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Tuesday, 16 October 1984
Page: 1764


Senator MAGUIRE(4.58) —I rise to oppose the matter of public importance submitted by Senator Dame Margaret Guilfoyle. It reads:

The refusal of the Government to disclose its taxation policies before the election.

I reply first to Senator Dame Margaret Guilfoyle by hitting head on her claim that the present Government is a high tax government. We need only look at the figures available on gross pay as you earn income taxation collections as a percentage of gross domestic product to be able to nail that lie very firmly. I cite those figures for the Senate. For 1982-83, which was the last financial year of the Fraser-Howard Administration, gross pay as you earn income taxes were 12.7 per cent of gross domestic product. This financial year, the second financial year of administration by the Hawke Labor Government, gross pay as you earn taxation will be only 11.9 per cent of gross domestic product. There has been a very clear reduction in that proportion, which is contradictory evidence to the claim made by Senator Dame Margaret Guilfoyle and others today that this Government is a high taxation government. We need only to go back to the period in 1977 and 1978 referred to earlier by Senator Richardson when he talked about the election fought on a fistful of dollars. At that time the Fraser Government introduced a new taxation system, the bottom rate of which was 30c in the dollar . Previously there had been two tax rates below 30c in the dollar. All the Fraser Government could manage was a tax rate of 30c in the dollar at the very bottom of the tax structure.

Of course, it was Mr Howard who in the two Budgets in 1981 and 1982 presided over the largest ever rise in sales tax in this country. The compound increase in collections from sales tax as a result of the extension of the tax base and the higher rates imposed in those two Budgets was 66 per cent-a very large increase indeed in that tax on sales of goods and services.

One of the distinguishing features of the Budget we brought down in August is the introduction of the 25c in the dollar taxation rate. As I pointed out, that will be lower than the rates applying under the Fraser-Howard Government. In fact it is the lowest rate for six or seven years. The 25c in the dollar tax rate will apply on incomes up to $12,500 and will be of great benefit to people on low and middle incomes. Overall the effect of that tax cut will be $7.60 a week on incomes up to $28,000. One of the key features of the introduction of the 25c in the dollar tax rate is that many Australians will now move into a lower taxation bracket. In fact figures made available to me suggest that two and a quarter million Australian taxpayers will pay tax now at the 25c in the dollar tax rate. Previously they would have paid tax at higher rates. Of course, taxpayers on incomes above $12,500 will benefit also from the introduction of that rate because that rate applies to the first $12,500 of all incomes.

This afternoon Senator Chaney pulled some amazing figures out of the air. One that I tried to scribble down in haste was a claim that there had somehow been a 7 per cent rise in taxation under this Government.


Senator Chaney —That is quite right; income tax.


Senator MAGUIRE —In income tax. But Senator Chaney omitted to tell the Senate and the people of Australia that he was comparing two different periods in Australian history-one with an economy which was in decline and the other with an economy with sharp growth. He ignored the fact that whatever taxation figures he was talking about were based on a growing economy with more and more people employed in both the public and private sectors of the economy.


Senator Chaney —What about the per head figure?


Senator MAGUIRE —I will get to that in a moment. As to Senator Dame Margaret Guilfoyle's claim about people moving into higher tax brackets-I think she claimed that an extra one million people have moved into the 46c in the dollar tax bracket-she should give us the whole story. Why did she not tell us and the people of Australia about the people who have moved into the lower tax brackets? It is all very well to make claims about what people are paying at the margin, that is, on the last dollars of their income, but to ignore the fact of what they are paying on the total of their income. It is a specious argument to make claims in isolation about people moving into higher tax brackets.

As a result of this Budget, we will have a distinguishing feature in Australian taxation with the introduction of a lower tax bracket and therefore many Australians moving into lower tax brackets. It may be true that one million extra taxpayers will move into the 46c in the dollar tax bracket, but the figures made available to me suggest that more than two and a quarter million people will move down from the 30c in the dollar rate to the 25c in the dollar rate. The inevitable effect of that, for Senator Dame Margaret Guilfoyle's edification-I am surprised that after her years in the Finance Ministry she would make those sorts of claims-is that the average tax rate has been reduced for many taxpayers. More people are going into lower tax brackets than are moving up into higher brackets. It is the average tax rate that counts-not the marginal tax rate which applies only to the very last dollars that people earn and not to the total amount earned. They are a couple of the nonsensical claims which have been made this afternoon and which deserve no further debate.

This Government has made its taxation policies clear by its actions. It has in fact brought in a more progressive income tax system. It has increased the number of tax brackets. It has introduced new taxation rebates which will mean that most people who receive unemployment and sickness benefits will no longer pay tax, resulting in big changes in their situation. The one per cent Medicare levy has been relaxed. In the last 12 months we have heard honourable senators opposite saying, both in this place and around the country, that the Medicare levy would be increased. In fact not only has the levy not been increased but also it has been relaxed for many thousands of Australians. The estimates supplied to me suggest that over 150,000 Australians will no longer pay the Medicare levy as a result of the measures introduced this year. So rather than there being an increase in the levy for many thousands of Australians, there has been a reduction in the levy.

