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Wednesday, 9 December 1998
Page: 1678

Mr McARTHUR (10:58 AM) —We have had an emotional response from the Leader of the Opposition. I remind members of the House and all Australians that the Leader of the Opposition was part of the government that supported Treasurer Keating's tax plan, which was vigorously pursued, to change the Australian taxation system and introduce a GST in 1985. The Keating tax plan was vigorously defended and explained to all Australians. It was only scuttled by Bill Kelty and the ACTU. I challenge the Leader of the Opposition to say what he will do if, by chance, they get back into government. Will they change the important tax reforms introduced by this government?

In the words of Victor Hugo, there is nothing so powerful as an idea whose time has come. Tax reform is an idea whose time has come in Australia. The people of Australia voted positively and strongly for tax reform on 3 October, fully vindicating the leadership of John Howard as Prime Minister and as the advocate of tax reform for the people of Australia. The fundamental change being introduced on this occasion is that those Australians who spend money will have to pay their fair proportion of taxation. Those people who receive income will be able to make some savings with the heavy burden of taxation taken off their back. Quite simply, Australian taxpayers have the tax man on their back, stunting incentive and growth.

Average taxpayers pay too much income tax. If taxpayers are at the highest marginal rate, they pay tax at 47 cents in the dollar. We only have to look at the practical example of the hardworking shearers. As the shadow minister at the table would understand, they pay 47 cents in the dollar because they work very hard. Likewise, the hardworking Australians who pay tax on their overtime fully understand the impact of marginal rates on their tax bill.

Male average weekly earnings in 1997-98 were $36,958, according to ABS figures. These people pay high levels of income tax that have been increasing over recent years. In 1960-61, 11.9 per cent of the average income earner's wage went in tax. By 1997-98 this figure had increased to 23.2 per cent—that is nearly one-quarter of salary going to tax.

Our tax reform measures will mean a new tax system that will address this fundamental problem and will mean that 80 per cent of taxpayers will be paying an income tax rate of no more than 30 per cent. The fundamental proposition is that there will be a flatter rate of tax for income taxpayers of Australia. It is important to look at the marginal tax rate and the changes that have taken place over the years. In 1955, the marginal tax rate was 19 times average weekly earnings, whereas in 1998 it is 1.3 times average weekly earnings, and that is a key figure in the advocacy for change to the tax system. Why did the Australian people support tax reform, whose time had now come, in 1998? Because it removes the imposition of taxes by stealth. Instead, the GST will be a source of revenue to state governments, which will have a clear understanding of how much money they will receive. They will be part of a growth tax and that should take away the angst between federal and state governments.

There will be no more hidden wholesale sales taxes. The opposition supports wholesale sales taxes of 12 per cent, 22 per cent and 32 per cent on things that people use every day. These are the necessities of life, and I refute the argument that the GST is a new tax on the necessities of life. Let me remind members of the House that the GST will be at 10 per cent, not at these varying rates under the present incomprehensible tax arrangement.

Tax by stealth—bracket creep—has increased revenue, particularly to the former government. As income earners moved into a higher tax bracket they paid more marginal tax. With the GST, the situation quite clearly will be that 80 per cent of taxpayers in Australia will be paying a tax rate of 30 per cent except for those very high taxpayers on incomes of $75,000 and over who will continue to pay 47 cents in the dollar, maintaining the integrity of a progressive tax system. I remind members that $75,000 per annum represents 1.7 times average weekly earnings, which ensures it is a fair distance from the bracket creep possibility.

The new tax system removes the hidden charges on people's bank accounts. Do people in Australia understand that state and federal governments are taking $2.4 billion from their bank accounts by stealth—in the middle of the night—to fill government coffers? The new tax system is open and transparent. We are doing something completely radical with this set of tax reform proposals—we are telling Australians what tax they are paying and how much their tax will be. It is not hidden as it is with wholesale sales tax.

The new tax system safeguards the current government services. We need to ensure funding so that we can maintain services to Australian society—age pensioners, people seeking help, and young students at schools. We need to change the indirect system, which is currently shrinking. The tax reform proposal before the House will in fact expand that indirect tax base so that it grows with the economy and helps fund these future demands by Australians for government services.

Fundamentally, the proposition of the Leader of the Opposition is that the taxation rates of individuals should be increased. That is the very proposal we totally reject. It removes incentive and continues to place heavy burdens upon hardworking Australians. The only alternative is to focus on consumption of goods and services, which, every commentator would agree, is the growing sector of the economy. Every other Western country has adopted this method of taxation because it is more equitable and so that people, across the board, pay their fair share.

The new tax system will be simpler and easier to administer. The current system, by any measure, is too complex. Accountants, lawyers and individual taxpayers would agree that the set of tax statute laws and regulations is too complex, too hard to comprehend and leads to litigation of a mammoth kind. The new tax system will simplify it by putting into the goods and services area a new tax of 10 per cent and removing the wholesale sales tax that the opposition support—they are going to support a wholesale sales tax regime that they know in their heart of hearts is fundamentally unsound.

There is the fundamental proposition in the tax reform package that all business inputs will be refunded. I think a number of Australians who have not been close to the tax debate do not fully understand that. Exporters and businesses will benefit from the business import rebate system, so that exporters will not have these hidden taxes in their cost structure. There is also the choice of monthly or quarterly rebates—businesses will be able to get their GST rebate back as it suits them.

The new tax system will give Australians incentive to work. All those shearers, waterfront workers and people in manufacturing who work overtime, who work hard, who put in a fair day's work for a fair day's pay will get a fair day's salary without such a heavy tax burden. It means that most people will pay less income tax—again, that 30 cents in the dollar for 80 per cent of Australian taxpayers.

We will remove tax by stealth through bracket creep with the GST. It abolishes unfair taxes like provisional tax, and most members of this House would be aware there is considerable angst about that tax. It guarantees future revenue for human services and for state governments, for which they have been arguing since Federation. It simplifies the tax system and brings a commonsense view to it.

The new tax system is fair and it is vital for Australia's tax system. There is nothing more powerful than an idea whose time has come—that is, tax reform—and the new tax system will really and truly come to be a part of Australia's progress and development. I am very confident that this House will pass it, and I live in hope that the Senate will pass the most comprehensive tax reform laws ever introduced to the Australian parliament.