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Tuesday, 8 December 1998
Page: 1595

Mr NAIRN (6:07 PM) —One of the most overstated quotes is the one about the two most inevitable things in our lives being taxes and death. Equally inevitable is the fact that if a government or an opposition is strong enough to put forward a major reform of taxation then substantial public debate will ensue. If you are up-front and open, then you can be guaranteed of strong public participation in the debate. If you are sneaky about tax changes, then you might just avoid the debate, and recent history proves this. Remember back in the mid-1980s when the then Labor government floated the idea of major reform with the preferred option being the introduction of a goods and services tax? Much public debate took place and there was strong support for it. There was acceptance that our taxation system needed overhauling; it was outdated and taxes were applied to a base that was far too narrow, making it very unfair to a number of sections of the community, in particular, ordinary income taxpayers.

It is interesting to look back at some of the quotes at that time in support of the introduction of a goods and services tax. The Treasurer of the day, Paul Keating, was the one really trying to push reform at the time and he put forward an introduction of a goods and services tax. He said:

. . . There are three main advantages of (consumption) tax.

First, it will allow a more rational indirect tax system than the current anomaly-ridden wholesale tax, which has multiple rates, numerous exemptions, and fails to tax the services sector.

Second, it will enable us to generate tax revenues to provide for a major reduction in the marginal rates of income tax. No other tax has the same potential for this purpose.

Third, it generates tax from those who will continue to evade or avoid income tax. That provides a useful `net dividend' for distribution to the rest of the community.

Those are all arguments that I think the House will remember being put forward in the debate that we had just recently before the October federal election. With regard to business, Paul Keating said:

For business, this is a simple tax. They will also benefit from no longer carrying the cost of the wholesale sales tax which they pay and have to finance on their stocks.

He further said:

The great value of a tax of this kind in terms of its efficiency will be its simplicity. . .

He went on to talk about the exemptions—and we have had lots of debate recently about whether things should be exempt or not. He said:

At the moment we all have to buy the necessities; if you're not buying them you can't live. And you buy them now out of your after-tax income, after it has suffered these very high, oppressive marginal rates.

He went on to say:

What we are saying is that you buy the same necessities, but out of your relieved tax income.

That is a very relevant point because those opposite continue to talk about the introduction of a GST of 10 per cent on items. They choose never to talk about the taxes that will be removed and they also choose not to talk about the dramatic decrease in income tax.

But here was one of their great idols of the past—Keating—back in the mid-1980s, wanting to put forward a reform but, unfortunately, the bulk of the Labor Party were not prepared to take the hard decisions. They were not prepared to go forward and wanted to continue with the draconian taxation system that we have had since 1930. It was probably a great system back in 1930, but it is certainly totally out of date today. That was the debate in 1985.

In 1993 we had another debate and that came from the opposition this time. John Hewson put forward, once again, a comprehensive plan for taxation reform which included a goods and services tax. We had an enormous debate leading up to the 1993 election. So dating back even to 1985, but then more so in 1993, the public have participated very strongly in this debate. In 1993 the government of the day, interestingly with Paul Keating as their leader, went in the totally opposite direction to what he said back in 1985. It is a wonder how he could really stand up and make the claims that he did in 1993, given the sorts of the things he said in 1985.

That is another example of where, if you are prepared to be strong and up-front, there is good public debate, but if you want to just sneak through some changes and not be strong and up front, then often there is not the debate. That happened in 1993. While we were having a debate about the possible introduction of a GST, the Labor Party of the day were behind the scenes getting ready to make massive taxation changes after they got back in 1993—but not for massive taxation reform, simply massive taxation changes.

What they did was whack up the wholesale sales tax—10 per cent went to 12 per cent, 20 per cent went to 22 per cent, and 30 per cent went to 32 per cent. They increased the items that were subject to the tax and therefore added an enormous burden. I just find it unbelievable listening to some of these Labor people coming in here and talking about the burden of taxation reform under our proposal and how people will be worse off and we are not compensating them. Can you find one single item of compensation after 1993 when they got back into government, snuck back into government by not telling people what they were going to do—

Mr O'Connor —Only seven major reforms to the tax system in 13 years.

Mr NAIRN —Can you find one single bit of compensation after 1993? Not one cent! And these people now stand up here and say that they are going to look after the downtrodden, the battlers and everybody else. How much compensation did they provide those people with after 1993? Not one cent—not a single cent—in compensation. The hypocrisy is astounding. So that was the great debate we had in 1993, and the end result of that was that the people of Australia got massive taxation increases without any compensation whatsoever.

Then we came to 1998. We have had a situation where the government of the day this time was strong enough and up-front enough to put forward taxation reform prior to an election, and that dominated a fair part of that campaign. So, once again, we have seen quite substantial debate out there among the public about taxation reform. We have had it this time because we, the coalition, have been prepared to put that forward. The claim that many Labor people make is that there has not been enough debate. But, if you look back at 1985, 1993 and 1998, there has been an enormous debate among the public.