The taxation changes which have been introduced in this Budget have been very significant, involving over $2,000m in a full financial year and representing a 17 per cent reduction for those on the very bottom of the income scale. This is in fact a very large reduction in the taxation burden as a result of one change in the Budget. Of course, the tax cuts are very genuine tax cuts and have been accepted by the Australian Council of Trade Unions. That is an organisation which will not be fooled by phoney figures. It has accepted these tax cuts as real and genuine. In fact the taxation reductions are provided as part of the prices and incomes accord. They are designed to strengthen further the prices and incomes accord. They increase the disposable income of Australian workers by tax cuts rather than by their receiving money from wage rises. The total effect of the tax cuts is to give the equivalent of a 4 per cent money wage rise. They are some of the aspects of our record on taxation.

In the last month some claims have been made that more should have been done to increase the taxation threshold, the level below which people are not liable for income tax. I simply refer to the fact that the new 25c in the dollar tax rate will mean that a number of taxation rebates will go further in freeing Australian taxpayers from taxation. I simply instance the dependent spouse rebate which, as a result of the introduction of the 25c in the dollar tax rate, will now free from taxation liability people receiving up to $8,700 a year. Previously that rebate freed people from a taxation liability only if their income was below $8,000 a year; so it is a very large increase indeed. Similarly the new rebates for unemployment and sickness beneficiaries introduced in this Budget will free many more Australians from a taxation liability.

This afternoon I heard Senator Dame Margaret Guilfoyle refer to a figure of 23 per cent which she claimed was the rise in taxation collections in this year's Budget. It has to be said that that figure certainly does not apply to pay as you earn taxation figures. In fact the rise in gross collections from pay as you earn taxation will be 10.7 per cent a year. If there is an increase in revenue of the order of 23 per cent it seems to me that in the main it reflects three major things. The first is the recovery in the farm sector in Australia which has led to higher farm incomes. We have heard over the last 12 months the Opposition claiming that the Government's policies have had very little to do with economic recovery in this country; that it has all been due to the rain coming down in the southern parts of Australia. But the Opposition cannot have it both ways. If it makes those sorts of claims it should be able to admit that a more buoyant farm sector will produce more revenue for whichever government is in power. Also, the rise in government revenue has been the result of the stimulation of the economy by this Government. We have seen the end of the recession, a rise in business incomes, a rise in business surpluses and, consequently, a rise in the revenue flow to government coffers. That is not to say that businesses or farms are in a worse position. They have higher revenues from which they are paying the taxation.

I refer also to the prescribed payments system. The Budget Papers make it very clear that in relation to any 23 per cent figure for the rise in taxation collections, the introduction of the prescribed payments system, the deductions at source for payments for work, has had a large and significant effect on changes in taxation collections in this Budget. Senator Richardson referred to applications for 55,000 new taxation file numbers. I am pleased to say that the Commissioner of Taxation has taken the matter further. He has examined those 55, 000 applications for new taxation file numbers and has looked at 11,000 of them in great detail. He found that 71 per cent of that 11,000 had never lodged a tax return. That is where the revenue is coming from. It is not coming from the ordinary pay as you earn taxpayers of this country, from the ordinary honest workers earning their wages and salaries. The revenue is coming from the people who have never paid tax before. I think it is high time these people did pay tax . This financial year it is estimated in the Budget that collections from the prescribed payments system will rise to $350m compared with $250m last year. They are some of the elements of taxation growth in the Budget. If we are going to have lawyers talking about economic matters I think we are in dire straits. The fact is that when one looks at the rise in wages and salaries budgeted this financial year of around 7 per cent and a rise in employment of around 3 per cent, the summation of those two is very similar indeed to the projected rise in gross pay as you earn receipts in the Budget.


Senator Chaney —Not true.


Senator MAGUIRE —I refer Senator Chaney to Budget Paper No. 1 which he may like to read later this afternoon. He will find those figures in there. I think that indicates fairly clearly that there will be no rise in the average tax rate paid by Australians. In the debate this afternoon we heard talk about people being affected by inflation by being pushed into higher taxation brackets. I have already dealt with the claim made by Senator Dame Margaret Guilfoyle on that matter. I simply refer to the fact that under the changes in the tax brackets to take account of inflation which existed under the Fraser Government-I suppose I should say half indexation, because that is generally what prevailed-the best that a person on average weekly earnings could have got from the policies of the Fraser Government being applied in the present circumstances would have been a $ 2.30 a week tax cut. That is the sort of figure we are looking at. I simply draw to the attention of honourable senators the $7.60 a week tax cut for most Australian taxpayers in this year's Budget. The best the Liberal policies could have given those people was some $2.30 a week. That is a tremendous difference. I move:

That the business of the day be called on.

Question resolved in the affirmative.