Mr CREAN (1:25 PM) —I move:

That all words after "That" be omitted with a view to substituting the following words:

"the House:

(1) condemns the Government for proposing to replace the Wholesale Sales Tax with a regressive GST;

(2) notes the advantages of the WST which include no tax on services, the exclusion of necessities such as basic food, clothing, footwear, health, and building materials, flexibility, a multiple rate structure to enable differential tax rates to be applied to different goods where appropriate, low administrative costs for government, very low compliance costs for most businesses as only 75,000 taxing points are needed compared to 1.4 million taxing points for the GST;

(3) calls on the Government to undertake a review of the WST to address the perceived anomalies with a view to correcting them as the alternative to the introduction of a GST; but

(4) notes that a GST, if introduced, cannot be maintained on top of the WST, as this will result in an unreasonable increase in the indirect tax burden on ordinary Australians".

The Treasurer says this country needs tax reform. I agree with that—the system does need constant reform. But the simple fact is that the need for tax reform does not mean that the only option is a GST, nor does it mean that the existing tax system is broken.

Is the tax system broken? This is what is often asserted. Not according to the Treasurer, who just the other day admitted that it is not broken. Not according to the Minister for Finance and Administration, who has just released a document showing revenue $5 billion higher in the first four months of this year than in the same period of the previous year. Not according to the Australian Bureau of Statistics, which, just yesterday, released data showing that growth in total tax across the country in 1997-98 was 5.2 per cent, or $8¼ billion.

Being in surplus is a rare occurrence in most OECD countries, but not in Australia. Including this year, the Commonwealth has been in surplus for six of the last 12 years. Labor delivered four successive surpluses in the late eighties and early nineties. Now the budget is back in surplus again and is forecast to be in surplus into the foreseeable future—all this without a GST.

The supposed notion that the sales tax base is crumbling is unsustainable. The facts demonstrate a very different story. Rather than declining, sales tax has maintained a very constant proportion of total revenue and GDP over the last decade. Australia's fiscal position is sound due to Labor's sound economic management and tax reform. Australia's tax mix—that is, the relative share of direct and indirect taxes—has indirect taxes at around 30 per cent of total tax revenue, comparable to the OECD average.

But the most damning indictment of the claim that the system is broken comes from new modelling released just today. According to that modelling of the government tax package, an analysis based on the Monash model:

The Treasury has asserted that a major change in the tax mix is necessary because the present array of indirect taxes will raise insufficient revenue in relation to Australia's future public sector requirements. However the Treasury provides no explicit revenue forecasts.

I underline that point again. The Treasury, according to the Monash people, provides no explicit revenue forecasts. I continue with the quote:

At this stage of our research we have found no evidence to support the Treasury's proposition. In our basecase forecasts, indirect taxes grow at about the same rate as GDP, even in the absence of increases in rates of indirect tax.

The Treasury and the government will not produce their modelling. Try as we have to get that modelling produced, they will not. They are hiding it like they are hiding so much else in relation to this package, but we will insist upon this material being made available in the Senate inquiry. But here is independent modelling debunking the assertion of the Treasurer.

In short, the system is not broke, and it is not going to break. There is no need for the large increase in indirect taxes being proposed by Mr Costello. Australia simply chooses to raise its indirect taxes in a different way from other countries. This system works well in Australia, is fairer to ordinary people and to families and should not be abandoned for a GST. The truth is that, while the coalition desperately want a GST, Australia does not need one. The Treasurer says he wants to replace a 1930s tax system with a GST—a value added tax. But the idea of a value added tax was first advocated in the United States by T.S. Adams in 1911. He wants to replace a 60-year-old tax with an 80-year-old one. He claims that we should have a new tax for the new century, but what he is proposing is a 1911 tax. Some reform!

He forgets to point out that, in Australia's case, the transition will be harder than in other countries because we have no turnover tax and therefore no large administrative infrastructure to collect the tax from a large number of production units. But, as much as the Treasurer would like to characterise it, Labor is not about defending a 1930s tax system. Labor has already modernised Australia's tax system.

