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Thursday, 2 June 1994
Page: 1174


Senator PANIZZA (11.21 a.m.) —I wish to address briefly certain measures in the Taxation Laws Amendment Bill (No. 2) 1994. The 1994-95 budget was supposed to be a budget with no increased taxes. Yet, as a result of the budget and the taxation legislation which is now before the Senate, there will be record tax collections in the next financial year. This bill mainly embraces changes to existing taxation measures. Honourable senators should remember that in last year's August budget the government grossly increased the taxation take by way of a thumping big increase—and a continuing increase—in the price of fuel. Then it has the gall to say that it has not increased taxes.

  This bill is concerned mainly with changes in FBT conditions and extending the tentacles of the FBT; the collection of HECS, which has been well addressed by Senator Teague; and changes to the capital gains tax situation. Mr Acting Deputy President, you and I have been in this place a few years now—maybe not as long as some others. We have seen the extent to which there has been taxation creep in Australia and the way in which the tentacles of taxation have been further and further extended to fund the government's budget—a budget that has not been funded by a natural increase in Australian business. However, we will address the state of the Australian economy at another time.

  Taxation is getting more and more complex. Employers are required to do more and more work in respect of compliance costs. These costs affect not only large corporations—at least they already have personnel on their staff that can deal with them—but also they have a great effect on medium to small business organisations.

  My eldest son, who is an accountant, tells me that in 1983, when this government came to power, the tax act had 2,731 pages. Mind you, he reckons that when he started his course in 1980 the act contained only a quarter of that number of pages. In 1994, 11 years later, and before this bill goes through the parliament, the act contains 6,713 pages. So, as I have already said, the compliance costs are continuing to grow.

  Take the fringe benefits tax, for instance. In 1988-89, FBT compliance costs totalled $128 million or 10 per cent of the FBT collected at that stage, which was roughly $1.2 billion. We can add 10 per cent in compliance costs to whatever increase in tax the legislation now before the Senate will impose on employers, businesses and anybody else who pays tax. Compliance costs do not stay still—they definitely increase with increases in tax. So we can expect that 10 per cent will be added on. In comparison, PAYE compliance costs work out at about only 1.4 per cent of PAYE collections. So we can see that the FBT, which was brought in by this government, is a loose cannon that is being fired at everything. When the government has tried to plug gaps, another one has opened up somewhere else. This is going on continuously. The basis of FBT was supported by Senator Bell.

  I have always believed that the Australian taxation system could be run without a FBT if the old taxation laws were applied properly. However, I will not debate that now. Compared with PAYE tax, the compliance costs of FBT are totally ridiculous and out of hand. Australian business spends 11 times more in compliance costs than comparable business in the United Kingdom. Why should we be paying so much more tax than one of our competitors?

  An analysis done by Challenge Bank shows that in 1990-91 96 per cent of companies, on average, had higher compliance costs. As I said before, the compliance costs keep rising. Who are paying these costs? They are being paid by employers, businesses and individuals. The end result is less profit, which means that employers employ fewer people because businesses cannot grow. Compliance costs are picked up by businesses and employers for no reward.

  Employers and businesses not only have to pay ever increasing compliance costs under this government's taxation act, but also they have to pay normal statutory accounting fees

associated with filing tax returns and copany returns, and so on. They have to pay for tax returns and company returns. As well as that, they pay fringe benefit tax and capital gains tax. Then, of course, state taxes must be added to that. So accountancy fees are an ever increasing cost for small and large businesses. Of course, this is good for accounting firms.

  I turn to another favourite subject of mine. While the government is loading these compliance costs on to employers, it has made no attempt whatsoever to recompense them for the free work they are doing for the government. Employers get no reward whatsoever for collecting PAYE tax, superannuation and the FBT, and it all goes to different places. I have here a copy of an easy-to-use schools information kit for teaching about tax. It is another brainwashing exercise by this government to teach in schools that tax is a good thing. I will not go into the merits or demerits of the government's brainwashing exercise for schools. However, towards the end of this tax guide for schools, which was put out by the Taxation Office under the name of Mr George Gear, from the other place, it states:

Will the Tax Office be reimbursing schools for their time and effort?

Yes. The Tax Office will pay schools $3 per student application in recognition of administrative costs incurred by the schools who participate in the scheme.

My remarks seem to be causing some merriment in the ministerial advisers box, but I believe that this is relevant. The tax office will be recompensing schools by $3 for each tax file number. I know that $3 is not a great amount of money to be paying to schools for signing up a tax file number, and I cannot see why there is a great necessity for tax file numbers to be signed up in the school, except to give those students, while they are young, a de facto Australia Card number for the rest of their lives. But in this case the government at least recognises that there is an administration charge and gives the schools a small amount.

  There is no recompense for business, of course. Public servants come up with these ideas to advise the government on how it can rake in more money. They must know, but they do not give a hang what they load onto the private sector, which has to make these collections and incur these higher compliance costs. Do the public servants ever talk to employers who incur these compliance costs about what it does to their businesses? Obviously not.

