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Thursday, 6 September 1984
Page: 601


Senator JACK EVANS(6.11) —I commence by making it quite clear that the Australian Democrats are not opposed in principle to the gradual or planned transfer of taxes from personal income tax to consumption taxes. I will not be speaking as vehemently against the Sales Tax (Nos 1 to 9) Amendment Bills 1984 and the Sales Tax (Exemptions and Classifications) Amendment Bill 1984 as I might against other forms of taxation. But this transfer of taxes needs to be undertaken on a planned basis. The ad hoc and band-aid approach which this Government and previous governments have used, will be endemic in our present tax system until we get the whole system sorted out. That is really very regrettable because it means that nobody in industry has much of an idea of his or her future or even whether there is a future from Budget to Budget.

I can best demonstrate that by talking about some of the taxes that were imposed last year by this Government which have had a quite disastrous impact on the industries concerned. The fibreglass and pre-engineered pools industry suddenly found itself facing a massive tax increase which put it at a distinct competitive disadvantage with the concrete pool industry. It pleaded, requested, reasoned and explained to the Government why it was necessary to leave out the fibreglass pools sales tax and instead have a sales tax on components of all pools introduced which would have brought in the same amount of revenue to the Government but which would not have given that competitive edge to the concrete pool industry. Of course, it needs to be recognised that, in the main, the concrete pool industry is the supplier of pools to the wealthy areas, although not exclusively. But if one looks across the board at the general introduction of pools, one sees that the concrete pools go into the expensive, high cost areas of most metropolises. On the other hand, fibreglass pools usually go into the middle class areas, the working class areas and the country areas.

What did this Government do? It gave a competitive advantage to the concrete pools industry by leaving concrete pools alone, untaxed, and taxing the fibreglass pools. I find it quite incredible that a government of this complexion could do that. Of course, the result has been not only to affect drastically the fibreglass pool industry to the point that its comparative sales have dropped in Western Australia by 14 per cent of overall pool sales. Incidentally, sales in Sydney have dropped by 29 per cent. It has meant, in addition, that some of the fibreglass pool manufacturers, usually relatively small businesses, have either gone out of business or have had to retrench staff . That does not seem to me to be a reasonable approach by a Labor Government.

Today I again appeal to the Government to look once more at what it has done. Last year I forecast that this would be the result of this type of action. The proof is now there. I appeal to the Government to look again and consider the damage it has done to small businesses around Australia. The Government should give the fibreglass pool manufacturers an opportunity to breathe again and the people in the middle and lower income groups a chance to buy their pools at reasonable prices.

A similar thing has happened with air-conditioning ducting. This was an industry which was starting to grow in Australia because of the increasing need for air-conditioning, particularly in remote areas. A government which has proclaimed that it is supporting regionalisation, decentralisation-the spread into country areas-suddenly introduced a tax on air-conditioning ducting which is most likely to be felt in those remote, hot country districts. The immediate effect was a cost increase of about one per cent on all people building homes with air-conditioning ducting. It was not a one per cent increase in the cost of air-conditioning ducting but a one per cent increase in the cost of a home. It also had the effect of adding to the costs of high rise buildings. That might not have worried this Government. I am not sure whether it has a feeling of antagonism towards the high rise commercial building industry but I would have thought that it would have given every incentive possible to industries putting up factories to air-condition those buildings. It did not. This is a further disincentive. If one wants to air-condition a building and use ducting, which is necessary in most factories, one has to pay extra. This Government has provided people with an incentive to treat their employees worse. That is a cop out for a Labor government if ever I saw one.

The small industry which was really savagely hit by this Government in its last Budget was the tyre retread industry. I made some forecasts at the time of the last Budget when this sales tax was confirmed. I said that there was the potential for massive retrenchments in the tyre retread industry around Australia. I went beyond that. I said that it could cause the bankruptcy of some of them, all because of a changing definition by the Taxation Office. What has happened? This Parliament and this Government gave a competitive edge to the multinational importers of new tyres. Does that sound like a Labor government to honourable senators?


Senator Peter Rae —With DC preferences and the much delayed decision in relation to DC preferences affecting this along with a lot of other things.


Senator JACK EVANS —I accept Senator Peter Rae's addition. This is not just an industry problem. Once more, as a result of action by this Government, we have given an advantage to the big industries and the big multinational importers. But we have given a competitive disadvantage to the little Aussie battler out in the back of beyond in all the little country towns or the moderate-sized country towns and we have put a lot of them out of business.


Senator Peter Rae —But that is because they are interested in big business and big unions and not in the small businesses.


Senator JACK EVANS —Absolutely. It makes it quite obvious that only one party is interested in small businesses-I hate to rebound on Senator Peter Rae-the Australian Democrats. Both the conservative Australian Labor Party and the conservative Liberal Party of Australia are supporters of big business; the evidence is there before our very eyes. What has happened with the tyre retread industry? On top of the disadvantage to the industry itself and the retrenchment of staff from that industry, a lot of country towns have lost a very valuable and useful service. Tyre retreading was an instant or an immediate service available to people who wanted a tractor wheel or utility wheel retreaded, who wanted something fixed quickly but did not want, in the case of Western Australian country towns, to wait for a new tyre to be brought up from Perth or over from the eastern States. Such people needed somebody to get on to their problems pronto, and the tyre retreaders were able to do that. They are just going down like ninepins now and that service is being denied people in country towns. That is a very sad thing for many country people-employees, employers, farmers, people just trying to eke out a living in country areas.