We make no apology for concentrating on equity when we reform the system, and we continue to insist that taxation reform be fair. His case is that the sales tax was introduced in 1930 and therefore it should be repealed and replaced with a GST which was developed in the 1950s in Europe. On that basis, all excise, customs duties and income taxes, both personal and corporate, would also be repealed because they all predate the sales tax. But the truth is that we do not have a 1930s tax system. Our tax system is almost unrecognisable from that of the 1930s. Successive Labor governments have constantly updated it and Labor fully modernised it through our period of office.

The 1985 tax summit agreed to significant sales tax reform, and in 1992 the sales tax legislation was substantially streamlined. Labor in government also repaired the direct tax base which was crumbling, a tax base we inherited from the man who is now Prime Minister—bottom of the harbour, John Winston Howard. Remember him when he was Treasurer—and all those rorts, all those bottom of the harbour schemes? That is the tax system that we inherited.

Labor's major reforms include the fringe benefits tax, the capital gains tax, the petro leum resource rent tax, the taxation of foreign source income and cracking down on tax havens. Collectively, these fair, progressive measures contributed around $7 billion this year to better public services without impacting unfairly on ordinary Australians and ordinary PAYE taxpayers. Other reforms, such as the superannuation taxation regime, have further increased this contribution to around $10 billion.

The coalition oppose the vast majority of these fair, modernising taxation reforms. We all remember the now Treasurer, the member for Higgins, and his desperate attempts to block Labor's measures to crack down on tax avoidance through employee share ownership schemes. I quote him:

We've knocked off the last two and we plan to knock this one off as well. We will be opposing root and branch Labor's latest proposal.

So today we have in charge of our tax system the tax rorter's friend, now Treasurer of Australia, Peter Costello, and old Barnacle Bill from the bottom of the harbour as Prime Minister. That is who is proposing this taxation reform—and what form have they got? Appalling form.

The real issue in taxation is keeping the direct tax base in good repair. That is where the focus should be with the government, not increasing the cost of living for ordinary families. Labor has demonstrated that, if the government is vigilant in keeping tax avoidance in check, we do not need an unfair tax on necessities. That remains the case today.

The wholesale sales tax is a better tax than the GST. Its structure is very flexible and can react quickly to urgent situations. Two recent examples come to mind. When the High Court held that the business franchise fees of the states were unconstitutional, what did this Treasurer do? He used the sales tax to impose a 15 per cent surcharge on wine and other alcoholic products to recover the threatened revenue. This increased the number of rates from six to seven. Let me repeat that. The Treasurer, Mr Costello, increased the number of sales tax rates from six to seven. But it was very effective also in dealing with the unprecedented fiscal crisis confronting the states.

Were any of the states criticising the sales tax then? No. Because it helped to save their budgets in a relatively simple and effective manner. Furthermore, when some of the states threatened to renege on the uniform gun laws, what did the Prime Minister do? He threatened that a punitive level of sales tax would be imposed on certain firearms if the states broke the agreement. So, for the Prime Minister's greatest achievement in his first term, he enlisted the flexible multirate sales tax. These options are simply not available under the flat rate GST.

So sales tax has a great flexibility as a policy tool, and it has been used by both the current Prime Minister and the current Treasurer in precisely this mode. The wholesale sales tax is an input tax, just as his tax on financial services and home rentals is an input tax. A multiple rate structure in an indirect tax is not a fault; rather, it is an advantage. His input taxes, just as wholesale sales tax—the very thing he berates—he now adopts in his tax package: input taxing.

Mr Costello has also criticised the seven-rate structure of the wholesale sales tax. But we should remember that the GST will have up to five rates—nil; 10 per cent; probably around four to five per cent, depending on the flow-on impact for input taxed industries; and others for luxury cars and for wine. Sales tax has seven rates, of which Peter Costello produced two, and the tax he berates he now adopts. In fact, the Treasurer is a serial taxer and a serial hypocrite to boot!

Labor believes that necessities should not be taxed—food, clothing, footwear, electricity, gas, telephone and health care. We also believe that luxuries should be taxed at a higher rate than ordinary items. All of this can be achieved by sales tax. What should also be understood is that the flat rate GST structure proposed here is not the norm. Most countries that have a GST have a multirate structure. They believe that differing goods and services should be taxed at differing rates. Just some examples of countries with differential rates in the OECD include Austria, Belgium, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Mexico, the Netherlands, Portugal, Spain, Sweden, Swit zerland, Turkey and the United Kingdom. We should also consider the range over which these exemptions fall.