  One thing I can say is that I employ people; I do not think that can be said about anyone on the other side of the chamber. I am not talking about staff in senators' offices, who are paid by the government, I am talking about money that comes out of my pocket to pay staff in my business.


Senator Bell —The odd sandwich shop!


Senator PANIZZA —I am not talking about Senator Bell; I am referring to those on the other side. I know that Senator Bell mostly votes with the other side, but he does not sit on that side. I am pretty confident that no-one on that side pays his or her own employees. I am responsible every week of the year for finding wages for about nine people; and that builds up to 20 or 30 people at different times of the year. I speak with experience of these costs the government keeps loading on and of the time involved in compliance. The government has recognised this in the schools and is willing to recompense them. Obviously it thinks that more votes will come from those schools in the long term than come from private industry. I would like the minister to think about that in time.

  I turn to HECS and the fact that the HECS repayment is going to be collected one year early by a different method. There is no argument that HECS has to be collected eventually when people, mostly young people, who have arranged to pay their HECS later on pass a certain tax threshold. They were led to believe that they would have to pay it when they reached that threshold, but the government has now decided to do something different.

  Let us take first those under the PAYE system. The government, by steps, is going to collect this money 12 months earlier. I believe that that early collection will amount to $12 million, and once again the responsibility is loaded onto the employer. The employer has to find out from his employees whether they are liable for HECS. I already have in my business office a circular from the Taxation Office and the schedule of what I will be collecting. Even though the schedule has not gone through this parliament, it is already available.


Senator Watson —We're going to remove it.


Senator PANIZZA —The government may have to remove it. It may have to put a lot more through the shredder because of its up-front presumption that it would go through this parliament. The employer has been loaded up with another job, in addition to all those others I have mentioned.

  Turning to provisional tax, it will definitely be collected one year earlier. Those young people paying provisional tax—they will be in business, otherwise they would not be paying provisional tax—would have budgeted for paying their HECS when it was supposed to be paid. What will happen to their budgets? The government is going to collect two HECS payments in one year. Do not let anyone tell me any different; that is what will happen. There will be two payments in one year.

  Those people going into business, generally young people, may have a house mortgage or a car under lease or hire purchase. They may have goods in the house under hire purchase. They are probably starting a family, which is logical these days at around the age when they are getting into business. Worse still, the husband and wife probably both have an up-front HECS repayment to make. My remarks are causing quite a bit of merriment to Senator Cook, who has never employed a person in his life.


Senator Cook —That's not true.


Senator PANIZZA —It might cause merriment, but he must have been young once and starting a family. He did not start a business, that is for sure; his job in Western Australia was wrecking other people's businesses. These people have all of those commitments and, if they were in business, they would have done a budget. Then suddenly the government sends around a bill for the second payment. That is what the government is doing to young people who are starting off in life.

  In my few remaining minutes, I would like to address a budget issue that I address every year. I refer to the uplift on provisional tax. We still have in this budget an uplift of eight per cent. Can those opposite tell me that any business is going to expand by eight per cent these days? We heard the Prime Minister (Mr Keating) on the radio this morning going off his brain because we have reached five per cent growth. Five per cent growth is easy to achieve when we have had nil growth for so long, but that is not eight per cent.

  Self-funded retirees such as my aged mother, for instance, have made provision for themselves and have money invested. Even with the investment advice of people more expert than I am, I know that we cannot reach eight per cent. Yet in my mother's provisional tax and that of umpteen other self-funded retirees, they have to find an uplift of eight per cent. The most one can get even on a deposit of $1 million—Senator Cook can ring up a bank if he wants to—is 4.65 per cent.


Senator Watson —It is eight per cent on last year.


Senator PANIZZA —Yes, it is eight per cent on last year, but we still have that uplift all the time. Yet that is a very basic factor when we consider self-funded retirees. If people have taken a different business, I suppose they can squeeze a little more out by cutting down on other expenses. But self-funded retirees can do nothing. There is a big variation at the top. There is to be an eight per cent uplift from last year, and people cannot return more than that. By looking at the superannuation funds that are around we see they are showing the same sort of thing. That is what this government, Senator Cook, the Prime Minister and his Treasurer (Mr Willis) think about self-funded retirees. Of course, the same view is held by members of the Labor Party right across the board.

  My time in this debate has nearly run out, but I support by colleague Senator Watson in condemning the government. I refer to the way in which the government has thrown more compliance costs around and the way that HECS has been treated. I happen to have with me a letter that was received by a student:

The Government is introducing some changes which will affect the way HECS clients repay their Accumulated HEC Debt from 1 July 1994. The changes will not affect the amount of the debt, only the way you have to pay it.

But what this letter does not say is that people with a HECS debt have to pay it 12 months ahead. On that score the government should be condemned.