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Wednesday, 31 March 1999
Page: 4821


Mr KELVIN THOMSON (10:50 AM) —The member for Curtin was talking about vertical fiscal imbalance. Let me say to the House that those who worry about vertical fiscal imbalance are generally states using this as part of their ambit claim in terms of bargaining for extra money or ideologues who want to reduce the role of the Commonwealth. There has been vertical fiscal imbalance for decades; it has served this nation, frankly, quite well. We have very good standards of service. We have low rates of taxation. We have a very successful economy.

The extraordinary thing about the member for Curtin's concerns about vertical fiscal imbalance is that in fact the GST package exacerbates that very problem. If you are worried about vertical fiscal imbalance, this makes it worse: the Commonwealth is collecting all the revenue in the shape of GST and then handing it all over to the states for them to spend. It was an extraordinary series of comments by the member for Curtin, and she should really wake up and understand exactly what is going on with this GST package.

In the brief time that we have available to speak on this important GST legislation, I essentially want to speak to the opposition's second reading amendment, which talks about our concern that the proposed lock-in mechanism is absolutely ineffectual and will not prevent future Commonwealth parliaments from increasing the GST rate or removing exemptions. I also want to pick up the part of our amendment which notes that the GST will become more unfair as the rate increases and the part of our amendment which condemns the government for the new tax system package.

The lock-in mechanism is a completely cynical exercise. This government knows perfectly well that no parliament can bind a successor parliament. All it will take for a GST to rise is for a successor parliament to come in here and introduce legislation to undo this legislation. In virtually every country in which a GST has been introduced we have seen a subsequent increase in its rate. The latest of those was Switzerland, on 1 January.

Mr Hockey interjecting


Mr KELVIN THOMSON —The minister interjects concerning Canada. I always enjoy discussion about Canada. As I recall, Canada was the country where a conservative government introduced a GST and then lost of the order of 160 seats and was reduced to two.


Mr Hockey —Then why don't you just let us introduce it? You should support us.


Mr KELVIN THOMSON —On political grounds that would be a temptation, but in the public interest we reject it. It is all very well for the member for North Sydney to be interested in this. If his side of politics were reduced to two his might be one of the two surviving seats. In every country that has introduced a GST we have seen the rate of GST rise: in the UK from 10 to 12½ per cent; in New Zealand from 10 to 12½ per cent; and in Denmark from 10 to a whopping 25 per cent. So the idea that this legislation is going to lock in the GST is absolute nonsense.

The other place where a GST has come in is New Zealand. I was intrigued recently to see the minister announcing a range of measures designed to stop New Zealanders from coming to Australia. The report of this suggested that New Zealand's plunging economy had brought almost 20,000 Kiwis to settle in Australia last year. So much for the impact of the GST on New Zealand.

The government, and perhaps some other people, think that the Labor Party should be giving it away and suing for concessions in the Senate and elsewhere. Why would we do a fool thing like that? It would be a fraud on the voters, to whom we as Labor Party candidates and representatives went at the last election and said, `If you vote for us, we will oppose a GST: we will oppose a GST in the House; we will oppose a GST in the Senate.' This government might be happy to break its election promises but this opposition is not and we will continue to oppose the GST.

What is the evidence concerning the GST and its impact post-election to emerge through the Senate's inquiry processes? We have seen evidence that the compensation package as it impacts on pensioners will be absolutely worthless. All the evidence is that the rise in pension rates to occur over the next few years with a GST is absolutely the same as the rise which would occur in the absence of a GST. So the effective value of the government's compensation package for pensioners is zero. That is the first thing to come out of the Senate inquiry.

The second thing to come out of the Senate inquiry is the GST's impact on jobs. I talked in the House last week about the modelling of Professor Peter Dixon from the Centre for Policy Studies at Monash University which indicates that if workers were to endeavour to achieve compensation for some of the price rises which will come from a GST we would see a scenario in which up to 120,000 jobs would be lost, many of those jobs in regional Australia: 16,000 in regional New South Wales, 11,000 in regional Victoria, 12,000 in regional Queensland, 2,500 in regional South Australia, 1,600 in regional Western Australia and 2,200 in Tasmania. So the GST will have a severe impact on people in regional Australia—and this from a government which claims to have an interest in their wellbeing. Similarly, the GST will have severe impacts in health, education, tourism, forestry and fishing, food, drink and tobacco, and textiles, clothing and footwear. So there will be some real problems from the GST package in the employment area.

We have also seen from the Senate inquiry the impact of the GST on local government. Prior to the election the government claimed that the non-commercial activities of local government would be outside the scope of a GST so that, if a service was provided for a nominal charge, GST would not apply. Senator Ian Macdonald subsequently told the relevant Senate committee that a GST will apply to all local government services, even those with a nominal charge. So the swimming pools, the sporting fields, the community halls, the equipment hire, the nurseries, the publications, recycling charges and waste charges—all those sorts of things—will be GSTable, and ratepayers will face either diminished services or increased rates as a result.

The other area where we have heard alarming evidence in the Senate inquiry concerns the impact of the GST on charities and fund-raising efforts. St Vincent de Paul, Anglicare, Yooralla and the Helping Hand Association for the Intellectually Disabled—all those sorts of organisations—have come before the Senate and produced evidence that, notwithstanding what the Treasurer claims, they will be worse off as a result of the GST. To try to put them on a level footing with a business is fundamentally unfair. Unlike a business, the profit from their activities is not a private profit; it is used to provide more services for people who need it most. To burden them with the paperwork and the membership fees and all the other things that will come with a GST is totally unfair.

Similarly, the evidence is that a GST will have a catastrophic effect on the fund-raising efforts of bodies such as schools. I went along to the Coburg West Primary School fete recently. The kids were being charged $2 for a go on the mini-golf. What we will see with a GST is a charge of not $2 but $2.20 and, much more seriously, a requirement that each transaction be reported. That sort of red tape would completely throttle the efforts of schools and any other organisations which engage in charitable and fund-raising activities to raise money for these important services. As a result, the GST will threaten school fetes and have a catastrophic effect on them.

The other part about the GST which has become clearer with time is that it amounts to a redistribution of wealth in reverse—a transfer from the poor to the rich. I received, and others may have received, a letter recently from Brian Clarke of Guildford in which he put forward two alternatives to the GST. He said `increase income tax from 20 to 60 per cent for all taxpayers earning less than $15,000' and then give half of the money raised as tax deductions to the top 20 per cent of income earners while the other half goes as deductions to the 50 per cent who are middle income earners.

So this package is about a massive transfer of wealth—something like $6 billion—with over 50 per cent of the income tax cuts going to the top 20 per cent of income earners. As a result, we are opposing the GST package. We are not opposing the legislation before the House, but we are moving amendments which specify our concerns and I urge the House to accept those amendments.