Mr Hockey —We had an agreement about time.

Mr CREAN —My time is up there on that clock. You broke agreements today and it is getting back to you now.

Mr Hockey —We had an agreement and you—

Mr CREAN —And we had an agreement about this morning and you have broken it.

Mr Hockey —You have broken it.

Mr Costello —You agreed to give us 10 minutes.

Mr CREAN —And you agreed to give us more time today and you broke it.

Mr Hockey —We had an agreement.

Mr CREAN —You broke it.

Mr DEPUTY SPEAKER (Mr Jenkins) —Order! The honourable member for Hotham will resume his seat. The ministers will stop interjecting. The honourable member for Hotham will address the chair and address the question before the chair which is that this bill be now read a second time.

Mr CREAN —Thank you, Mr Deputy Speaker. Examples of consumption for which GST exemptions have been given include telecoms, legal services, ferry, road and bridge tolls, standard municipal services, passengers, transport, sport, burials, sale of new buildings, artists and travel agents. None of those attracts or—

Mr Hockey —On a point of order: we had an agreement in place that there would be 10 minutes allowed for the Treasurer to complete on this bill, and the shadow Treasurer and member for Hotham is breaking that deal. I ask him to keep to that deal.

Mr DEPUTY SPEAKER —Order! The minister will resume his seat. There is no point of order.

Mr CREAN —None of those I have listed attracts sales tax. So, rather than being out of step with the rest of the world, Australia's exemptions in its indirect tax system are consistent with general overseas practice. Food is not generally taxed at the standard rate either.

The efficiency of sales tax is also impressive. For the 1996-97 year, almost 95 per cent of the revenue is provided by a little over 8,000 taxpayers. These firms will provide around $14 billion in sales tax this year. Contrast this with the GST that will increase the number of taxpayers from 75,000 to 1.4 million. The initial cost of the GST approach is estimated as $7,000 by the National Tax Accountants Association. This represents about $10 billion in costs in the first year, with huge ongoing costs as well.

The government claims that sales tax is a tax on manufacturing and the GST spreads the burden to the services sector. But you cannot look at these issues in isolation. The services sector will have this GST imposed on everything that they do. This is the country's fastest growing sector in terms of employment. Of the two million new jobs created in Labor's 13 years, practically every one was generated in the service sector. The GST is a tax on service industries and a tax on jobs.

Government ministers say a payroll tax is bad because it is a tax on jobs but, in the same breath, they propose a new $30 billion tax on those jobs. This is going to have interesting implications for the Ralph review of business taxation. For, while sales tax is weighted more heavily on manufacturers, miners and farmers, so are the various tax concessions and outlays measures. Last year, manufacturers, farmers and miners received $2.6 billion in budgetary assistance—75 per cent of total industry assistance. In proportion to its size, the services sector received just a fraction. So manufacturers are compensated for a sales tax with significant concessions—tax expenditures. Service industries do not receive the tax concessions, but they also do not pay the tax. So the GST is going to change all of that. Service industries which will be paying 10 per cent on everything will demand significant compensation. They will be the ones pushing for the 30 per cent company tax rate goal. Note the word is `goal'. `Goal' is an even more discredited commitment than a non-core promise. These people will demand, through the Ralph re view, reductions in the company tax rate. They will argue that with the GST manufacturers will no longer need special assistance measures. It will be an interesting debate and we will be following it intensely.

This week we have witnessed the disappearance of the Treasurer's great anomaly-free tax system. We can score as many points on the GST anomalies as he can on the wholesale sales tax. But the truth is that all indirect taxes are going to have anomalies, particularly where there are exemptions. They arise when the boundaries for those exemptions are drawn. The point about sales tax is that the task of administering these issues and sorting out the anomalies does not fall to the ordinary small businessman and woman.

The wholesale sales tax does an effective job and it should not be repealed. It is a better, fairer, more efficient tax than the GST. Unfortunately, the GST has now been passed by the House despite Labor's best efforts. Labor will redouble those efforts to have the GST rejected by the Senate, but we are now presented with a series of bills which, however inadequately, are designed to compensate for the GST—

Mr Ronaldson —On a point of order, Mr Deputy Speaker: there was very clearly an agreement between the opposition and the government in relation to the conduct of this debate. This is a flagrant breach of it.

