country telephones were to be switched over to automatic, is to be delayed for another two years. City people have had this service for years-in some instances for decades-but, despite Australia's supposedly being an advanced country, country people have to wait. What a warped sense of priorities! All the fancy, prestige-building, whizz-bang schemes will continue while the neglected people in the bush wonder whether they would be better off by trading their pedal telephones in on a carrier pigeon or attending smoke signal lessons at the local reserve. Australia Post has indicated also that, as a result of this imposition, it will probably have to raise the price of stamps. With this Government's addictive hunger for more money, services will drop and taxes will go up all round.

The Government has the hide to criticise us for not having released the nitty-gritty details of our tax policy, but what was the Labor Party's tax policy at the last election? It did not have one. Its tax policy was simply that it would hold a tax summit some six months down the track in 1985. We know what came out of that. But the Government's tax policy has now been brought down. What is it?


Mr Cadman —More tax.


Mr COBB —Exactly; it is more tax, as the honourable member for Mitchell said. It involves a capital gains tax, fringe benefits tax, superannuation tax, entertainment tax, assets tax, and more sales tax, such as we are seeing today. The next step in the Government's grand plan is a wealth tax.


Mr Cadman —That is right; that is next.


Mr COBB —That will be next, and we will be hearing more about that. The sales tax legislation we are debating could not have come at a worse time, arriving as it does on top of all these other taxes. It will have inflationary consequences and will be especially damaging for exporters in this country. Already we have to compete against overseas competitors in countries whose inflation rate are only one-quarter to one-fifth of Australia's. It appears that this gap will widen, partially as a result of this legislation. With every piece of legislation introduced into the Parliament by this Government, it seems that our cost of living goes up and our standard of living goes down.

I do not have to tell honourable members that this sales tax Bill will increase even further the complexity of tax legislation, especially sales tax legislation. I wonder whether anyone realises just how many sales tax Acts there are in Australia governing indirect tax. I found just 25 on a preliminary search. Goodness knows how many more there are. This will be at least the twenty-sixth. We have 11 Sales Tax Assessment Acts, 11 Sales Tax Acts, one Sales Tax (Exemptions and Classifications) Act, one Sales Tax Procedure Act, one Taxation Administration Act dealing with sales tax offences and, on top of those, this sales tax Bill here today. The red tape, paper work and bureaucracy associated with sales tax alone keeps whole tribes of timber cutters, public servants and accountants and whole bevies of other bureaucrats occupied on a full time basis. Debating this Bill is even keeping me employed this afternoon. Even a superficial look at our sales tax legislation shows how the country is crying out for less.

A provision in this Sales Tax Laws Amendment Bill and in a Customs tariff by-law Bill to be debated today concerns varying the amount of goods passengers arriving in Australia can purchase both sales tax free and duty free. From 1 July 1987, inward passengers will have the existing concessions replaced with legislation providing that one can bring in, free of sales tax or duty, goods to the value of $400, or $200 for persons under 18 years of age. In addition, all items of clothing, except furs, for personal use will be allowed free entry. However, free entry of migrants' motor vehicles, which has existed in the past, will now be abolished. The quantitative restriction on alcohol of one litre will remain, and one will be allowed to bring in 250 grams of tobacco or 250 cigarettes. Articles for personal hygiene, excluding perfume, will be exempt from sales tax and duty.

On average, these changes represent somewhat harsher restrictions than before as they will raise another $20m in revenue for the Government. So, again, it is a question of the Government collecting more tax. To have remained revenue neutral with the present situation, the limit would have needed to be set between $500 or $600. As we heard earlier in the debate, the Industries Assistance Commission's preferred option was for the limit to be set at $1,000. It should be noted that if someone brings in goods of a value in excess of $400, the exemption will apply to the first $400 of value and full sales tax and Customs duty will be payable on the remainder of the goods. It is still not totally clear what these changes to the revenue will achieve, apart from making the pleasure of taking an overseas holiday a little less, and bringing the Government another $20m in taxes.

Most people would be of the opinion that changes should not be made unless there is good reason for doing so, because of the hassles and disruption that such changes will bring, particularly these ones. For example, an estimated 50,000 Australians are today abroad on short term trips, most of whom will have no idea, until one or two days before they re-enter Australia, of how these new restrictions will apply. We can imagine the chaos that that alone will create. Many of these people will purchase items that they believe to be free of these taxes and duties, only to find that they are caught out when they return home.

To police all this, the Australian Customs Service is planning to install computerised duty collection facilities at each processing point to collect the duty that travellers will have to pay on that portion of their purchases which exceeds $400. However, family units, which comprise the bulk of travellers, will be able to combine their limits, where they wish to do so, to bring in articles costing in excess of $400. It is to be hoped that there will be some mechanism to identify couples where the female of the twosome has retained her original passport in her maiden name.

