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Tuesday, 23 October 1984
Page: 2225


Senator COOK(4.52) —A peculiar lethargy has descended upon the Senate this afternoon as the Liberal Party of Australia has tried to stir the possum on taxation. What we have got is a repetition of accusations and claims from a Liberal Party that has the tired air of a loser which is going on to lose yet again at another election. It is merely going through the motions. It is peculiar, too, that the Opposition speakers in this debate-Senator Chaney, Senator Dame Margaret Guilfoyle and Senator Messner-were all Ministers in the Fraser era. They are all now Peacock front benchers and are the cream of what the Liberal Party can offer in terms of economic debate in this chamber. By any standard their performance today is that of people who do not expect to have the faith of the electorate of Australia placed in them on 1 December because they have demonstrated by the vacuity of their arguments that they have no arguments to put.

The matter of public importance today alleges that the government is concealing its real intentions on taxation. It is interesting that the Liberal Party and those honourable senators who were part of the Fraser Ministry and who have spoken in this debate should even have the gall to come forward and propose that matter. On the front page of today's Age newspaper there is a box headed 'Tax: the bite and the offers' and two tables of which the people of Australia should be aware. One table shows the income tax bite starting in 1973-74 and ending in 1983-84. It shows that the bite has risen from 4.2 per cent to 19.7 per cent. During the period of office in which these former front benchers, now Peacock's people, came in here and argued that their Party offered a better deal for Australia the income tax take went up. As well we find if we look at the second table on the front page of today's Age that in 1973-74, 39 per cent of pay as you earn taxes constituted the share of revenue raised by taxation. By 1983-84 it had gone to 45 per cent. The Age commented:

In 1975, an average income earner paid tax at a maximum rate of 30c in the dollar. In 1984, average earnings attract tax at a maximum rate of 46c in the dollar.

Those changes have come about under a Liberal Government. They have come about under the stewardship of those former Ministers who now parade here as paragons of virtue on taxation. We do not have to explain our role. We do not have to answer the allegation in the matter of public importance that the Government is concealing its real intentions on income tax. This Government runs an open ship. It runs a clear, open and active government in which, in all areas concerning living standards, the expectations of the community and the realisation of the Government's performance are well known. I refer to taxes, wages, prices, the social wage, and interest rates. On all those things which go to make up living standards this Government has an enviable record. Any one of the speakers on the other side of this chamber would be pleased to claim that record as the Opposition's own. However, the galling thing for honourable senators opposite is that they cannot.

They have asked us to try to justify something which we are not concealing. We do not have to justify what we are not concealing because the record speaks for itself. On 1 November, Australian wage and salary earners will receive a tax cut of $7.60 a week. After the election there will be a comprehensive review of taxation. Much has been made of this by Opposition speakers. It is interesting that they should pretend that there is something sinister about it. One casts one's mind back to April of last year when for the first time in this country we had a national economic summit following upon which we established the Economic Planning Advisory Council, a body which will have a key role in any review of taxation generally. EPAC represents all of the community. Clearly what galls the Opposition is that it cannot understand how consensus operates and how it is possible to take the views of all sectors, synthesise those views and come up with new taxing regimes that are approved of. Not for us the ad hoc bandaids the Liberal Party proposes in its $2.5 billion tax plan announced yesterday; a tax plan that will add, by the calculation of the Treasurer (Mr Keating), 5 per cent to inflation in this country.

Since we do not have to explain, I will turn to what in fact will happen on 1 November when Australians across the board, wage and salary earners all, get a tax cut. The tax cut we propose to introduce will go beyond the level of tax indexation. In terms of gross value it will be worth $2.1 billion in a full year . Indexation would have been worth $1.2 billion in a full year. The biggest benefits resulting from our cuts will go to low and middle income earners. The Australian Council of Trade Unions, in examining the Government's Budget proposals, has declared that the tax cuts are genuine. On the strength of all the benefits contained in the Budget and knowing that living standards for Australian wage and salary earners have been maintained, no wage increases will be sought until 1985. The tax cuts help preserve the accord and therefore help preserve the recovery. The tax cuts strengthen purchasing power for consumers. Already the indicators show that we are in for a bumper Christmas as consumers with tax cuts in their pockets-real gains in living standards-are able to spend more and buy the country out of the recession.

The tax cuts proposed by the Government guarantee greater equity and redistribute income properly across the board. What we will introduce will be of most benefit to low and middle income earners. Taxpayers with an income between $12,500 and $28,000 will receive a benefit of $7.60 a week. For those earning below the tax threshold-$4,595 and $12,500-the tax cut will be almost 17 per cent. Those earning more than $28,000 also will receive a tax cut but this will steadily reduce as incomes exceed $28,000 to a flat $2.79 a week for incomes above $35,000. The new tax scale, which takes effect on 1 November 1984, consists of five steps in place of the old three-step scale. The scale is more progressive and means that lower income earners pay relatively less tax than previously. The first tax step is now 25c in the dollar; previously it was 30c in the dollar. It reduces significantly the average and marginal tax rates for the lowest income earners in this country.

The Opposition has sought to draw attention to an estimated increase in income tax collections in the Budget of 23 per cent. We have heard a lot about that today. That is the Peacock figure. Most of that is accounted for by two factors: Firstly, the surge in incomes from farms and businesses and, secondly, the full year revenue effects of the Medicare arrangements, which essentially replace the former private health costs. Ordinary pay as you earn taxes on wage and salary earners are increasing at about 10.7 per cent, which is accounted for by wage and employment growth. Pay as you earn taxes in 1984-85 will represent a smaller share of gross domestic product than in either of the last two years of the Fraser Government.

