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Thursday, 2 June 1994
Page: 1228

Senator COOK (Minister for Industry, Science and Technology and Minister Assisting the Prime Minister for Science) (4.54 p.m.) —The Sales Tax (Exemptions and Classifications) (Two Wheel Drive Vehicles with Jeep, Platform, Pick-Up or Utility Body Type) Amendment Bill is Senator Watson's private member's bill, so I thought he would want to hear the government's view on the legislation.

Senator Watson —I'm pleased you're treating it with the consideration it deserves.

Senator COOK —I, for one, have always applauded the initiative available to members and senators of private member's bills. When senators and members of the other place put an effort into taking an initiative under that opening, they are entitled, in my view, to receive a considered reply from the government. Whatever else might be said of the efforts that they have made, in their view they have made a serious attempt to reflect changes in law which affect their constituents or which hold to a view that they might have. That is commendable in itself as a diligent exercise for members of parliament.

  With such a bright beginning, however, I am sorry that I must pass a pall of gloom over the expectations Senator Watson may have of the government's response. The government will not be supporting this private member's bill. For me, as the Minister for Industry, Science and Technology, that could be seen as an awkward position, privately. If Senator Watson's arguments were to be supported by us, or if they were taken to the nth degree and found to be true, it may be thought that there would be some benefit to Australian vehicle manufacturers. This was a point touched on by Senator Spindler as I entered the chamber.

  I am here today not as the Minister for Industry, Science and Technology; I am here in my representative role as Minister representing the Treasurer and, specifically on tax legislation, as Minister representing the Assistant Treasurer, who is the particular—

Senator Watson —I wouldn't mind hearing your views on it through each portfolio.

Senator COOK —Nonetheless, the government, as a collective, forms a collective view, and it is that view that I reflect here. There are two points in relation to the bill that make us conclude that we could not support it. The first relates to whether the bill will achieve one of the objectives, which is to help the sale of two-wheel drive vehicles for farm use in Australia or whether it will not do that. The second is a revenue argument based on the amount of sales tax revenue gained for tax purposes from transport. As a subset of that argument, there is a question related to contractors and how contractors would apply here. In introducing the two themes of my opposition, may I—

Senator Panizza —We are talking about farmers only.

Senator COOK —No, we are saying that this legislation would apply to farmers and to contractors on farms. The first thing I say is that one has to be careful when approaching tax measures from an industry assistance point of view. Trying to provide particular assistance to industry by restructuring the tax law is a hazardous undertaking at the best of times. One may look at a settled body of law and disturb it in some way in order to provide a particular benefit, which may well be a benefit that is properly and sensibly thought through. Even if that is the case, it is frequently found that by doing that a loophole is opened up elsewhere that was not intended and a further anomaly is created, which can be an injustice and an inequity.

   As a threshold point, when approaching issues of this nature, one has to do so with white gloves, long tongs and great care, because disturbing tax law is fraught with the difficulty of opening avenues for tax avoidance. I therefore come to the major argument.

  Underpinning this legislation is the view that it will somehow help the Australian automobile industry by ensuring that two-wheel drive vehicles may be purchased in greater numbers from the manufacturing section of that industry by farmers and contractors working on farms. I think that view—which, I note, was reflected by Senator Spindler—is challengeable.

  The Department of Industry, Science and Technology has advised the tax office of a cost comparison on utilities—the sort of two-wheel drive vehicles that farmers would purchase—sourced in and out of Australia. For vehicles of this type sourced out of Australia, principally from Japan, there is a cost advantage—it varies according to make and style—of between $6,000 and $8,000 per vehicle. If the benefit contained in this bill were provided, rather than achieving the objective of helping the Australian manufacturing industry, it may achieve the unintended objective of helping the Japanese manufacturing industry because of the cost competitiveness of Japanese utilities over the Australian product.

  Another matter to bear in mind is the amount of revenue garnered by the government from sales tax. Sales tax is an important tax levied by the government and the transport section of the sales tax revenue stream is the largest and most important. It is true that it is an input cost; nonetheless, it is a substantial tax and one that the government intends to keep in place.

  This measure would open a new loophole in that area of taxation, causing a reduction in income. No-one is talking about how revenue would be made up if it were lost in this area. Since we need a predictable amount of revenue to deal with budgetary considerations, the government would regard interference with such an important revenue stream as unacceptable.

  The issue of contractors also arises. As I understand it, under this proposed legislation contractors who work on farms would be entitled to claim the tax concession for their vehicles as farmers would. These contractors may well work part of their time on farms and part elsewhere; clearly, the majority of their time would need to be spent working on farms. Many of these small contractors who do farming, spraying or other agricultural work use their vehicles for different types of contractual work away from the farm. Given their access to this tax concession, they would have an advantage over competitors in off-farm businesses without access to this tax concession. In our view, that would be an unfair competitive advantage.

  As far as industry assistance measures are concerned, the automobile industry is a core industry for Australia. The government recognises it as being fundamental to the continuance of a wide and growing industry base in manufacturing. We recognise it as being central to our development plans for the future and to the growth of the export of elaborately transformed manufactures. It is an important industry.

  We have in place ongoing discussions with the automotive industry and all the major production houses in Australia. We have in place considerations about how input costs for them can be reduced. That seems to me to be the most sensible way to go if industry development initiatives are foremost in our minds rather than changing the tax arrangements. For all these reasons, and while acknowledging the initiative taken here, the government declines support for this bill.