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Monday, 7 December 1998
Page: 1503

Mr CREAN (5:36 PM) —I thank you, Mr Speaker, and the Minister for Financial Services and Regulation. The simple impact of A New Tax System (Goods and Services Tax Imposition—General) Bill 1998 and the related bills that are being debated before this House is that they introduce a new 10 per cent tax on almost everything everyone buys. From children's clothes to the books we read, to the wedding ceremony, to the pain-killers, to the holidays, to the food we eat and to the house that remains the Australian dream—a new 10 per cent tax on all of it.

Every minute of every day for the rest of their lives, Peter Costello will have his hand in the pocket of every Australian. If this legislation is rejected by the parliament, the GST will truly become never ever for Australia. But, if we pass it, make no mistake: Australia is stuck with the GST for ever; it will never ever go away. And every time Australians find that hand in their pocket they will know whose it is. Every time small businessmen and women—1.4 million of them—work late at night as government tax collectors, they will know who is keeping them from their families. This will always be Peter Costello's GST. If this bill is passed, the GST will hang around his neck like an albatross every minute of every day for the rest of his political career. No wonder Peter Reith is laughing.

The government has no mandate for this GST. It has a mandate to form a government and to present its program to the parliament for debate and decision. That is all. I have a mandate, as does every Labor member in this House and the other chamber, to do everything in my power to stop the GST. That was my promise to the voters of Hotham, and I have no intention of letting them down.

The Prime Minister demands a larger mandate. He demands that the Senate has no right to reject the program, even though more than half of all Australians voted against the GST. That was not always his view. In the parliament on 15 September 1987 he spoke of:

. . . the simple proposition that when people vote at an election they do not vote on only one issue. The mandate theory of politics from the point of view of proper analysis has always been absolutely phoney.

But the role of the Senate was most cogently set out and defended by the member for Flinders on 17 May 1988, when he told the parliament:

The fact is that the system of rotation for terms of members of the upper House is a good idea. The mandate is the same but is given at a different point in time . . . This is a fundamental aspect of our system, and it is a sensible system. It has worked well.

If senators are bound by any mandate, it is the mandate on which they were elected. In the current Senate that means that 56 of the 76 senators were elected on a mandate to oppose the GST. Twenty-eight ALP senators, seven Democrats, two Greens, Senator Colston and 18 coalition senators were elected in 1996 on John Howard's `never ever' promise. Seventeen of the remaining coalition senators were elected in 1993 to support a GST, but not on food. If the Prime Minister insists on claiming a mandate, he should insist that all senators vote according to theirs.

The Senate is an important house of review and the inquiry that the government was forced to accept is the clearest demonstration of that. But we will not be using the inquiry simply to attack the GST; we want to look at the alternatives. The government says a GST is necessary to take the economy forward. We want to show that you can have tax reform without a GST, because Labor supports tax reform. An effective tax system is one which is constantly under review and reform.

Labor, in government, has a strong record on both economic management and tax reform. The total composition of Labor governments of 1983 to 1996 could walk onto any international stage and take a collective bow for reconstructing the Australian economy and making it the strongest in the world. Labor, through the accords, cooperatively and comprehensively produced the wage restraint and the sustained lift in productivity that laid the basis for the low inflation underpinning the falling interest rates. It was Labor that broke the back of inflation. When we came to power we inherited a 10.5 per cent underlying rate of inflation, and it was Labor that set the Reserve Bank target to get it down into the two to three per cent range. It was Labor that got the underlying inflation rate within that range in the March quarter of 1992 and kept it there for most of the next four years.

Labor produced the huge fiscal consolidation in this nation in the 1980s, and Labor developed a competitive and outward looking economy. We floated the dollar, and that is what has buttressed the economy this time around. We created two million jobs. In short, we left the coalition an economy that even they could not mess up in hurry. And now they want to claim all the credit for interest rates, inflation and economic growth.

The recent IMF report that the Treasurer was crowing about dealt with Australia's record over the last seven years. Labor was in government for two-thirds of that time, and our tax system underpinned the totality of it. Labor also, when in office, did restructure the tax system in the mid-1980s—and we did it without a GST. We eschewed a broad based consumption tax but broadened the direct tax base. We also received a mandate from the tax summit of the time, in 1985, to increase the wholesale sales tax, but not on the necessities of life—on food, on clothing or on shelter.

