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Wednesday, 19 November 1986
Page: 2493


Senator MAGUIRE(3.30) —On behalf of the Government I oppose the urgency motion which has been moved by Senator Chaney on behalf of the Opposition on the fringe benefits tax. The first thing that came to my mind this afternoon was why on earth the Opposition would want to move an urgency motion on the fringe benefits tax. There is no apparent reason for doing that. I presume that it is to divert attention from other developments in the national capital. Senator Chaney, in his presentation, attacked me on two occasions. (Quorum formed) Before I was interrupted by Senator Messner, who I notice is not speaking in this debate, although he is the Opposition's taxation spokesman-I will be raising the reasons for that in a while-I was explaining why I oppose the motion moved by Senator Chaney this afternoon on the fringe benefits tax.

Senator Chaney, in his initial remarks, complained that no Ministers were taking part in the debate. Over the last 18 months on the many occasions we have debated taxation matters in this place Senator Chaney has not won a point. On every occasion Senator Chaney, the Leader of the Opposition in this place, has been drubbed by the Government's back bench. He has been beaten on the arguments time and again, week after week and month after month, by the Government's back bench on the question of taxation. Time and again the Liberal Party of Australia's front bench in this place has been humiliated on the question of taxation by the Government's back bench-not its front bench. Senator Chaney and his colleagues must be a bunch of masochists to want Senator Walsh and Senator Button to debate taxation with them this afternoon when they are losing to the Government's back bench time and again on this subject.

I asked myself earlier today why, on this day, Senator Chaney has chosen to move a motion on the fringe benefits tax. It occurred to me that perhaps the only thing the Opposition can agree on at the moment is its opposition to the fringe benefits tax. The Liberal Party is in such a state of disarray and internal shambles that the National Party is now intervening to try to sort out the Liberal Party's leadership. One of the reasons for the Liberal Party's opposition to the fringe benefits tax is that it is trying to sabotage the very substantial personal income tax cuts which will be introduced by this Government in a fortnight's time-on 1 December. The Liberals know just how popular those income tax cuts will be in the community and are trying to white-ant them by moving motions such as the motion Senator Chaney has moved today. They want to weaken the Government's tax avoidance armoury. The fringe benefits tax is vital to that armoury. There has been an explosion of fringe benefits payments in recent years. Estimates available indicate that the loss of revenue due to the payment of fringe benefits would have doubled in a decade had no action been taken by this Government.

Not all fringe benefits are tax avoidance mechanisms. I readily concede that. I am aware that people in the community have expressed concern about some fringe benefits not being available on the basis of tax avoidance. I take note of those points. Certainly in-house discounts made to staff are not necessarily tax avoidance devices. But in recent years there has been an explosion in the payment of fringe benefits. In general that explosion reflects a preference for avoiding taxation.

The Liberals did nothing on tax avoidance and evasion in the years they were in office. Mr Howard had five Budgets in which to take action on tax avoidance and evasion, but he did nothing to stop the haemorrhaging of the Australian income tax base as a result of the tax avoidance. This afternoon Senator Chaney had the cheek to come in here and claim that there were `record taxes' under this Government. The fact is that in the period of the Fraser-Howard Government the share of gross domestic product going to taxation rose by a massive 1.7 percentage points. That is the record under the Liberals. Despite the fact that they did nothing to stop tax avoidance and evasion, the tax share of gross domestic product still rose by 1.7 percentage points.

The Opposition in this place has repeatedly opposed the Government's taxation reform measures. It has opposed the fringe benefits tax. It has opposed the capital gains tax. It has opposed the disallowance of entertainment expenses, commonly known as the free lunch. It opposed our measures last year to crackdown on the free lunch. Time and again ridiculous examples were put forward alleging horrific effects on the Australian economy as a result of this Government's courageous crackdown on the free lunch.

The important thing to bear in mind about the taxation reform measures which have been introduced by this Government is that they constitute an integrated tax reform package. Senator Chaney has had some claims here this afternoon about the impact of the fringe benefits tax on the car industry. He has ignored very carefully the fact we are talking about a taxation package and that the overall tax level will not be affected by the package. It is a redistributive package. On 1 December we will be seeing repayment of revenue to the Australian community in the form of personal income tax reductions. Like all Liberals in this place, Senator Chaney has taken a partial view of the tax package. He has looked at one side of the balance, but not the other. He has ignored the fact that the revenues are being paid back to the community. Those revenues, through the reductions in personal income tax and the resulting increases in personal disposable income, will result in greater consumer spending. As personal income tax cuts flow back into the economy the community will see a greater level of consumer spending.

The cuts will be spent on a wide range of consumer items in the economy. I presume that one of those items will be motor vehicles. People receiving tax cuts will have more disposable income to spend on them. Overall, the Liberals are essentially trying to sabotage the personal income tax cuts. They have opposed all the revenue measures the Government has brought forward-the fringe benefits tax, the capital gains tax and the disallowance of entertainment expenses, which are financing the personal income tax reductions which will occur in a fortnight's time. The Liberals want to preserve the tax avoidance privileges of the few in the community and, in doing so, deny personal income tax reductions to the many.

The fringe benefits tax, before the recent amendments were made, was estimated to collect $325m in the current financial year, rising to, in a full year, $700m, including the revenues from the substantiation of allowances. They are very large sums of money. In addition, the disallowance of the free lunch will add another $330m in a full financial year. Without those very substantial sums of money there could not be significant reductions in personal income tax in the near future. The fringe benefits tax is equitable, it is fair, and it will help restore the ability to pay principle in the community. Those who have the greater ability to pay will pay as a result of this measure. That is a very important principle to bear in mind.