Mr DEPUTY SPEAKER (Mr Nehl) —There is no point of order.

Mr CREAN —They are designed to compensate for the GST by removing sales tax, introducing personal income tax, and various other compensation measures. It would be a double blow to the Australian community to be hit with a GST but retain the wholesale sales tax and receive no compensation. Labor will therefore not oppose these measures in the House—

Mr Ronaldson —On a point of order, there was a clear agreement between the opposition and the government in relation to the conduct of this debate, and this is a flagrant breach of it.

Mr DEPUTY SPEAKER —Your point of order is not a point of order. It is not relevant to the debate.

Mr CREAN —We call on the government to address any perceived anomalies in the wholesale sales tax rather than impose a new 10 per cent tax on almost everything. I point out, however, that if we succeed in defeating the GST in the Senate, the compensation measures will become unnecessary—

Mr Hockey —On a point of order, Mr Deputy Speaker: the member for Hotham made an agreement with us about speaking time for the Treasurer.

Mr DEPUTY SPEAKER —There is no point of order. The minister will resume his seat.

Mr CREAN —I will address the point of order, because this government has broken agreement after agreement on the time that we were going to have for debate.

Mr Ronaldson —The point of order, Mr Deputy Speaker, which I am raising with you, at 12 minutes before 2 o'clock, is that there was a clear agreement between the opposition and the government.

Mr DEPUTY SPEAKER —Order! Resume your seat. I regret to inform the Chief Government Whip that agreements made between parties are not part of the standing orders and you cannot raise a point of order on it.

Mr CREAN —And the abolition of sales tax will be opposed.

Mr Hockey —I rise on a point of order.

Mr CREAN —Mr Deputy Speaker, is this another point of order on the same point? If so, you should adopt the Speaker's ruling and—

Mr Hockey —Why don't you keep to the agreement?

Mr CREAN —Why don't you keep to your agreement?

Mr DEPUTY SPEAKER —Order! Both members at the table will resume their seats. Before I call the minister, I have already ruled that there is no point of order regarding agreements made informally between the parties. So if you wish to raise a point of order, it had better not be on that one.

Mr Hockey —My point of order is on relevance. The member for Hotham is not speaking to the appropriate bill; he is right off track. He is talking about the overall package and, therefore, I ask you to bring him back to the substance of the debate, which is an end to sales tax, which the member for Hotham is opposed to.

Mr DEPUTY SPEAKER —I thank the minister.

Mr Reith —On a point of order in respect of the arrangements for today, Mr Deputy Speaker—

Mr DEPUTY SPEAKER —Order! It being 1.50 p.m., the time allotted for the remaining stages of the bill has expired. The question is that the bill be now read a second time. All those of that opinion say aye, to the contrary no. I think the ayes have it.

Mr Crean —The noes have it.

Mr DEPUTY SPEAKER —Is a division required?

Mr Crean —Yes.

Mr DEPUTY SPEAKER —I have only had one call. Do you want a division or not?

Mr Crean —Yes, on the amendment.

Mr DEPUTY SPEAKER —You have not moved the amendment.

Mr Crean —I did.

Mr DEPUTY SPEAKER —No. You have not moved the amendment. It was not seconded. If you did move it, it has not been seconded. Order! It has not been seconded and therefore lapses.

Mr Crean —Mr Deputy Speaker, this is an absolute joke. I moved this amendment.

Mr DEPUTY SPEAKER —No. Resume your seat.

Mr Crean —On a point of order, Mr Deputy Speaker, and it is this: did you call for the seconder before you ruled my motion out of order?

Mr DEPUTY SPEAKER —No, I have no obligation to.

Mr Crean —You are required to do that.

Mr DEPUTY SPEAKER —The rules and regulations for the House required me, at 1.50 p.m., to put the question despite the fact that you still had not finished and you still had not had somebody second your amendment. The question is: do you want a division?

Mr Crean —Yes, I want a division on the amendment, Mr Deputy Speaker.

Mr DEPUTY SPEAKER —No. There is no amendment. I will put the question again so everybody is quite clear. The question is that this bill be now read a second time.

Question resolved in the affirmative.

Bill read a second time.