The simple truth is that the tax system that we now have is not broken. Revenue is actually increasing, not leaking. In the first four months of this year, revenue was $5.2 billion higher than for the same period last year. This is on a system that is supposed to be broken.

As shadow Treasurer I have inherited the tradition of the great economic reforms and sound economic management of the Labor government of 1983 to 1996. It is a tradition that I am proud to continue and one that I will not step back from. I repeat that Labor supports tax reform. We must be constantly reforming, but we have to identify the purpose of that reform. We must identify the constraints to our growth and the market failures. There is no point pretending that market forces work in cases where they do not. We need a tax system that encourages innovation; and that encourages investment in infrastructure, in venture capital and in skills formation. That is where the job opportunities are and where competitive advantage lies. But the tax package of this government does not address any of those. The tax package that Labor took to the last election did.

We need a tax system that complements policies and creates jobs. We need a system that encourages welfare to work, building on the tax credits proposals that Labor went to the last election with. We want a fair system and one that discourages tax avoidance. That is what we will be looking to develop in the course of the coming months. The GST is not a fair tax. Try as you might, you cannot make it fair. We found that when we looked at it in 1985. The more you subject this tax package to scrutiny, the more it unravels. That is why the government has not allowed for the proper debate that is necessary in this chamber.

We will oppose the GST, but we will use the Senate inquiry and other opportunities to develop and promote alternative tax reform—reform without a GST. Just as Labor got it right in the mid-1980s, so we will lay down the basis for the next round of serious tax reform. We will be looking at issues such as those raised by the five economists. They recognised the importance of tax credits, and I believe they underestimate the flexibility in the existing wage structures for new starters—flexibility through the training wage introduced by Labor, through wage subsidies that Labor was prepared to promote and this government cut, and through the fact that there are significant regional differentials around the award rates that are struck.

I have welcomed the five economists' intervention because I think that looking at tax credits to compensate low income earners makes sense. We need to reward people for work—that makes sense, too. That is why we will be continuing to pursue that dimension of our policy. If we can find the means through tax credits to lift real disposable income for low income earners and take pressure off money wage increases, that too is worth investigating.

These bills, apart from imposing a 10 per cent tax on almost anything, do not constitute serious tax reform. The GST is inherently unfair. That is why we are committed to totally opposing it. It is a regressive tax. The GST means a massive shift in the tax burden from business to the individual and from the rich to the poor. It is unfair because it disproportionately hurts low and middle income households, especially those with children. These households spend a higher proportion of their income on items that are currently untaxed. These items are not luxuries; they are not discretionary expenditures that families may choose to discontinue if a new tax is put on them. They are the necessities of life. They are the basic services that people need for a decent standard of living.

According to the Melbourne Institute of Applied Economic and Social Research, less well-off people spend more of their income on housing. Consequently, if housing costs are subject to a new tax, this will impact the most on lower and middle income families. Rent is currently tax free under the wholesale sales tax system; so are basic building materials—bricks, concrete, stone, timber and roofing; and so are basic housing services costs such as electrical services, plumbing services, and home handyman and gardening services. There is a similar pattern of expenditure on the other necessities of life. Fuel and power account for 5½ per cent of the expenditure of the bottom 20 per cent of income earners but only 1.6 per cent of the top 20 per cent. Food takes up 24.6 per cent of the lowest income families' budgets but only 12½ per cent of the best-off families' spending.

The Prime Minister does not believe it, though. He told Neil Mitchell on 1 October that `it is the wealthy who buy food'. How out of touch is this man? But not only is the compensation inadequate; there is no guarantee that once this tax is in place, it will stay in place. It did not in New Zealand. The fact is that there will be losers out of this tax package. The compensation package put in is not guaranteed to stay and, as I will point out later, neither is the rate of tax itself. As we saw in New Zealand, it was the compensation package that went quickly out the back door. There will be losers under this tax package. David Vos, tasked by the government to assess it, admitted that `this will be a winners and losers issue'.

But the tax is also bad for the economy and jobs. It will slow economic growth and cause job losses. Tony Abbott admitted that the GST is not about generating new jobs. The VECCI chief—the employers' chief—David Edwards, was quoted in the Australian as saying that the GST will not create jobs. A number of economists have cast real doubt as to the job impacts of the GST. Transitional arrangements will cause real problems for the building and motor vehicle industries. Accord ing to one of the studies by a modeller whom the Prime Minister is fond of quoting:

Housing investment is likely to be higher initially and then sharply lower. Further out, . . . housing investment will be 2% lower than it would otherwise be for the indefinite future.