Let us look at some of the people who have been hit in the cities, where we have the potential for one of the great sunrise industries to leap ahead. As a result of the genius-I put it at that level-the creativity, the entrepreneurial capabilities of Australians in computers, we had and perhaps still have the opportunity to leap ahead in a high tech industry. But what did we do? We imposed a sales tax on computer programs and software. Rather than encourage this new high tech industry, we decide that we will discourage it. I suspect, although I do not have the evidence in front of me, that we would be the only country in the world that looks on a high tech industry in this way. We will give it a disadvantage as it tries to leap into the 1990s-a brand spanking new industry that can get us exports around the world and can show what we in Australia are made of. We will hit it to leg before it even gets off the ground by imposing a sales tax. This is the reality compared with some of the gestures that have been made by this Government to assist high tech.

There are two or three items that I will touch on briefly because they are part of a schedule of amendments I will be moving in the Committee stage. These include deaf aids for the moderately deaf, special aids for disabled or physically or mentally handicapped people, and sunscreen agents in cosmetics. I will not go into those in detail because Senator Macklin has made an appeal to this Government to help people in these particularly disadvantaged areas and in health areas. He has researched and become quite expert in championing the cause of these people, who seem to have nobody in this Parliament-or in this Government, anyway-looking after their interests and who need relief from sales tax in those three groupings.

I wish to touch on the problem of the wine tax which was introduced by this Government. I am getting the feeling that the Government is already regretting, for the second time, its attempts to kill off the wine industry. That is a pretty savage expression to use and I should use a gentler one when referring to the Government's actions. I do not think that it had in mind the killing off of the wine industry, but I also do not believe that it understood that that would be the effect of its measures. Its earlier attempt, to impose an excise from which it subsequently withdrew, was recognised subsequently to be potentially very damaging to the industry. This is its second endeavour, and again it becomes obvious that the homework has not been done.

I will not go through the background to this chapter and verse because Senator Rae has done that admirably. He has obviously had the same kinds of approaches from his constituents and constituents around Australia that I have had. In my case the approaches have been particularly from constituents in Western Australia, where there is a feeling not only that a number of the smaller wineries will go under but also that the industry itself is in danger of collapsing. I refer not to the wine industry but to the small vineyards industry . The small vineyards are trying to build a quality export wine that will enhance this country's reputation around the world. We all know the kind of reputation that a good quality wine can give to a country. We have seen it for years, if not for centuries, from France in particular. Australia could have that kind of reputation on world export markets if it encouraged the wine industry to grow and to develop the way it has over recent years. It has developed as a result of the small specialist grape growers and wine producers who have made it their business to concentrate on a very high quality product. Plenty of grape growers around Australia are satisfied-I do not denigrate this for one moment-to sell their product, mass-produced and in bulk, to the producers, who put it into casks and flagons and sell it as cheap wine to a bulk market. The sales tax on that low cost wine will not hurt the market nearly as much as it will hurt the high cost quality end of the market. Not only will the effect flow on to those small businesses around Australia and to the export industry, but also it will have an overall impact on the industry which will cause a restructuring. I ask the Minister for Resources and Energy (Senator Walsh) whether this is the hidden agenda, the real meaning of this new tax. Is it intended that the wine industry be restructured? I know that an inquiry is taking place at the moment, but is it intended that the wine industry be restructured in such a way that we will cater for a bulk wine industry, a cheap wine industry and gradually phase out the quality wines? That will be the effect of imposing the tax in this way as a sales tax.


Senator Walsh —Come on, Jack. What have you done with your income redistribution principles?


Senator JACK EVANS —I thank the Minister for that interjection. If it is aimed at income redistribution, that is an acceptable objective for a Labor government , as long as the Government recognises that in that income redistribution approach it is restructuring the industry by definition. It is saying: 'Low cost wines, low taxes; high cost wines, high taxes'. That is obviously what will come out of this. High cost wines are produced by small businesses, small enterprises . The Government is saying: 'Bulk producers, low tax; small producers, high tax' . The small producers are the ones who are trying to get into quality wines. The Government is saying, in effect: 'We will look after big businesses but we will tax small businesses as hard as we possibly can because they are supplying to the quality market, and under our principles as a Labor government those who supply to a quality market will be hit with a savage tax'. In 10 years time that might well be an acceptable approach. If the wine producers were up and running, if the industry were a healthy one, that would be an acceptable approach, and I would not deny it to the Government to use that approach; but right now it is an industry struggling to get off the ground. I ask that the Government give it a chance to get off the ground before it taxes it, otherwise it will have no industry there to tax.

Sitting suspended from 6.30 to 8 p.m.


