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Monday, 1 December 1986
Page: 3062


Senator WATSON(4.05) —I rise in support of a matter of public importance which was raised by my Liberal colleague from South Australia, Senator Messner-a matter of public importance on a very significant date, 1 December. The Australian Labor Party heralds the so-called tax cuts as a great achievement. We in the coalition parties are concerned about the delay and devaluation of the Hawke-Keating personal tax cuts. The Liberal Party of Australia believes the Labor Party has been cheating Australians of real tax reductions. The Labor Party does not support many newspapers but to one, the Australian Financial Review, it gives some credibility. A headline on its front page today is ` ``Sleight-of-hand'' tax cuts follow confusion on FBT'. This headline epitomises the attitude of the Labor Party towards tax cuts in this country.

What has happened? Even after the 1 December tax cuts virtually all single income families will be paying a higher proportion of their income in pay as you earn tax than they did when the Liberal Government left office in 1983. In addition, taxpayers are facing increasingly onerous burdens as a result of actions taken by this Labor Government. We have had a whole range of new taxes under Labor; yet we are talking about tax cuts. We have had the capital gains tax, the fringe benefits tax and substantiation. More significant is the fact that we are finding nowadays that many of the tax laws are really being made not by the legislature but by the Australian Taxation Office by administrative decree. Therefore an increasing range of taxes in this country do not have any legislative sanction. They were made outside the law. Many of the changes are incompatible with present legislation. Quite often the tax laws which are being administered by the Taxation Office are contrary to the original political intent. This is a sad reflection on the way in which this Labor Government is allowing the tax administration of this country to be carried out to the detriment of ordinary pay as you earn taxpayers, the business community-indeed, to the detriment of the whole of the Australian community.

Let us look at the thrust of the contribution by the Minister for Finance (Senator Walsh) to this debate today. His contribution was based on his estimates of figures for the last year of the Fraser Government. My colleague Senator Messner rightly pointed out to the Minister that the Minister's outrageously inflated estimates were figments of his imagination. The basis of his argument rested on those estimates. Senator Vigor, on the other hand, merely gave the Senate a recycled version of his favourite topic-takeovers. We have heard this speech time and time again. It is good in sentiment, but it is a far cry from the issue before the Senate today. The Liberal Party is concerned about taxation; it is concerned about the impact that tax is having on the ordinary taxpayers of this country and the fact that many Australians have a reduced standard of living.

Let us look at some of the facts. Why has the Labor Government had to pay an advertising agency $2m to tell people that they are getting a tax cut? It is the first time in the history of this country that a Labor government has had to spend taxpayers' funds to tell ordinary people how good a tax reform package is and how much they are getting in tax cuts.


Senator Messner —How much is it costing?


Senator WATSON —Two million dollars.


Senator Archer —More than that.


Senator WATSON —Yes, it will be higher. That $2m is the first instalment. It will be more than double that. The present Labor Government is the highest taxing government in Australia, raising 25.5 per cent of gross domestic product in taxes. They are the facts. What has happened? Under the last Liberal Government people were taxed $44 billion, but under this Labor Government people are now taxed $71 billion. This is an increase of 61 per cent in just four years, and the Government is trying to convince us that we are better off with these tax cuts. We acknowledge that they are tax cuts, but we are saying that people are not better off under a Labor government; they are better off under a Liberal government. That is the point that we are making. We acknowledge that the Government is putting through a nominal or notional tax cut today. It is just dressing it up. What we are saying is that overall people are now worse off under Labor than they were under a Liberal government.

What is happening to the average wage earner? He will be paying 20.5 per cent-this figure does not include the Medicare levy-of his income in tax, compared with 17.5 per cent in the last year of the Fraser Government. By 1 July 1987 about two million taxpayers will have moved from the new 29 per cent tax bracket to the 40 per cent tax bracket. What will the Government rely on? It will rely on tax bracket creep. When inflation and wages go up, the tax goes up at a much faster and higher rate. The Government will give some tax cuts-it will cut taxes a little-perhaps in July 1987. But I doubt whether that will take place. I will give honourable senators my arguments on that subject later. How will the Government finance these cuts? It will finance them through inflation.

By 1 July 1987, 50 per cent of all taxpayers will pay the 40 per cent tax rate or higher. These are ordinary Australians. We are not talking about the tall poppies that the Government is trying to cut down. In regard to the company tax rate, it is doing the same thing. We have the highest company tax rates in the world-46c to 49c in the dollar. According to the Budget Papers, the total tax take in the 1986-87 Budget will increase by 11 per cent, or $6.5 billion. Government spending will go up quite massively. Net pay as you earn income tax collections for this year will go up by $2.6 billion, even after today's tax cuts. They are the real figures that we must look at.

