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Tuesday, 8 December 1998
Page: 1623


Mr PYNE (8:32 PM) —I think the House would probably agree that the member for Jagajaga has disappointed tonight in her performance on A New Tax System (Goods and Services Tax) Bill 1998 and related bills. She is not interested in the truth; she has demonstrated that most clearly. She has maligned and misrepresented the government's legislation in three particular areas. Firstly, she neglected to mention that health is GST free, especially in the areas of S3, S4 and S8 pharmaceuticals. In her speech, she said that medicines and pharmaceuticals would attract the GST, but the truth is that any medicine that is available by prescription, which includes Panadol—and she actually specifically named Panadol as something that was not GST free—is GST free, as are all those pharmaceuticals that have been scheduled as S3, S4 and S8 pharmaceuticals. Secondly, she ignored in her attack on the government that this bill will ensure a significant increase in the disposable income of all Australians, either through increases in the pension or other compensation, or in the income tax cuts which she totally neglected in her description of the government's bill.

Finally, she said that exemptions in the health area create a world of complexity. The Labor Party, which is proposing many exemptions and supporting the Democrat exemptions in the Senate, particularly in relation to food, comes into the House and demonstrates such double standards in saying that there would be a wealth of complexity created by exemptions in health. I would have thought that if that were the case then creating exemptions in food would create a wealth of complexities for all Australians which this government is trying to avoid by having as few exemptions as possible.

In fact, the member for Jagajaga also neglected to talk about the current inequities and complexities in the system that we are trying to abolish, the 1930s tax system that the Labor Party introduced and the Labor Party supports, and which has myriad complexities for all small business people—and chemists are included as small business people..

This parliament is faced with two clear choices tonight: a choice to implement a new, progressive tax plan which will generate economic growth and secure Australia's future or a choice to persevere with an outdated, irrelevant, economic growth stunting tax system that is a throwback to the Scullin government of the 1930s. The Labor Party consciously chooses to preserve the outmoded and outdated wholesale sales tax regime, which is not relevant to 21st century Australia. The Labor Party stands beside the wholesale sales tax systems of countries such as Ghana, Swaziland and the Solomon Islands.

Just to give an example of the complexities of the current system, recently there were sales tax rulings in two areas which added to that complexity. Labor supports a tax system which gives tax exemptions for general purpose road vehicles if they go across a road from one property to another but does not give a tax exemption if the vehicle goes down a road from one property to another.

Labor supports a tax system which provides that frozen yoghurt is an exemption from the ice-cream exemption for wholesale sales tax on food. And how do we determine whether the product in question is frozen yoghurt? The Taxation Office provides that scientific data needs to be produced which establishes that the primary constituent is yoghurt and that the final product must retain a pH level of approximately 4½. It is an exemption on an exemption on an exemption, and the Labor Party supports it. A tax system tied up in knots by red tape such as this has no place in 21st century Australia. The Australia of the future has no place for Labor's economic policy vacuum.

The coalition government has repaired Australia's economy from the fiscal vandalisation of the Keating-Beazley years and the recession which they gave us and which Mr Keating said we had to have. The next step for Australia is to capitalise on these strong economic foundations by implementing structural tax reform. As a measure of the government's economic credentials, in the last week we have seen—and Labor could never boast it—the Reserve Bank announcing an interest rate cut, taking official rates to a 30-year low of 4.75 per cent, and the release of the national accounts which confirm that Australia is the economic strongman of the Asian region with an economic growth of five per cent. If only Labor could have boasted those figures.


Mr O'Connor —Oh, but we did.


Mr PYNE —Oh, yes? You boasted interest rates of 4.75 per cent? Ha! The Labor Party are now claiming that they could boast an interest rate of 4.75 per cent when we all know that Labor had interest rates of 22 per cent, 17½ per cent, 19 per cent—certainly never close to 4.75 per cent. The new tax system is an extension of the solid economic foundations built by this government to date. This legislation sweeps away an outdated, inefficient tax system that does not serve the needs of modern Australia.

The new tax system rewrites Commonwealth-state financial relations. The new tax system will give income tax relief to families and average wage earners. The new tax system will provide more benefits for pensioners and self-funded retirees. The new tax system will help our exporters, delivering more jobs and increasing our standard of living.

If Australia is to have a dynamic and rapidly growing economy we need to remove regulatory and other barriers which reduce incentives to work, save and invest. The current wholesale sales tax system—Labor's tax system—is a major impediment to Australia's economic growth potential and the living standards of all Australians. The current tax system—the tax regime that Labor is still standing beside—imposes high marginal tax rates at relatively modest levels of income and reduces the incentive for many Australians to earn more.

Labor wants to keep the tax system that will, soon after the year 2000, see a taxpayer on average weekly earnings paying the top marginal tax rate of 47 per cent. It surprises me that the member for Corio, who is in a relatively marginal seat, would be standing alongside a tax system that will put every Australian into the highest marginal tax rate bracket after the year 2000. A fairer and simpler tax system will make it easier for business to understand the taxation implications of investment proposals. It consequently improves our international competitiveness and our standing as a place to do business by making our tax system transparent and by removing tax induced distortions. I am sure the minister at the dispatch box is hugely in favour of this tax system because he has been charged with the role of making Australia a financial centre for Asia and the world. I am sure he is doing that.