Senator JACK EVANS —Before the sitting was suspended I was describing to the Senate the difficult position in which wine producers and grape growers have been placed as a result of the imposition of the new wine tax. I do not wish to take up the Senate's time by pursuing that matter any further, other than to give notice of an amendment that I shall move in Committee which reads:

That the House of Representatives be requested to make the following amendments in the Sales Tax (Nos 1 to 4 and 9) Amendment Bills 1984:

Page 2, sub-clause 3 (1), proposed new paragraph 4 (d), line 8, leave out '10 per cent', insert '2.5 per cent'.

I shall explain my reasons. I had hoped that the Opposition would move a more substantive motion on this issue and give all of us the opportunity to express, by request, our strong desire to the Government that this tax be delayed. Regrettably, that is not the position that the Government has taken. As the Government has already indicated through the Minister for Social Security ( Senator Grimes) that it will not accept the proposal for a delay, we are left with no alternative but to introduce an amendment that would provide a phase in of the tax, commencing at 2.5 per cent and giving the industry an opportunity to adapt to a sales tax system at the lowest possible rate initially and then, over a period of years, to a higher sales tax regime. I believe that that is the fairest way of introducing this tax. In fact, the Australian Democrats wish that governments were sufficiently adept at forward planning to be able to phase in and phase out all taxes on a graduating basis such as this. If we accept the 10 per cent tax, we are in the process, as I indicated earlier, of literally destroying or setting back by many years a sunrise industry, and a sunrise rural industry to boot.


Senator Peter Rae —It has been booted.


Senator JACK EVANS —It has been booted very severely. I shall be moving a motion on behalf of the Democrats to the effect that we should give the industry a chance to survive, accepting the fact that the Government insists on having some tax, by providing for the tax to be at the new low level of 2.5 per cent. I shall be moving a number of other amendments in the pattern that I described earlier reflecting the Democrats' disappointment at the continuation of taxes which interfere with, and in some cases destroy, certain businesses and industries. Those taxes will cover the range of fibreglass and pre-engineered pools, air-conditioning ducting, recapped tyres and retreads, computer programs and software, deaf aids for the moderately deaf, special aids for the disabled or physically or mentally handicapped and sun screen agents in cosmetics. We believe that there is a valid and genuine case for the elimination of sales taxes for each of those industries and items.


Senator Peter Rae —Will the honourable senator explain the philosophy in relation to interfering with the Government's right to prepare its Budget? I am debating not the issues but the philosophy. What is your attitude towards the right of the Government?


Senator JACK EVANS —Does the honourable senator mean the attitude of the Australian Democrats towards the Government's right?


Senator Peter Rae —Yes.


Senator JACK EVANS —The Democrats have been quite consistent. We have said all along that there is a need for a gradual transfer of taxes from personal income taxes to consumption taxes. There is no problem with that, except that those taxes must go hand in glove. There is no point in just building up sales taxes and increasing the total tax package if one does not concurrently have a real reduction in personal income tax. There has been no real reduction. There has been a substantial increase in personal taxes, so we are not at all happy with the proposed increases in sales taxes. Each honourable senator must make up his mind about the Government's right to determine what shall be taxed. We should decide whether we are prepared to go to the brink or beyond the brink in disagreeing with the Government's approach to those taxes.


Senator Peter Rae —Do you regard that as a reason for withholding Supply, and if not, why not?


Senator JACK EVANS —I think we have proven that we do not agree with withholding Supply, but that it is possible for us to amend the sales tax legislation, as we did when we amended the sales tax proposals with regard to the necessities of life, without having a massive impact on the Government's Budget. Those measures looked after those who were genuinely, and in some instances desperately, in need of protection from the government of the day. That position applies to each of the categories that I listed tonight just as it applied, perhaps to a greater degree, to the proposal to impose sales taxes on the necessities of life. I have no problems with that.

I would hope that philosophically the Liberal Party could agree that there is a role for the Senate in amending a sales tax Bill by a request to the House of Representatives. I am advised-I accept that advice-that that measure has the full impact of an amendment to the Bill. I sincerely hope that the motion that I shall be moving in Committee for a reduction in taxation from 10 per cent to 2.5 per cent will have the support of the whole of the Opposition in the Senate. We need to test whether the whole of the Senate is willing to live with that tax or whether we shall get together to say: 'Look, there is somebody in the Federal Parliament willing to protect you innocent people out there who have suddenly been hit to leg and are about to lose your livelihoods and about to have an industry destroyed'. I look to Senator Peter Rae and his colleagues to join with us.


Senator Peter Rae —That amounts to reducing government revenue. Do you have a proposal to replace that government revenue with some other form of revenue?


Senator JACK EVANS —The measure would bring about an infinitesimal reduction in the Government's revenue but would be a massive interference with the industry concerned. We do not have a problem.


Senator Jessop —But you don't believe in rejecting Supply.


Senator JACK EVANS —We lived comfortably with the withdrawal of taxes on the necessities of life when the Liberal Party was in government; we shall live comfortably with enabling a small, vital sunrise rural industry to survive. I think that Senator Jessop could live comfortably with that as a senator for South Australia.