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Monday, 23 February 1987
Page: 418

Senator RICHARDSON —My question is directed to the Minister for Finance. Is it true that the broadest indirect tax base on final consumption expenditure can be conservatively estimated at $140 billion, as stated in the document released by Senator Messner last Friday? Can the Minister explain how wide a range of expenditures would need to be included in the base for a VAT before it would be reasonable to state $11.2 billion as the gross revenue yield from a VAT of 8 per cent?

Senator WALSH —The figure of $140 billion as the base for a value added tax appears to have been taken from Professor Porter's Centre of Policy Studies. It should be noted that it is not the broadest indirect tax base that could be applied, because it explicitly excludes rent payments. Indeed, in technical terms the $140 billion is taken from the national accounts and it is private consumption expenditure minus rent. I do not know whether or not the rent was deducted from the base because Professor Porter's organisation is funded partly by the Housing Industry Association.

Nevertheless, the Porter figure is a very broad one. It includes basic necessities such as bread, milk, potatoes, children's shoes and clothing-an 8 per cent tax on children's shoes and clothing; that is what Professor Porter and Senator Messner are advocating-household electricity and gas bills and so on. The tax base would also include a range of other items less apparent. For example-and this is on the definition of private expenditure as the base, minus rent-when a farmer provides food for a farm employee as part of his wage that food would be part of the Messner-Porter VAT base. The VAT would be calculated and paid on that base. The people who complained about the fringe benefits tax want to impose a VAT on exactly that same area of remuneration in kind instead of cash.

More importantly, perhaps, and more surprisingly to some, when an age pensioner visits the doctor or has a prescription filled, the full cost of the doctor's bill and of the pharmacist's bill, which is commonly as high as $15 or $16 per prescription, will be subject to a VAT of 8 per cent. So the pensioner would easily finish up paying $5 or more in value added tax for a `free' prescription if the policy of Senator Messner and Professor Porter were to be implemented. Moreover when a church body, a charity or a professional society pays wages or salaries to its employees the payment of those wages and sal- aries-plus add on costs, incidentally-forms part of that Messner-Porter tax base of private consumption expenditure minus rent. That would of course be the equivalent of an 8 per cent payroll tax on churches, charitable institutions and non-profit organisations.

Senator Messner —On a point of order, Mr President: I draw attention to the fact that Senator Walsh is using this as some kind of misrepresentation of my own position. I am not sure of Mr Porter's position but I certainly object to my name being linked with any VAT proposal.

The PRESIDENT —There is no point of order.

Senator WALSH —The proposal would also require the levying of VAT on car registration fees, on the stamp duty that is levied on car insurance policies and on a portion of the interest charged on consumer loans. That is not an exhaustive list of the payments which are recorded in the national accounts under the heading of private consumption expenditure. Finally, if Senator Messner does not like the partial, the non-exhaustive, list of transactions that would be subject to a VAT based on private consumption expenditure, I would certainly welcome from him a comprehensive list of those that he does propose to include. I will try to get the base assessed for him, if he wishes, on that basis.