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Wednesday, 6 May 1987
Page: 2394


Senator JONES —My question is directed to the Minister representing the Treasurer. Is the Minister aware that a National Priorities Project sponsored book entitled Spending and Taxing was launched this morning? Does the economic analysis contained in that book support the view that by international standards Australia is a high personal income tax country and that we ought to shift our tax mix away from income tax towards consumption taxes of the value added type?


Senator WALSH —I am aware of the launch of the book referred to. Indeed, a Mr Fraser-not the survivor of Memphis but another Mr Fraser-of the National Priorities Project was kind enough to send a copy of the book to my office this morning prior to the launch.


Senator McKiernan —Have you read it?


Senator WALSH —No, but I have read bits of it. On page 204 of the book there is a bar diagram which might lead a casual observer to believe that Australia is a high personal income tax country. The text, specifically on page 205, makes the true position clear, when it states:

However, in terms of the share of total receipts from other taxes on personal income, Australia is well below average. This is because employee social security contributions . . . are important revenue raising instruments in most OECD countries.

It then goes on to say:

When these additional taxes on labour income are included, the international comparisons indicate that in fact Australia receives a relatively light share of tax receipts from taxes on income.

Earlier this week I made a related point in response to a question from, I believe, Senator Chaney. The book recommends the introduction of a value added-type consumption tax, but it does so on the grounds of seeking to rationalise Australia's existing indirect taxes. It does not recommend that as a means of raising alternative revenue to finance personal income tax cuts in the way proposed by the Leader of the Opposition some time ago. Page 208 of the book states:

The most important justification for indirect tax reform is not so much to allow reductions in personal income taxes as to reform the structure of the current indirect tax `system', particularly the wholesale sales tax and the excises on petroleum products.

Of course that is not the same thing as saying excises on petroleum products should be abolished or that there should be no taxes on petroleum products. The book provides some arithmetic on the effects of doing the latter, but it does not seek to advocate or recommend such a policy.

Finally, this book, from the little that I have seen of it, should make some contribution to dispelling a myth currently being peddled, and I think probably accepted to quite an alarming degree-the myth that fiscal responsibility equals tax cuts or that tax cuts equal fiscal responsibility. The evidence, particularly in recent years from around the world, shows that in fact there is a positive correlation between cutting taxes and fiscal irresponsibility. That is most dramatically demonstrated by the Reagan Administration in the United States of America. A comment spelt out by one of the few rational spokesmen for the political Right of Australia, John Hyde, in his column in the Australian last Saturday stated that the supply side theory, or Reaganomics, had been empirically disproven by the Administration which gave it its name. Of course, that is recognised almost everywhere except, apparently, among the various pedlars of snake oil who populate the Opposition benches.