What are the Opposition's policies on taxes? We heard its announcement yesterday but it should be remembered that the Deputy Leader of the Opposition, the discredited former Treasurer in the Fraser Government, Mr Howard, on 7 October last circulated proposals for a 30 per cent flat tax rate. The proposals were made in a paper released by the Centre for Policy Studies at Monash University and involve doing away completely with high income tax brackets and lowering the threshold at which no tax is payable from $4,595 to $4,000 per annum. This would effect a redistribution of income from the poor to the wealthy in line with Liberal Party philosophy. The paper that Mr Howard cited advocates coupling this flat rate of tax with a consumption tax, the effect of which would be to push up the consumer price index considerably-the estimate being by five to six points.

In this debate some test ought to be objectively declared so that those who might be listening can judge for themselves which is the best way to go about making a choice about the policies of the two parties. I want to suggest three tests: The comparative test-which of the two proposals is better; the performance test-which of the two parties has done better; and the credibility test-which of the two parties can be believed.


Senator Crichton-Browne —Tell us about land rights.


Senator COOK —Someone rattles the honourable senator's cage and he raises the matter of land rights because he does not like hearing about the economy. He does not like hearing how his party, when in government, failed and how we are succeeding. I turn to the comparative test. Let us do a quick thumb nail comparison. On a document headed 'The Main Features of Coalition Tax Policy', released by the Opposition, point No. 1 states:

The overall taxation burden can only be reduced by a combination of spending restraint and economic growth.

It is interesting that the Opposition should say that; it is interesting that it should say that spending restraint and economic growth are the only ways we can reduce the tax burden, because it did nothing when in government.

If we compare the performances of the parties, under our Government workers will get a $7.60 a week tax benefit, the accord will be adhered to, living standards will be maintained and will improve, and the fight against tax evasion and avoidance will continue. There will be a comprehensive review of taxation, generally and by the Economic Planning Advisory Council, possibly culminating in a tax summit, and the income tax burden will not increase. That is a firm commitment of the Prime Minister (Mr Hawke). We have heard a number of ifs and buts from the Liberal Party. We have had an indication that there will be a broadly based consumption tax. There has been no direct articulation of how that will apply, how regressively it will affect wage earners and how it will dampen economic growth. No costings are offered by the Liberal Party as to what it will cost and we are told their scheme will be phased in-'phased in' being a pseudonym for saying that they do not really know when or how it will apply. They are those vague terms in order to avoid direct costings and in order to escape argument.

The Opposition has a proposal for income splitting, the effects of which are best summed up by the Nicholson cartoon in this morning's Age. That cartoon depicts an ordinary Australian, his wife and kids standing on one side and a typical Liberal, upper class society matron and her husband standing on the other side, before their portico. The ordinary Australian says-this is the comment on the equity of the Liberal Party's tax proposal-'My wife has to work to make ends meet'. The Liberal says: 'My wife will have to stay at home to make ends split'. The Liberal Party fails to recognise in terms of its proposal that increasingly women are joining the work force; increasingly there are two income families because that is an essential change in our society and the value--


Senator Crichton-Browne —It is an essential need.


Senator COOK —Yes, an essential need brought about by the the economic malaise that his party led this Government into.


Senator Crichton-Browne —What about the last 18 months? How many jobs have you created in the last 18 months in the private sector?


Senator COOK —I will tell the honourable senator about jobs in a minute. He should restrain himself and try to relax for a few minutes; he will get the full story. Of course there is good reason why he would want to try to shout down what I am saying. It effectively gives the lie to how effective his proposals would be. The Opposition's commitment has to be seen against its original proposal for the introduction of flat taxes.


Senator Peter Baume —We have never proposed that. Why do not you stick to what we have actually come out with.


Senator COOK —Senator Baume should go back and read what the discredited former Treasurer of the Fraser Government said in October of last year, when he quoted a proposal to introduce a 30 per cent flat tax. If the honourable senator does not know what his own Opposition is proposing, I do not know why he sits on the front bench. I go back to the performance of the Government and the fact that apparently even the Opposition recognises that economic growth is essential. One does not have to be very bright to compare the economic performances of both governments and come to the firm conclusion that more Australians are in work and so more Australians are in fact paying taxes, unemployment is down, inflation has been halved, interest rates have fallen by at least 2 per cent, retail sales are booming, housing commencements are well up, private investment is increasing, real unit labour costs have fallen and industrial disputes are down. That is our performance-a performance that can be easily and favourably contrasted to that of the previous Government.

Finally, on the matter of credibility, it was the Liberal Party, under the leadership of Malcolm Fraser, that in the 1977 campaign raised the ogre of a fistful of dollars. It offered the bribe but when it came to the pinch and it was returned, nothing was forthcoming. It was that party that presided over massive tax avoidance and evasion in this country and did little to curb it. It is that party that has ensured that all the efforts we as a government have made to try to bring in Bills to squash tax avoidance and round up back taxes have come to nothing, because honourable senators opposite have consistently voted against those Bills. It was their Deputy Leader, the former Fraser Treasurer, who presided over the fight inflation first policy which put Australians out of work.


The ACTING DEPUTY PRESIDENT (Senator Haines) —Order! The honourable senator's time has expired. The discussion is concluded.