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Thursday, 2 June 1994
Page: 1177

Senator IAN MACDONALD (11.41 a.m.) —I am pleased to be able to take part in this debate on the Taxation Laws Amendment Bill (No.2), and I am honoured to be on the speaking list with my colleagues who have already spoken. Those colleagues are experts in their fields. It is tremendous that this parliament contains people of the calibre of Senator Watson, who is one of the few people who understand what taxation legislation is about. As well, Senator Short spoke on the matter and he, too, is an acknowledged expert in the financial field. Senator Teague also contributed to the debate, and he again is an acknowledged expert with a lot of expertise in education. My colleague Senator Panizza, who has just spoken, is well recognised throughout the parliament as someone with practical experience in the background of the legislation and a businessman who contributes to the wealth of Australia. He is a man who employs people and who understands the effects of this government's atrocious legislation on the wealth creators of Australia. Therefore, it a real pleasure for me to join with those experts in talking on this bill.

  I heard Senator Kernot's contribution and a bit of Senator Bell's contribution and could not help but smile. The Australian Democrats, the very left wing of the Labor Party, are making the same old political points trying to criticise the government, when in most aspects they are part of the government. They, like the Labor Party, are the high tax party. They want to spend government money on every conceivable thing. The Democrats, of course, are a little better than the Labor Party. They want to spend all the money but they never acknowledge where they will raise the taxes from, except to put up taxes on fuel and things which impact most heavily on regional Australia.

  The fairly lightweight contributions of the two Democrat speakers stand in stark contrast to the contributions made by my colleagues. One thing that can be said for the Democrats, however, is that they did speak on the bill and showed some interest in it. We notice that no senator from the Australian Labor Party is interested enough in these vital matters even to bother putting his or her name on the speaking list. The Minister for Industry, Science and Technology (Senator Cook) will speak only because he is required to close the debate on the bill. Once again, the Australian Labor Party has shown it has absolutely no interest in these vital matters of taxation and HECS that affect Australians so importantly. As my colleagues have said, we will be supporting the very sensible amendments to be moved by Senator Watson, amendments which will stop this government garnisheeing the wages of students to pay their HECS charges.

  I refer to that aspect of the bill which deals with fringe benefits tax. My colleagues have explained the specific provisions of this legislation as it relates to banks and the amount they charge their employees. Fringe benefits tax is one of those iniquitous taxes that are simply wringing Australians dry, particularly those in remote and regional Australia, and that is the aspect I want to focus on. I have no objection to fringe benefits taxes where they tax what is, in effect, wages where wages are converted to some other form of payment. Quite rightly, those should be taxed. But the way this government applies those taxes and the compliance costs are atrocious. Again, those issues have been mentioned by my colleagues.

  In regional Australia the fringe benefits tax has its most iniquitous impact. It impacts unfairly on people in regional Australia and costs them more than it does anyone else. I refer to a timely article in today's Courier-Mail quoting the United Graziers Association on this specific point. The association points out that many employers are required by awards to provide housing and other benefits. In some instances they are required to provide food, accommodation or housing free of charge. Because the award requires employers to do that, they are then slugged with fringe benefits tax.

  The United Graziers Association relates that on average producers—that is, cattlemen—made profits of $9,300 in 1992-93 but that a quarter of that profit will be paid by them and swallowed up by fringe benefits tax. I dare say that someone like Senator Cook, someone who has worked for a trade union or for a government all of his life, would not understand what it is like trying to get by on a business profit of $9,300. That in itself is difficult enough, but when businesses have to pay a quarter of that on fringe benefits tax for providing accommodation and food which is required to be done by an award, the situation becomes intolerable.