In presenting these bills to the House, the coalition government are saying to the Australian electorate, `We are seeking a better Australia for the 21st century.' By voting against these bills the Labor Party are saying to the Australian electorate that they oppose the government's mandate for tax reform for their own political expediency, irrespective of the social costs. By voting against these bills the Labor Party are saying that they oppose the government's plan to abolish the unfair wholesale sales tax system with seven different rates between zero and 45 per cent. Labor will be saying to the Australian people that they want to keep a system where televisions, video recorders and so on—domestic items in the household—attract a sales tax rate of 32 per cent.

By voting against these bills Labor are thumbing their nose at Australian families who will be between $40 and $50 a week better off under the government's tax plan. By voting against these bills Labor are abandoning pensioners and self-funded retirees by denying them the opportunity to share in the financial benefits of a new tax system. Labor are turning their back on small business, which has been crippled by an avalanche of paperwork from Labor's wholesale sales taxes, and on the abolition of nine incentive destroying indirect taxes by the states.

By voting against these bills Labor are favouring the wealthy who have the financial means to access sophisticated arrangements to legitimately minimise their taxation liabilities. They are turning a blind eye to the black economy. Labor are putting at risk the government's ability to provide a stable and equitable revenue source to fund essential government services for the community. Labor are snatching the benefits from those eligible for the First Home Owners Scheme of a lump sum payment $7,000 to assist in the costs of buying a home. And by voting against these bills they are striking a blow against improved and more productive Commonwealth-state financial relations and a secure revenue source for the states.

Labor are also cruelly denying 4.7 million more Australians from having a top marginal tax rate of 30 per cent or less and from sharing in almost $13 billion in income tax cuts every year. I think they will hang their heads in shame at the next federal election when the Australian people have the chance to endorse our new tax system and say what they think of the Labor Party.

The government's tax plan has been subjected to almost two months of rigorous public debate by political opponents, the media and most importantly the Australian electorate. The Labor Party resorted to their usual tactic of running an outrageous scare campaign specifically targeted at the elderly in an attempt to distract the Australian electorate from their lack of imagination and policy development. It is unprecedented in contemporary politics for a government to go to the polls with a new tax system and win. Clearly the coalition, on any measure, has a mandate for tax reform.

The necessity for tax reform for Australia's future has been recognised by successive governments for nearly three decades and recently by Mr Stanley Fischer from the International Monetary Fund. Mr Fischer, the first deputy managing director of the IMF, has endorsed the government's management of the economy and its policy framework, including tax reform. Tax reform was publicly identified by the Hawke-Keating government as a priority. In 1985 the Hawke-Keating government held the taxation summit and the Treasurer, Mr Keating, knew that a broadly based taxation system was essential if Australia was to remain internationally competitive. That is why he and his friends in the Labor Party supported a 12½ per cent consumption tax.

Despite cosmetic reforms to keep the average taxpayer's head just above the water, the former Labor government could never summon the strength or party unity to bring fairness to the taxation system in their 4,500 days in government. Rather than rolling up their sleeves and doing the hard yards Labor chose to ignore the problem and rack up national debt. In the last five years of the Labor government, Australians watched our national debt snowball $70 billion—$16 billion a year.

By their treatment recently of the member for Werriwa, the Labor Party have demonstrated that they still cannot and will not deal with the realities of the tax system because it requires too much discipline and too many tough policy decisions. Having set the thought police onto the member for Werriwa by squeezing him from the front bench, Labor continues to stand by a broken, unfair, incentive destroying wholesale sales tax system.

I implore the Labor colleagues of the member for Werriwa—including the member for Perth and the member for Corio—to read his book Civilising Global Capital: New Thinking for the Australian Labor Party. This body of work refers to the narrowness of the current indirect tax base which does not cover services, and refers to the advantages of taxing consumption over income. In the book, he writes:

Even without the spread of globalisation the tax system would be in need of constant repair and reform. Notwithstanding the pitfalls of tax reform in the electoral arena, this process now seems unavoidable in Australia. The effectiveness of the taxation regime, both in its adequacy and equity, has become a first order issue for social democracy.

The member for Werriwa is right, and the ALP should heed his advice. As shadow treasurer, Gareth Evans was the target of vilification by the Australian electorate because of Labor's policy vacuum. Since accepting the poisoned chalice that is the Labor Party shadow treasury, Simon Crean has demonstrated a propensity for parliamentary tricks rather than for making constructive contributions to the tax reform debate. Sadly, Simon Crean runs the real risk and the great indignity of being as irrelevant as Gareth Evans was as shadow treasurer.


Mr DEPUTY SPEAKER (Mr Hawker) —Order! The honourable member will refer to other members by their seats.


Mr PYNE —Certainly, Mr Deputy Speaker. The dilemma of the member for Hotham is that, following the experiment of the member for Werriwa, it is quite clear that there is no room for an economic thinker on the front bench of the modern Labor Party.

In stark contrast to Labor's policy paralysis, the package of legislation currently before the House represents fundamental economic reform which capitalises on the government's economic achievements to date. An affordable private health system, a tertiary education system accessible to any young Australian, a compassionate and pragmatic social justice program and an economy which gives industry an incentive to grow and export can only be achieved through tax reform. A better Australia needs a better tax system.

Perhaps the final word on the necessity for tax reform belongs to the previously men tioned Mr Fischer from the IMF. When asked whether the timing was right for tax reform in Australia, he responded:

I don't know what the right time is, but when politicians campaign, say they are going to do something like that which could be unpopular, I think they get a mandate to do it.

I implore members of the Labor Party to reach deeply into their souls and recognise the damage they are doing to the Australian economy by not supporting a reformist tax system. I urge the Democrats in the Senate, Senator Brian Harradine and Senator Colston to do likewise—to support what is essential for Australia's future and growth.