Previously, two persons with the same total remuneration but with different elements in that remuneration-one receiving all his or her remuneration in the form of wages and salary and the other getting a large share in the form of fringe benefits-paid vastly different amounts of taxation. They were taxed differently under the tax regime the Liberals were happy to live with. That was grossly unfair and totally inequitable.

There was an absolute proliferation of fringe benefits under the Liberals. There was very rapid growth in those payments. So quickly did they grow that they could not have had any linkage with economic growth. In the great majority of cases, the growth of fringe benefits clearly constituted a tax avoidance mechanism. School fees at private schools were being paid by employers for their employees' children. Free travel and holidays were being made available. Medical fees were being paid by employers and company cars were being provided. As I have pointed out before in this place, the term `company car' is a misnomer. It is a vehicle that is provided by an employer to an employee. The employer claims a full company tax deduction for that motor vehicle so that we, the rest of the taxpayers, help to pay for that motor vehicle in the first place. The car is then made available essentially for the private use of the employee. Those are the sorts of things that were going on. Research available to this Government has shown that, in the last 12 months, of the total remuneration of some top executives 40 per cent-not 14 per cent but 40 per cent-came in a fringe benefit form.


Senator Cooney —How much?


Senator MAGUIRE —It was 40 per cent. That was completely untaxed. As I have pointed out before in the Senate, when 40 per cent of a person's total remuneration is being received in that form surely that cannot be described as a fringe benefit. It is no longer a fringe item when 40 per cent of the total pay packet comes in a non-taxed form. That is very inequitable.

One of the important principles of taxation is that of horizontal equity. Back in March last year Senator Chaney tried to lecture us on the principle of horizontal equity, and he used the case of a family. The principle applies to taxpayers with similar incomes and suggests that they should be treated similarly in their payment of taxation. Senator Chaney wants that principle to apply in the case of a single taxpayer and in the case of a married taxpayer with a similar income but he does not want it to apply where one taxpayer receives all his or her remuneration in wages and salary and the other receives a large element of the remuneration in non-cash benefits. That is a gross inconsistency by Senator Chaney who is prepared to apply the horizontal equity principle in some cases but not in others.

What is unfair about cracking down on tax avoidance and evasion through these measures? What is wrong with cracking down on blatant tax avoidance in the form of non-monetary remuneration? I put it to the Senate that there is nothing at all wrong with that. It is very important that these measures be undertaken and that the Senate take note of the points made by the Government in support of its policy of cracking down on tax avoidance through fringe benefits. The Liberals are showing their true colours in opposing the crackdown. They are protecting the rorts, they are protecting tax avoidance, they are protecting the privileged. That is their role in the community.

In this motion today Senator Chaney has claimed that the fringe benefits tax is having adverse consequences for low income earners. That is the first time since I have been a member of this place that the Liberal Party has even mentioned the needs and aspirations of low income earners. Factual data is available which undermines the sorts of claims made this afternoon by Senator Chaney about the distributive effects of the fringe benefits tax. I refer to the Australian Bureau of Statistics employment benefits survey, which shows that the payment of fringe benefits is very highly skewed to the highest income earners in the community. I point out in regard to transport fringe benefits-a major category-that in August 1985, 7.1 per cent of all employees received transport fringe benefits. Of persons in the lowest income bracket in that survey-those earning below $200 weekly-only 3.3 per cent received a transport fringe benefit. In the highest income bracket in the survey-those earning over $560 a week-the proportion of those who received transport fringe benefits was not 7.1 per cent but 18.8 per cent. Clearly, the availability of fringe benefits is not emphasised for low income earners so much as for high income earners. Fringe benefits are very much more available-certainly transport fringe benefits, the company car-to the highest income earners.

As I pointed out this afternoon, the tax changes made by the Government will help finance personal income tax reductions for the many. In trying to prevent the fringe benefits tax proceeding fully the Opposition is really trying to sabotage the significant personal income tax reductions which will occur on 1 December next. The revenue to be collected from the fringe benefits tax will be paid back in tax reductions. The tax free threshold, currently $4,595, will be raised to $5,100. Tax rates will be reduced across the board. The 25c rate will be reduced to 24c-lower than any tax rate that Mr Howard, as Treasurer of this country, could achieve in five Budgets. The 46c rate will be reduced to 43c and the 60c rate will be reduced to 55c in the dollar. Those changes in tax rates are very significant. As a result of those and the increase in the tax free threshold, a person receiving a gross weekly income of $400 will receive a tax cut of over $6 a week. A person on $300 a week will receive a tax cut of $4.50 a week.

When these cuts are combined with the first instalment of the Government's taxation reductions in November 1984 they come out to a figure of $13.60 for a person on $400 a week and over $12 a week for a taxpayer receiving $300 a week. Those are very significant reductions in personal taxation. There will be a further round of tax cuts next July when the 46c rate, which will be 43c in December, is further reduced to 40c in the dollar. The Liberals could never achieve those sorts of reductions in taxation. They are possible only with the advent and introduction of the fringe benefits tax, the capital gains tax and the disallowance of entertainment expenses. They are part of a taxation package. The revenues from the fringe benefits tax will be paid back as cuts in personal income tax.

This Government is restoring integrity to the Australian taxation system. That system will receive more respect because the ability to pay principle has been restored. The Opposition would abandon tax measures to crack down on such things as fringe benefits. As a result, it would jeopardise personal income tax reductions for the many. Unfortunately, the Liberals have no credibility on taxation. They have no policies on taxation. As the Daily Telegraph pointed out on 6 November, the whole of Australia is waiting and demanding to see what will constitute the Liberals' taxation policies. On behalf of the Government I oppose this motion.


The ACTING DEPUTY PRESIDENT (Senator Jessop) —Order! The honourable senator's time has expired.