In the short time I have to speak today in this debate, I will talk about a couple of items that have been fairly topical throughout the whole debate going back to 1985. First of all, there is the effect of a goods and services tax on business. I think I can speak with some credibility, having been a partner in a surveying practice for the 15 years prior to coming into this parliament, about the effects of the various existing taxes on business and what the effect would be as a result of taxation reform.

The amount of wholesale sales tax, as it goes through the whole business cycle, is quite staggering. If you sit down, in any small business, and look back through the many purchases that you make, I do not think there would be a single item where I would not be able to find the effect of some wholesale sales tax on it. Once again, we see those opposite—and it is pretty hard to find any of them over there who have ever had any experience in this area—stand up and talk about the burden it would be on small business and how they do not pay sales tax on things. It is just the greatest load of rubbish, because just every small business has an enormous amount of tax built into their purchases.

I went back through some of the things that my business spent on on a regular basis and looked at the sorts of savings that would take place. We ran about eight, nine or 10 vehicles. In terms of fuel alone, it will basically work out that the refund you will get in GST from the fuel—and that means a reduction in the cost of fuel for running those vehicles, because the actual price of fuel will be about the same after the GST goes in as it is now, so you effectively get a reduction—will mean that for more or less one month in every 12 our fuel bill will be free. That is an enormous difference and an enormous benefit to the running of a survey practice such as the one I was involved in.

On the cost of vehicles, of all of our survey equipment—there is 22 per cent sales tax on all of those sorts of things. All of that will be refunded. It will not only reduce from 22 per cent to 10 per cent, the 10 per cent will be refunded. The pegs and the stakes, all of the materials that we would use daily—these are the big purchases in a business like that. They all reduce from 22 per cent sales tax down to 10 per cent, and it is refunded. So there are certainly significant gains to be made in that part of it, and that really affects your cash flow because you are paying those purchases on a regular basis and you are getting it refunded under the GST proposal.

Probably more importantly, when I look around my electorate and the types of businesses there, by far and away they are predominantly small businesses and many of them are involved in export areas. With great parts of the electorate being a fairly rural seat, there are significant businesses that rely very heavily on selling our produce overseas. The savings there are enormous. A company like Bega Cheese, which has got into the export market in the last five years, has gone from zero export sales to about $15 million a year in those five years, which is terrific. They have put a big effort into that.

But they have a problem in that they have to compete with New Zealand, and New Zealand, with a goods and services tax regime, has all of its dairy products going offshore without any tax at all. Here we have Bega Cheese having to compete with New Zealand in England, Europe and various other places, and compete unfairly. Companies like that are very much looking forward to the introduction of a GST because all of those taxes will be refundable to them, and all the many other taxes that we are getting rid of means savings to their exporting.

The same applies to a company like Toorallie Wool in Bombala. Toorallie was set up in the early 1990s when the floor price of wool had disappeared and the people there thought, `We can do something different.' They went into manufacturing their own product. They now have stores in America, New Zealand and Europe and they are gradually increasing their exports of excellent Australian wool products. Once again, they will have a lot of the tax burden taken off them. They are a very competitive business. It is pretty tough out there in the world market, particularly in an area like wool. They are very much looking forward to getting those costs off them that will flow as a result of the introduction of a GST.

The other thing I would like to say is in relation to the benefits of a reduction in income tax. We have heard a lot from the Labor side, this bleating about, `It's all going to the high income earners.' Let us have a look at what will occur with the changes to income tax, and those rates changing quite dramatically. Currently, the bottom 20 per cent of taxpayers are contributing 2.3 per cent of income tax paid. The percentage share of the tax cut will be over four per cent to that group. The income tax percentage paid by that group after July 2000 will be two per cent. So it will reduce from 2.3 per cent to two per cent. If you go through the bottom 40 per cent, the bottom 60 per cent, and the bottom 80 per cent, it is the same. In fact, it is the top 20 per cent who will be contribut ing a larger proportion of tax. For Labor to huff and puff and carry on and say this is money for the high income earners is incorrect. The facts just do not show it. It is the lower income people who will benefit, and they certainly form a part of the spectrum within my electorate, having incomes below $24,000, $25,000 and $30,000 a year. They are going to benefit from it.

Various pieces of information released this week have demonstrated in no uncertain terms the excellent job the coalition has done in repairing and managing the economy. The information has shown strong growth, low inflation, sustained low interest rates, reduced government debt and reduced unemployment. That shows just how much we have got it right.

Tax reform is the next step to build on the economic and workplace relations initiatives of our first term. The people and businesses of Eden-Monaro will benefit from this reform. Average wage earners will pay less tax, businesses will be working in a fairer system, and the many businesses that rely on selling to the rest of the world will be more competitive with the impost of the wholesale sales tax taken off their backs, along with a whole myriad of other taxes. In addition it will allow them to sell more. If they are selling more they will have to produce more. If they produce more they will need to employ more people. That means real and long-term jobs for the people of Eden-Monaro. These bills must be supported.