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Tuesday, 8 December 1998
Page: 1606


Mr St CLAIR (7:05 PM) —I will try not to go over ground that has already been discussed in this place, but I would like to point to the Prime Minister's 13 August 1997 announcement when he put forward the five principles for taxation reform. They are worth going over again: there should be no increase in the overall tax burden, any new taxation system should involve major reductions in personal income tax with special regard to the taxation treatment of families, consideration should be given to broad based indirect tax to replace some or all of the existing indirect taxes, there should be an appropriate compensation for those deserving of special consideration and reform of the Commonwealth-state financial relations must be addressed. I believe that is what A New Tax System (Goods and Services Tax) Bill 1998 and related bills are doing.

The new tax system to come from this will include a broad based consumption tax which will apply to most goods and services. With the introduction of the new tax system, wholesale sales taxes will be abolished plus, in consultation with the states, the following nine types of taxes are also to be abolished: financial institutions duty; debits tax; stamp duty on marketable securities; conveyancing duties on business property; stamp duties on credit arrangement, instalment purchase arrangement and rental hiring agreements; stamp duties on leases; stamp duties on mortgages, bonds, debentures and other loan securities; stamp duties on cheques, bills of exchange and promissory notes; and, of course, that iniquitous tax, the bed tax.

The abolition of these taxes is vital to reduce the cost of doing business. With the present system, over half the money raised from the wholesale sales tax comes from taxing goods purchased by business. It imposes a hidden tax on export and import competing industries. The introduction of the new tax system will change this. Businesses will be entitled to full input tax credits and the hidden burden will be removed. In fact, business costs will fall by more than $10,000 million as a result of the GST and the abolition of current inefficient and unfair taxes.

The people of New England and regional Australia in general have been screaming out for major tax reform for years. The present tax system, which includes Labor's wholesale sales tax regime, has proven to be outdated and now unworkable. Mr Acting Deputy Speaker, I would like to point out to you and the honourable members of this House some of the anti-business anomalies that exist in the old Labor wholesale sales tax regime.

If, as a sawmiller I purchase a chainsaw to cut logs to length to place in the mill for sawing, the purchase of that saw is exempt from sales tax. However, if I purchase a chainsaw to cut a piece of timber off to sell to a farmer or builder then sales tax is applicable. If I purchase a forklift to feed logs into the sawmill I can purchase that forklift free of sales tax. However, if I purchase a forklift to load the finished timber onto a truck for delivery to a customer, whether a farmer or builder, then the purchase of that forklift is subject to sales tax.

Another antibusiness effect of the old Labor wholesale sales tax in New England can be illustrated by looking at the Tamworth tractor sales and service business of Goodwin and Kenny. This progressive small business sells and services tractors all over New England and the north west. However, when that small business goes to purchase a new service vehicle or a number of service vehicles so their mechanics can maintain the tractors they sell, they have to pay 22 per cent sales tax on them. This really is a crazy situation as this adds to the costs of production for farmers in this area and therefore adds to the cost of our exports. The new tax system will remove these impediments to doing business.

During the 10 months that I was campaigning in New England, leading up to the release of the new tax system and the federal election, the other issue that was raised with me more times than I can remember was: `When is the Australian government going to bring in a tax system that is going to reward effort?' This is exactly what this government is in the process of doing for the working men and women of New England and this country by introducing this legislation.

There will be one tax rate of 30 cents in the dollar for those earning between $20,000 and $50,000 a year and another tax rate of 40 cents in the dollar for those earning between $50,000 and $75,000 a year. This will give a substantial saving to working men and women. When overtime is offered to many workers they feel reluctant to do the extra work because under the present out-of-date system they are taxed out of existence and therefore not rewarded for that extra effort. The worker suffers, the employer suffers and therefore the nation suffers. These new tax rates will significantly alter this prospect and we can look forward to seeing both the employee and the employer rewarded for their extra effort and work. And that will lead to more jobs.

Regional Australia relies heavily on the transport industry, and New England is a main part of that. We need to transport the products we grow and manufacture to the market. We need to bring out to the country those inputs that help these businesses become more competitive and therefore more profitable. The transport industry has been hit hard over the years in the taxes it pays. It pays 2½ times the tax paid by other industries. I am not sure that many honourable members of this House are aware that the diesel excise, for example, has gone from 3c per litre in 1983 to 34.7c per litre plus a further 8.1c per litre, which is collected on behalf of the states. Every rise of 1c a litre in the price of diesel adds about $115 million per year to the costs of road transport in this nation. The rate of diesel excise rose by 16c a litre in the 10 years between 1987 and 1997.

Let us look at the present Labor sales tax system and see what it does to the costs of transport in this nation. There is 22 per cent sales tax on truck purchases. That translates into about $50,000 for a new prime mover. There are exemptions in the present system for some safety items such as seat belts, yet not for others, such as brake parts, et cetera. Confused? So is the tax man.

Even back in 1990 when most of these taxes were much lower, research showed that the tax burden added 5.4 per cent or $11,000 a year to the costs of operating a heavy vehicle in Australia. In the 1990-91 year the industry paid a total of $2.4 billion in registration fees and fuel excise. This year it will pay close to that in federal fuel excise alone. There needs to be a significant change. High diesel excise hurts not only the transport industry but also all Australians. The trucking industry is highly competitive and operates at world's best practice for freight haulage. But when faced with this tax slug it must pass at least some of its costs onto the customer. Since the customers of the trucking industry include virtually every other industry in not only regional Australia but the whole of Australia, the whole economy is affected. Those other industries pass the buck, literally in this case, onto consumers of their products wherever they can. This means our products are more expensive and therefore less competitive when those products go onto the overseas markets. Lower profit for the export companies, fewer jobs in Australia and fewer export dollars flowing into the economy will be the results of continuing short-sighted fuel tax policies and the non-introduction of this new tax system.

If Australia is to remain internationally competitive, and we need to, we need to look at ways to reduce the costs to industry, particularly the agricultural, mining, fisheries and forestry industries largely based in regional Australia. These industries contribute 80 per cent to Australia's merchandise exports. With the new tax system, exports of goods and services will be GST free. The new tax system will reduce the cost of producing goods and services for export by $4½ billion—a significant sum of money. This will be done by the removal of Labor's hidden taxes and therefore the promotion of growth and increased job prospects.

In conclusion, the current tax system is neither simple, fair, nor efficient—and simplicity, fairness and efficiency are the basic principles of the new taxation system. While the best plan the opposition has is to fiddle with our present taxation system, that is not the answer. Nor is the answer in the plans of the Democrats to increase exemptions, because that will just narrow the tax base and complicate the system. The Labor Party and the Democrats are playing a political game in the Senate with their inquiries, at the expense of the Australian population. Too much time has been spent talking about change. They should not be allowed to attempt to dismantle this new tax system, which I believe is basically a simple, fair and efficient tax system for the benefit of all Australians.