Duty free stores in Australia are concerned that items costing more than $400, which at present make up about 25 per cent of their sales, will now be bypassed because of this legislation. No doubt this will occur to a considerable degree, although some of those items will still be bought due to the combining provision that I mentioned earlier and also due to the first $400 being exempt. There is a saying that one man's meat is another man's poison. While duty free stores will be caught out to some extent by this legislation, other stores will benefit. A camera salesman in a town in my electorate of Parkes told me at a function the other night of his frustrations with people who go into his shop asking him to explain and demonstrate which is the best camera to buy. After he spends half an hour or so going through the procedures, they happily thank him for all his time and trouble and announce that they will buy the camera of his recommendation, duty free, when they go overseas the following week. He claimed to me that some 70 per cent of such big ticket purchases are made overseas. No doubt this part of the legislation will give some pleasure to my camera selling constituent.

Ideally, I would prefer that no Customs duty or tariff were placed on any goods into Australia. Although these duties are supposedly put on to help the competitive position of industries in Australia making similar goods, I am firmly convinced that these duties actually harm the industries that they are supposed to help. Certainly, they are damaging to our overall economy. The protection given to our car industry is a good example of this. Not only has our car industry become uncompetitive because of this protection, but also all Australians buying cars have to pay almost twice as much as they would if this protection did not exist.

As I have already indicated, on top of this, the sales tax regime in Australia has become hopelessly complicated. The potential indirect tax base in Australia extends over about $140m of goods and services. However, the wholesale sales tax system that we have is applied to only about $40m of that base. To collect the amount that is collected, of about $7 billion, what we have in place is a higgledy-piggledy mess of 10, 20 and 30 per cent levels, with no rhyme or reason determining which good goes into which category. For example, different snack goods are taxed at different levels for no logical reason. Even different brands of similar biscuits are taxed at different levels. Toys incorporating a musical movement are taxed at a higher level than toys without one, even if that music is played by means of an electronic chip. Individual maps attract tax but books of maps are exempt; towels made of cloth are taxed at a lower rate than towels made of paper; biros and pens are taxed at a higher level than pencils and highlighters; ornaments are taxed at a higher level than souvenirs; and so on. Whole armies of people are employed to determine which article goes into which category.

Quite clearly, the sales tax area needs drastic revision. I happen to be one who believes that this form of indirect tax should be scrapped entirely. It could be replaced with an across-the-board flat indirect tax at the consumption level. The mass of people in Australia today say that the progressive direct income tax levels should be flattened out. The company tax levels are already flat. They should remain so and should be lowered. So it is only logical that indirect tax levels, which are higgledy-piggledy and progressive, should also be flattened. The Treasurer (Mr Keating) himself toyed with that idea and rejected it at the Tax Summit to which I referred earlier. He was, of course, dictated to by the unions. However, his bull-headed approach, the fact that he had not explained the issue thoroughly and the fact that he tried to pitch the level far too high, at 12 1/2 per cent, caused him to lose the whole idea.

A broad-based consumption tax is not a new tax; it is merely a replacement tax. It is no more a new tax than a flat tax is a new tax in the direct tax area. We could bring in such a tax and it would be revenue neutral if it came in across the board at 5 per cent. We could fiddle with it and bring it in at a higher level, such as 8 per cent, which would collect an extra $4.2 billion. If we exempted articles that already have other indirect taxes placed on them, such as the excise tax on alcohol, tobacco and fuel, we would end up with a net extra collection on what we have now of $2.2 billion. We could use that either to lower direct income taxes or pass them back by reducing the fuel excise by 9 1/4c a litre.

There are many advantages to such a system. The tax would be placed on the final consumption product only, so all business inputs and exports would be exempt. It is a very simple system. The tax would come in at a low rate because it would be on a broader based area than the sales tax which we are debating today. The system would be more equitable. All items would be taxed at the same rate. Therefore, investment decisions would not be made according to the level of tax on each item. The price of many goods would actually fall. For example, this legislation talks about a 20 per cent sales tax on motor cars. If we brought in a broad-based consumption tax of 8 per cent, the price of an average family car would fall by about $1,000. That would do marvels for the motor vehicle industry.

We could abolish the customs duty legislation which we are to debate later today. We would not have to worry about sales tax as the rate would be so low. Business costs would be lower. For example, a businessman with $100,000 worth of spare parts in his shop has to pay a 20 per cent sales tax on those goods. Therefore, he must outlay another 20 per cent just to stock his premises. If we had a consumption tax, he would not have to pay that tax because it would not be paid until the consumer purchased the article. Therefore, it would benefit business, particularly small business. Most importantly, people with the same incomes would pay the same amount of indirect tax, which does not apply today.

The legislation before us serves only to highlight the absurdity of the present sales tax situation in Australia today. The legislation will have a high inflationary effect and it will impose a tax increase on Australian consumers. It will increase the complexity of the present system. The Government stands condemned for walking away from proper indirect tax reform in this country and for introducing this Sales Tax Laws Amendment Bill without taking into account the overall effects it will have on the economy and the people of Australia.