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Wednesday, 9 December 1998
Page: 1688


Mr SIDEBOTTOM (11:57 AM) —As a boy growing up in Tasmania, one of the basic principles I learnt from my parents was that everybody deserves a fair go. It is a basic characteristic of our society and one of our great strengths as a nation. However, the Liberal Party under John Howard is attempting to erode this value with the introduction of a goods and services tax. Introducing this tax will further divide Australian society into the haves and have nots. Once again we see the Liberals looking after their own—the big end of town. Big business and the wealthy will be the only winners out of a GST and I can assure you that there are not too many who fit that category in my electorate of Braddon.

The people of Tasmania totally rejected a goods and services tax at the last federal election. The member for Hinkler talked about a litmus test. In my electorate of Braddon there was a 10 per cent swing against the sitting Liberal member, who extolled the virtues of a goods and services tax but was not prepared to debate it in public. Why? Because it was of no real benefit to the people of Braddon, and he knew it.

Tasmanians have had enough of being treated like second-class citizens by this government. We are not going to roll over and have our standard of living drop further with the introduction of a grossly unfair tax that targets those who are already battling. Recent newspaper reports regarding the amount of personal income tax that a prominent Australian pays—you well know who—or, more accurately, doesn't pay, is an indication of where the real problem lies.

My electorate is already socially and economically depressed, with more than a quarter of its 80,000 population receiving income support of one form or another. It is ranked 17th lowest in medium weekly income out of 148 electorates Australia wide. The region has chronic unemployment running at 14 per cent and youth unemployment of more than 30 per cent. Despite the imperfections of the present income tax system, at least it gives substantial recognition to the principle that the amount of tax paid should have regard to capacity to pay. A goods and services tax or value added tax violates this basic principle. Any consumption tax ignores the vital principle of capacity to pay.

Millionaires and people whose income is below the poverty line will pay the same rate of GST. This is unfair because it disproportionately hurts low and middle income households, especially those with children. Effectively, the rate is much higher for low income people because they will pay the GST on 100 per cent of their income. These people will spend a higher proportion of their income on items and services that are currently untaxed.

These items and services are not luxuries. They are not discretionary expenditures that families may choose to discontinue if a new tax is put on the items. They are the necessities of life, the basic services that people need for a decent standard of living. Many of them will be paying GST on more than 100 per cent of their income as they have to borrow or incur debts just to make ends meet. Well-off people spend only a half or less of their income on essentials, so a much smaller proportion of their income will go on taxes. A GST is therefore, by definition, regressive.

Studies have concluded that food takes up 24.6 per cent of the lowest income families' budgets and only 12.5 per cent of the best-off families' spending. Fuel and power account for 5.5 per cent of the expenditure of the bottom 20 per cent of the lowest income families and only 1.6 per cent for the top 20 per cent of high income families.

Mr Hockey interjecting


Mr SIDEBOTTOM —No, you only know what happens at the top end of town, not the bottom. More affluent people will benefit from a GST because, while the cost of bread, milk and meat will increase, the price of expensive motor vehicles, jewellery and other items will drop because the GST will probably be considerably less than the current wholesale sales tax on these items. But many people in the lower income bracket have little or no scope to reduce expenditure on essentials such as food, clothing, heating, educational books, transport and funeral expenses.

And in regard to the elderly, my electorate has one of the most ageing populations in Australia, and a GST will be hard on them. The frail and the elderly have no option but to engage help around the home, so a GST will increase their budgets and they will be further disadvantaged.

The Howard government says pensions and other allowances will rise by four per cent in the year 2000, so we need to deduct the impact of the GST from the four per cent increase. The impact of the GST on prices in its first year will be over two per cent, so the government is really giving an increase of only two per cent in the value of pensions. Pensioners are already due for increases to keep in line with wages and inflation, so they are due for substantial increases without a GST. All the government has done is to take these due increases and rebadge them as GST compensation.

Braddon's small business sector will also suffer under a goods and services tax. The business sector in the north-west is characterised by a large number of very small firms. It is the major employer in the region, particularly of young people, and a GST will stifle the prospects of further growth in the area. A GST will be expensive and a burden for small business to implement and administer. The President of the National Tax and Accountants Association said earlier this year:

Small businesses will have to spend almost $7,000 each in set-up costs to comply with any goods and services tax.

The figures do not include an estimated $5,000 extra to buy computer systems, which many businesses do not have, in order to administer the new tax. Mr Regan also said that the new tax would more than double the cost of government red tape and cause many businesses to go bankrupt. The average small business in Braddon will have to spend at least 228 hours in the first year setting up the required accounting and taxation records.

A further reason for the rejection of the GST or any broadly based consumption tax is that it will accentuate the unfair position of small businesses compared with large businesses. Instead of confronting the severe additional costs that will be faced by small businesses, the costs for large businesses will be relatively small. For some larger businesses, especially retail chains, it is likely that the GST will result in a net benefit rather than a cost, thereby extending their competitive advantage over smaller, local, independent businesses.

The current wholesale sales tax is presently collected and passed on by some 75,000 businesses around the country. With a GST, nearly one million businesses, the majority of them small, will become unpaid tax collectors. This is an unnecessary and costly burden imposed on a struggling sector of the north-west economy. Small business people in Braddon overwhelmingly rejected a GST in 1993 and again in 1998.

The cost differential between living in Tasmania and the mainland will be further exacerbated by the goods and services tax, and no amount of uniform compensation will make up the difference. Because goods and services will be taxed, Tasmanians will be worse off by half.

Local government in my electorate is rightly uneasy about this government's tax reform proposals. It is little wonder, because local government received no meaningful consultation in the tax reform process to begin with. Likewise, concessions on gaining GST-free status for councils had to be wrenched out of this government, thereby preserving a major component of the tax base of local government. However, the GST status of many of the functions of local government remains unclear and ambiguous. Local government in my electorate strongly opposes the passing of responsibility for its financial assistance to the states and, if the GST is to be imposed, the compensation package for transition to the new tax system, already promised to small business and charities, should extend to local government.

To suggest that there will be no rise in the rate of the GST in the future is unbelievable. This government is happy to claim global examples of countries with a GST, so let us continue the exercise. Twenty-one of 23 countries in the OECD have increased the general rate of their GST. Why will Australia be any different? Let us look at GST rates which began at 10 per cent. The UK is now 17.5 per cent; Denmark is 25 per cent; and New Zealand 12.5 per cent. The GST is a Commonwealth government tax and can be changed by any Commonwealth government in the future. This will have to happen as the inevitable inflationary effect, well beyond the predicted 1.9 per cent, sets in.

I have listened to members opposite bleat about how wonderful and necessary their GST is for the Australian people—as if the nation is waiting with bated breath for the coming of the new-age tax. For goodness sake, we are talking about imposing a tax on people, not giving them the kiss of life.

Is Australia's economy worse off than the government tells us? Do not tell me that our so-called `ramshackle, 1930s tax system' has produced low inflation, a surplus budget, low interest rates, and progressively increasing taxation returns. Well, let us get rid of this system in case it continues. What nonsense. It is almost as nonsensical as saying the GST will eliminate the black economy. In fact, it does the opposite. That is chronicled in every economy that has a GST, and it will be no different in Australia. No, the GST is not progressive. It is unfair, unnecessary and inflationary. It is a tax on everything and was clearly rejected by the voters of Braddon and by the voters of Tasmania.