Motor vehicle industry leaders, too, have predicted a plunge of up to 10 per cent in the level of vehicle sales in the first half of the year 2000.

The next point is this: no-one believes the GST rate will not rise. They do not believe it because that is what has happened all round the world. As consumers in countries with a GST know, the rate invariably goes up. In the OECD, 21 out of 23 countries have increased the general rate of their GST, and Switzerland is reportedly about to become the 22nd. Mr Howard pretends that setting the rate at 10 per cent will mean that the rate will not rise. On the contrary, just three examples of other OECD countries show that this proposition is absurd: the United Kingdom introduced their GST at 10 per cent; it is now 17½ per cent. Denmark introduced its GST at 10 per cent; it is now 25 per cent. New Zealand introduced its GST at 10 per cent; it is now 12½ per cent.

Even John Hewson does not believe the rate will not rise. He told Glen Milne that it was impossible to give that guarantee. The GST, if passed, will be a Commonwealth tax imposed by ordinary legislation of the Commonwealth parliament. This legislation will be amendable by any future Commonwealth parliament, just like any other piece of legislation. There is only one way to stop the GST rising—stop the GST itself; don't vote it in now.

On the question of the 1.9 per cent inflation rate and the compensation package that flows from it, and the assertion of this government that there will be a 100 per cent pass-on of the taxes that are being abolished, the integrity of the entire package depends on 100 per cent of business savings being passed on to consumers, otherwise the 1.9 per cent inflation rate simply does not hold up and the compensation cost will blow out. But no-one believes that the 100 per cent will be passed on. The truth is that it is a fantasy. I offer three simple examples. Mr Sturrock from the car manufacturers said:

With all factors equal, a motor vehicle now carrying a recommended retail price of $30,000 will fall to $28,200 with the new tax system.

That is a six per cent fall. But the Treasury figures and the government's package are predicated on an 8.3 per cent fall. If they can be so far out in cars, how far out are they in the other aspects of the package? Mark Vaile, another of the government ministers, on fuel tax reductions stated simply that `the majority of savings will be passed on to consumers'. He is not guaranteeing the full 100 per cent pass on. And just last week the banks did not pass on last week's cut in official interest rates immediately and completely. It was a similar circumstance but there was nothing like a 100 per cent pass through.

There is further evidence that the 1.9 per cent inflation figure is ridiculously low. For example, the recent GST Premiers Conference agreed that the states will not abolish the stamp duty on some business conveyances for some years to cover the billion dollar-plus blow-out—the mistake that Mr Costello made in estimating the tax package impact on the state budgets. If they underestimated with the states to that extent, what have they underestimated in terms of other aspects of the package? The retention of a state tax will increase the estimated inflation impact.

In addition, the effect of the substantial tobacco tax rises in their own package had been deliberately excluded from the figuring by the government. It is as if it has been wished away. This will add around 0.2 per cent to 0.3 per cent to the inflation rate, with prices estimated to rise by over 13 per cent across the industry, according to page 170 of the government's own tax package.

The government has fiddled the inflation figures and it has underestimated completely the compensation necessary. In addition to this, consumers are already starting to pay for the GST, even before the GST legislation is passed. The most important example there is car lease costs and the advertisements in newspapers already saying that the prices are going up.

One of the most hypocritical aspects of this debate is the transparency of our indirect tax system. The coalition and business community both ran campaigns about the unfairness of hidden taxes but, according to the Treasurer on radio station 6PR, his GST will be `embedded in the price . . . just as goods tax is embedded in the price'. So a $15 billion sales tax is unfair because it is said to be hidden, but a $30 billion GST that is hidden is fair. What hypocrisy by the government! The double standard is obvious and it is unacceptable. But it is much worse because, unlike the wholesale sales tax, it is very simple for the GST to be separately itemised in prices and checkout documents.

The Treasurer has taken a policy decision to keep his GST hidden from consumers. This is consistent with his behaviour all along in the tax debate: disclose nothing, hide everything. He would rather retailers cop the blame. At the appropriate time we will be moving an amendment to require on all receipts full disclosure of the GST impact.