  The United Graziers Association points out that in remote Australia accommodation provided to employees has no general commercial value. It is only of use to employees because in many instances cattle stations are so isolated. The United Graziers Association gives a number of examples, one of which is that a grazier in the area where I come from paid $4,000 in fringe benefits taxes every year for employing five men to look after 6,000 cattle. We simply cannot keep taxing the wealth producers of this nation in that way. The UGA also rightly says that this tax is against employment because it is a tax that employers have to pay irrespective of what profit they make. In other words, fringe benefits tax is a disincentive to the provision of employment.

  In remote areas often no other accommodation is available. Simply because there is none other available, employers, those who run cattle properties, mining companies and local government in the more remote areas, have to provide—either compulsorily because of the award or of necessity to get employees there—housing and other benefits. For that they are charged a fringe benefits tax.

  The Western Australian Municipal Association, in a letter tabled by Senator Panizza when this bill was being discussed in December 1992, pointed out that a fringe benefits tax particularly affects local governments in regional areas. The association pointed out—the letter referred to the Pilbara but this applies to anywhere in regional Australia—that employers are required to provide non-cash benefits to attract their employees to those distant parts which are often very difficult areas to live in. They have to provide some inducement, but because private companies and mining companies do that, local governments are forced to do the same to compete. In many instances housing is not available on the market. It has to be specifically provided. Because of that, local governments now have to pay the full fringe benefits tax.

  With the grossing up provisions, local governments have gone from paying 48.25 per cent fringe benefits tax to 93.2 per cent fringe benefits tax. People in private business paying income tax can deduct that fringe benefits tax from their income tax, so the actual cost to them—and that is what the grossing up is all about—is around 48 per cent. But local authorities, because they are not businesses and do not earn business profits and, accordingly, do not pay income tax, cannot claim any part of the fringe benefits taxes they pay as a deduction. So for other Australians in business, the fringe benefits tax is effectively around 50 per cent, but for local government it is an effective 93 per cent.

  It is one level of government taxing another level of government. Local government in Australia used to pay about $16 million to the federal government in fringe benefits tax; it will now pay to the federal government $32 million in fringe benefits tax simply because of the way this government has drawn the legislation. That is not good enough. It is an effective clawback by this federal government of about four per cent of its payments to local government.

  The federal government pays local governments for general purpose grants—not road grants—around $700 million each year, but $32 million of that is repaid by local government to the federal government. That represents an effective four per cent of the money that the Commonwealth government pays local government coming back to the federal government. So effectively this legislation will reduce Commonwealth government grants to local government by around four per cent.

  I am surprised that the Australian Local Government Association has not been more vocal in its opposition to this. Certainly the New South Wales Local Government Association and the department did a joint study on behalf of the government and the ALGA which showed the adverse effects of fringe benefits taxes on local government. But has this government done anything about it? No, it has not. It simply continues to rip taxes from other levels of government so that those other levels of government maintain the odium of having to tax their taxpayers more while this lot here escape that odium.

  If the federal Labor government had any courage, it would collect the tax in some other way—but it does not. It pushes that onto local governments and makes them increase their rates or taxes via their taxpayers so this government can escape that odium. It has been brought to the attention of this government time and time again, but it refuses to do anything about it.

  An interesting aspect is that the government has recognised that the 93.2 per cent tax on non-profit making organisations is very unfair. In introducing the legislation in 1992, in the minister's second reading speech, the following paragraph appeared:

The Government is not considering any other changes to the FBT. In particular, we do not propose to alter the classes of FBT exempt organisations, so that religious institutions and public benevolent institutions will continue to be exempt.

It goes on:

Special arrangements will be provided . . . for non-government organisations that are non-taxpaying bodies which are subject to FBT at the moment.

That sounds pretty good; that is all that was mentioned. It did not go into too much detail on that. But let us look at some of the institutions that were given this exemption. Exemption was given to religious institutions, hospitals and public benevolent institutions, but we also see—lo and behold—that the trade unions are exempt. How do trade unions fit into the category of benevolent societies or public benefit societies? What is a trade union?

Senator Burns —That is how they started.