We believe that the Hawke Government has been quite deceptive in its approach to tax relief. It is as simple as that. The tax cuts which take place today were promised for 1 September. The Government has failed to deliver on its original promise. As a result of this three months delay, average wage earners will pay an extra $110 in taxes this year. But what has happened to the pensioners? The poor old pensioners' benefits were delayed, too. Furthermore, on the same day on which the tax cuts will become effective, the Government will levy an additional 25 per cent for Medicare. This will be taken from the pay packets of all Australian taxpayers. While the tax rates have come down, other taxes are going up. Sales tax on a range of consumer goods, including poor old flavoured milk, is being increased. There is also the fringe benefits tax. Ordinary middle and low income earners who get some small fringe benefit will now have to cash it out as a result of the Labor Government's policy. So their take home pay-their effective earnings-is actually going down as a result of this cashing out of the benefit, because they will not get much of an increase in salary out of this cashing out.

In regard to petrol, my colleague the honourable member for Franklin, Bruce Goodluck, is very concerned about the cost of petrol to the ordinary motorist. Under the Hawke Labor Government the excise on petrol has risen from 6c a litre to 19c a litre. This has meant that the ordinary suburban motorist is now paying an additional $5.80 a week in petrol tax. When one starts to look at the range of additional imposts that have been imposed by the Hawke Labor Government, the ordinary man is finding that prices are going up and his standard of living is going down.

Big government equals big taxes. The root, the cause, the crux, of our problems today is the size of government spending and the size of governments. This is causing a tremendous incentive to destroy the taxation system, which is gnawing at the heart of the fabric of our society. Do honourable senators know that governments now spend nearly 45 per cent of the national product, compared with 30 per cent only 20 years ago, and that taxation on average earnings has risen from 11 per cent 30 years ago to 24 per cent today? The figures are really quite frightening. Currently, 32 per cent of wage and salary earners are employed in the government sector. Therefore, we have one of the highest rates of public sector employment in the world. This has been achieved only by the imposition of higher taxes. As I mentioned previously, the Hawke Government is the biggest spending and biggest taxing government in Australia's history.

In the lead-up to the last election, the Hawke Government saw fit to impose a number of disciplines. It introduced the concept of a trilogy. This required a certain ratio of receipts as a percentage of gross domestic product. The trilogy required that this ratio be kept at or below the 1984-85 minimum, which was 25 per cent. But this ceiling has been broken each year by the Hawke Labor Government. So it has done very little in meeting its commitment in that regard. The figure for 1985-86 was over 25 per cent. In 1986-87 it is estimated to be 25.5 per cent. In other words, this aspect of the trilogy has never been met by the Labor Government. This tax impact on people has never been met. The Prime Minister (Mr Hawke) unfortunately has conceded that the breaking of the trilogy was a conscious decision by his Government. So he made the commitment to the ordinary taxpayers of Australia and then made a conscious decision at a later date, after the election, to break that commitment. People's disposable incomes will be so much less as a result of this conscious decision by the Labor Government to break that trilogy.

All families and single income people in receipt of average weekly earnings currently face both higher marginal and average tax rates than when the Hawke Government was first elected. That is the fact that must be presented today. The average tax rate in 1983 was 30c. By July 1987-that is, when the second instalment of tax cuts is due-it will be 40c. But how will the Government achieve this second instalment of tax cuts? The only way in which it can achieve it is by higher taxation or having bigger Budget deficits, because it will not cut expenditure. The Budget figures show that the Government is not meeting its commitments. It is not meeting the figures which it laid down in its Budget. What did Minister Walsh say about that? He said: `The figures must be rubbery'. He is condemned by his own words. The figures are rubbery, because the Budget figure for inflation is 8 per cent. Currently, it is running at a higher rate than that. This means that more and more people will move into higher tax brackets as their incomes rise. Rises in the tax rates are disproportionate to rises in income. In regard to increases in average weekly earnings, a figure of 6 per cent was forecast in the Budget. But the figure to August was higher than that-it was 8.7 per cent. Some fringe benefits are being cashed out and are becoming part of wages. The Government did not calculate the effect of the fringe benefits tax on average weekly earnings. The Australian Labor Party has not done its sums. It has not looked at the consequences of its legislative action. Let us look at economic growth. It is true that the economy is starting to stagnate. The Government estimated a figure of 2.5 per cent for economic growth. Today it has not even reached 2 per cent. The position is deteriorating.

The Labor Party is in trouble. The Australian people are in trouble because they have reduced disposable incomes. We have problems with a new range of taxes. We have problems of bracket creep. Therefore, I support this matter of public importance that has been raised by my colleague Senator Messner. Why should the Government spend taxpayers money on an advertising campaign to tell people how much better off they are supposed to be as a result of today's tax cuts? I support the proposal put forward by my colleague.