In ridiculing the wholesale sales tax for its anomalies, as the Treasurer and others do from time to time, they have led us to believe that we were getting an anomaly-free tax package. But we have been producing a litany of examples over the last two weeks demonstrating just where the anomalies are. For example, a pack of 48 Panadeine capsules sold in a pharmacy will be GST free, but a pack of 24 Panadeine capsules sold in the same shop will attract a GST. And that is not an anomaly? I would like to hear what is an anomaly, if that is not supposed to be one. How does this result in a simpler tax system?

The government wants us to follow what everyone else is doing on tax, but how are they performing? I quote the Treasurer:

In a region where practically every country is in recession. Go through them:

Remember this day?

Japan, Korea, Thailand, Indonesia, Hong Kong, Singapore, New Zealand.

`They are all in recession' he said. But go through them again, Treasurer. Japan—GST; Korea—GST; Thailand—GST; Indonesia—GST; Hong Kong—GST; Singapore—GST; New Zealand—GST. All of them are in recession and all of them have a GST. So who in the region is doing well? To quote Mr Costello again:

We would still be . . . outside of China anyway, the strongest growing economy in Asia.

Together with the US, the best performing countries in APEC are Australia and China. And they do not have a GST. So where is your argument? Why do it?

And what of the other countries the Treasurer seeks to sneer at? Botswana was growing at 4.9 per cent last year. Ghana and Swaziland had growth of three per cent last year. And Pakistan's growth was 1.3 per cent last year, coming off 5.2 per cent in the year before. To be fair to the Treasurer, Ghana did try to introduce a GST in 1995 but, after prices doubled, fierce popular resistance forced the resignation of the finance minister and they gave it away.

Now they are actually trying to introduce it again, urged on by the IMF. But, according to the business briefing of the Financial Times, economists fear it will lead to `lower revenues for the state and a one-off inflationary shock'. This is the brave new world of this government—the great new direction into tax reform.

The legislation, if you believe the Prime Minister, is the greatest piece of tax reform this century. Yet, for a great piece of reform, its introduction has been marked by secrecy, lies and deception. First, the promise `never ever' from the Prime Minister, and `snake oil' from the Treasurer—their quotes. Then there was the announcement 18 months ago of a great tax adventure, but never any detail—and, by the way, we could not mention the GST in all of that time.

Only two weeks before the election, in an announcement timed to avoid parliamentary scrutiny, backed by the lie that everyone would be better off and a refusal to make public the modelling, did we see it. Backed by a massive advertising campaign, funded first by the business community and then by the public, Australians paid millions of dollars for what the Prime Minister described as a referendum on the GST. But it was a referendum without a no case because taxpayers were only allowed to fund one side of the argument. Even then, more than half the population voted no.

Even now the government is refusing to release all of the information—the information necessary to make an informed judgment on this package. They were dragged kicking and screaming to a Senate inquiry. We said we needed one committee; the government said none, and now, with their miraculous negotiating, have ended up with four. The Treasurer falsely claims that Labor chairs all four of these committees. We do not. In any event, the chairs of the committees were negotiated by the coalition when in opposition. They were forced to release some of their modelling, but only some. Only last week, the government refused to release the material despite initially losing the vote in the Senate on a return to order.

If this is such a good package, why are they trying to hide it and what more have they got to hide? We will demonstrate that through the processes of the Senate because we are being allowed scant time in this place: something less than 18 hours of debate to debate what they have taken 18 months to compile and then only released before the election. If it takes 18 months to compose it, why shouldn't there be more debate allowed in this chamber, particularly when the Senate cannot even consider the legislation—by their own agreement with the government—until 19 April? Why the rush to get this through the House? We see them avoiding the questions in question time and now we see them avoiding the scrutiny of the bills. They want to group them together as a totality in a cognate debate, they want to limit the time on the detail and they want to restrict the opportunity for the opposition to expose this tax for the unfairness that it is.

And that is not all: the truth is they said they were going to release the totality of their tax package, but there are huge items missing from what they went to the last election promising to do. We cannot find the detail for the proposition that locks the rate in at 10 per cent. When they are questioned on that, they say, `Oh, that'll be in the next piece of legislation.' Why not now? That is what has got to be scrutinised in the Senate. The more you try and delay this, the more we will squeeze it out of you. We will persist in this regard because the public has a right to know. Where is the detail on the ACCC amendment giving it greater price monitoring powers?