Senator IAN MACDONALD —Senator Burns would know. They used to be decent and do a reasonable job back at the turn of the century, but Senator Burns knows what they do now. They are not interested in the workers. If those opposite were interested in the workers they would not be dealing with this sort of legislation now—legislation which impacts particularly badly on workers. It shows that Senator Burns and the trade union movement have no interest in the real workers in this community.

  What do trade unions do now? They used to do something good but now they are just toadies for the Labor Party. They are advisers to the federal government; they are political workers for the Labor Party; they are fund raisers for the Labor Party; and they do not do anything to look after the real interests of workers. If they did, they would be opposing the draconian fringe benefits aspects of this legislation, particularly in remote and regional Australia.

  Trade unions conduct businesses, own half this town and own the government. Any time any legislation is passed by this government it has to get the imprimatur of the ACTU. We all know that Kelty sits in the cabinet room as the additional cabinet minister with all the power, because nothing can happen under this government unless it is approved by the ACTU. I would like someone on the other side to deny it; they have all fallen remarkably silent because they know better than I do that it is correct.

Senator Burns —We are waiting for you to get your speech over with.

Senator IAN MACDONALD —Senator Burns is going to speak; I look forward to that and to hearing him deny that his government cannot pass a piece of legislation or make a decision without the ACTU dealing with and approving it. The trade unions are now simply toadies for the Labor Party and political workers at election time. And did they not do well in the last three days of the last election campaign? They raised millions of dollars for the Labor Party—a great deal of which this government gives them in the form of grants.

  We have been through this many times but it should be repeated at every opportunity. This government gives the trade unions grants, which then absolves the trade unions from using their own money; so the trade unions can give the money back to the Labor Party to campaign with at election time. So the circle goes round and round. In effect, this government—for so long as it remains there—will continue to use taxpayers' money to give to trade unions to enable those unions to give similar amounts of money back to the Labor Party. That is the sort of unit trade unions are now.

  What in that description qualifies trade unions for exemption from the fringe benefits tax? They own more property in this town than any single person, yet they get this exemption. We should contrast trade unions, which do very little for anyone except the ALP, with local government. Democratically elected local governments, which look after the interests of the citizens of our country in so many ways, have to pay the tax. This means they have to increase rates to their ratepayers and their citizens to pay this increase in fringe benefits tax. Trade unions do not have to do so. Where is the equity in that? There is none. Yet again this is a rort by the Labor Party in ripping off the taxpaying public to keep itself in power.

  I raise those concerns on behalf of the people of remote and regional Australia about the disastrous impact that the fringe benefits tax generally, and particularly the increase in recent years, has had on people struggling to make a living and to develop the country in the remote and regional areas. I cannot understand why the minister and his advisers, and the Labor Party generally, cannot see that. The things that attract a fringe benefits tax in remote and regional Australia are not fringe benefits; they are not income substitutions. They are necessities of life and things that have to be provided, in many cases of necessity, to get people there and to give them somewhere to live when they get to remote Australia. But in many instances they have to be provided under awards—awards no doubt foisted upon the public of Australia by the trade unions which get a pretty good benefit out of this.

  Those taxes impact so heavily upon remote and regional Australia, and I cannot understand why the minister and his advisers do not appreciate that and do not do something about it. I cannot understand why they do not do something to relieve local government of this added burden.

Senator Watson —All they need is a 48 per cent rebate.

Senator IAN MACDONALD —Exactly. The trade unions get the 48 per cent rebate and local government does not. The people who develop this country and work in the remote parts of Australia to create the wealth, pay the fringe benefits tax but trade unions do not.

  Perhaps the minister might find a couple of minutes to explain to me why the government does not look at the impact of fringe benefits tax on remote and regional Australia and do something about it—just as we announced we would do something about it in our last election policy—and why the federal government continues to rip money off local governments without relief when it can give relief to trade unions. I would appreciate the minister explaining those things just for a couple of minutes in his response to the debate so far.