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Monday, 13 May 1985
Page: 1795

Senator MESSNER —Does the Minister for Community Services agree that perhaps the main stumbling block to have emerged in the Government's efforts to extend the scope of indirect taxation is the question of compensation for lower and middle income earners? Does the Minister hold to his view put to a Canberra conference recently that compensatory measures can be made? If so, what sorts of measures does he favour? Can he give any estimate of the likely cost of compensating for a broadly based consumer tax of, say, 12.5 per cent?

Senator GRIMES —The point I made at the conference at the Australian National University was that, quite clearly, compensation can be provided for those low income groups. The evidence I used was the fact that every social democracy in Western Europe and other countries in the Organisation for Economic Co-operation and Development in fact have broad-based consumption taxes. In the introduction of those taxes they have compensated low income people for the effect of those taxes on them. That is the first point I made. The second point I made was that that did not mean that I necessarily advocated the introduction of such taxes into this country and I certainly would not advocate that unless I had evidence that measures had been taken to compensate those low income people.

I have no idea of the figures Senator Messner requested about how much would be needed to compensate low income earners. I think it was a bit of a nonsensical question. That matter would depend on at what level the consumer tax would be introduced and on what goods such a tax would be introduced. Therefore, one would have to make the calculations after those matters were taken into consideration. I dare say that in the next few weeks leading up to the tax summit we will all be able to look at the various suggestions and figures and make our calculations. If people are as innumerate as I am they will get someone else to make those calculations. We will see what sorts of calculations are needed and then make our judgments on any program that is put forward. But the point I made was that to suggest that it is impossible to compensate low income earners is demonstrably wrong when we look at Western European countries in particular, all of which have large broad-based consumption taxes such as value-added taxes.