Mr Hockey interjecting

Mr CREAN —Oh, that is coming too—so is Christmas, my friend. It is just not appropriate for you to laugh this away when you said that the full details would be before us.

Where is the repeal of the provisional tax which they made a great hoo-ha about? Where is the crackdown on trusts? Where are the excise cuts for petrol and diesel? None of this appears, and they are just a few of the examples. The amendment that I will move identifies the totality of those things that we say are missing from this tax package and for which we are calling on the government to produce legislation. Labor will move a series of second reading amendments to the bills in this package and, at the end of my allocated time, I will read in the full amendment I am moving. We will also be taking the opportunity to move a number of detailed amendments to bills in the consideration in detail stage of the bill.

The process of debate in this chamber by this government on this package of legislation is totally unsatisfactory. They are doing everything to avoid scrutiny of their legislation, and we will use every opportunity to ensure they get that scrutiny. We will ensure that the processes of the Senate and this House are used to the fullest to ensure that they fess up and to ensure that they demonstrate the full impact of their tax package and the flawed basis upon which it is constructed. (Extension of time granted) This is a very open-ended invitation, Mr. Deputy Speaker, but I will not abuse the process. I move:

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

"the House:

(1) condemns the Government for seeking to introduce a GST which is an unnecessary, unfair, job destroying tax which discriminates against low and middle income earners, the aged and families;

(2) condemns the Government for putting at risk the low inflation environment delivered by Labor by proposing to introduce an inflationary GST which will put at risk the low interest rates made possible by low inflation;

(3) condemns the Government for placing a higher priority on imposing a GST on Australian families that will make the tax system less equitable, rather than addressing tax avoidance loopholes, which would improve the equity of the tax system;

(4) condemns the Government for the hypocrisy of claiming that hidden indirect taxes are unfair merely because they are not separately disclosed to consumers and then proposing a massive new GST which will also be hidden from consumers even though a retail tax can simply be made transparent to consumers; and

(5) condemns the Government for granting the GST a higher legislative priority than all of the following related matters which have not as yet been introduced into the Parliament including:

(a) those matters listed below which are contingent on the GST package which the Government is hiding from the Australian people and from the Senate Inquiry process such as:

(i) the mechanism by which the rate of GST is supposed to be locked in;

(ii) the amendments to the Trade Practices Act which will grant the ACCC greater power to police the changeover to the GST regime which the Government claims will result in all of the reductions in Commonwealth and state taxes being passed on to consumers;

(iii) excise arrangements for petrol and diesel, involving supposedly retail price neutral shifts in petrol prices and a 25 cent reduction in diesel;

(iv) the repeal of the so-called safety net excise arrangements which were implemented after the High Court ruled state business franchise fees to be unconstitutional;

(v) the luxury car tax;

(vi) the wine equalisation tax;

(vii) repeal/Amendment to the Diesel Fuel Rebate Scheme;

(viii)the First Home Buyers Scheme;

(ix) the guaranteed distribution of GST Revenue to the states; and

(x) the $500 million GST start-up package for small business.

(b) Those related taxation/equity matters which are not contingent on the GST but which should be made available to the Australian people for their consideration including:

(i) providing a Fringe Benefits Tax Exemption for remote area housing provided to employees in the mining industry;

(ii) the repeal of Commonwealth Local Government Funding Legislation;

(iii) changes to childcare assistance;

(iv) excise arrangements for tobacco;

(v) the entity taxation regime involving taxing companies, trusts, life insurance etc under one common set of arrangements;

(vi) the business taxation measures involving the deferred company tax (ie full franking of all dividends) and the possible changes to the corporate rate and business concessions arrangements;

(vii) the new employer withholding arrangements which will replace the PAYE, PPS and RPS systems;

(viii) share buy-backs and liquidations;

(ix) extending capital gains tax relief and the retirement exemption for small business;

(x) limiting the existing Fringe Benefits Tax Exemption for non-profit organisations to $17,000 gross-up value for each employee;

(xi) the anti-avoidance legislation addressing complex chains of trusts;

(xii) the repeal of provisional tax and the introduction of the new Pay As You Go tax payment arrangements;

(xiii) the changes to the timing of company tax arrangements; and

(xiv) refundable imputation credits".

Mr McMullan —I second the amendment and reserve my right to speak.