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Thursday, 10 March 2005
Page: 57


Senator SHERRY (2:10 PM) —My question is to Senator Minchin, the Minister for Finance and Administration and the Minister representing the Treasurer. Is the minister aware that the OECD report Taxing wages states that, while the tax take across virtually all advanced economies has fallen over the last eight years, the Howard government is one of only two to have increased the tax burden on families? Is the minister also aware that an Australian two-parent family with two children, where one parent earns the average wage and the other two-thirds of the average wage, faces an effective marginal tax rate of 52 per cent? What is the Howard government’s justification for this extraordinary disincentive—one dollar in two—to ordinary Australian families trying to get ahead?


Senator MINCHIN (Minister for Finance and Administration) —Before answering that totally unexpected question, could I just take a few seconds to congratulate Mr Ian McPhee on his appointment today as the Auditor-General of the Commonwealth. In particular I thank members opposite for their bipartisan support for a man who I think will do a terrific job for Australia as Auditor-General. I also congratulate Mr Pat Barrett on his exceptional service as Auditor-General and wish him well in his retirement.

I will now turn to the question from Senator Sherry. A report was published in the Australian today about the OECD’s report on comparative tax takes in the various countries within the OECD. I point out in beginning my reference to and comments on the report that it is, of course, extremely difficult to compare tax rates across countries because the tax rates differ so much and because there are various elements taken into account. In Australia there is, for example, the family tax benefit system paid through the benefits system, there is payroll tax and there are all sorts of different taxes.

The important point to make is that, if you read this whole report, it does confirm that Australia has one of the lowest overall tax burdens in the OECD. In fact, our tax burden is the eighth lowest in the OECD. Out of the 30 countries, there are 22 countries with a greater tax burden than ours and only eight below. It also shows that the tax burden on ordinary Australians is not high in relative terms. In fact, in most of the cameos which are in this document it has fallen.

The poor old Labor Party, in its desperation to find some bad news on a day which is, as my colleague Senator Abetz has pointed out, a day of great news for Australia’s workers, with a continuation of one of the lowest unemployment rates we have had for 30 years—it is one of the best in the Western world—and another 20,000 jobs created, has ignored the fact that there are major problems with this OECD report. I just heard the Treasurer, Peter Costello, say that the Secretary to the Treasury, Dr Ken Henry, is writing to the OECD to complain about the fact that this report misrepresents Australia’s position.

It does so in a couple of respects. The OECD acknowledges that its tables do misrepresent the position, because it points out that Australia has converted previous benefits provided in the income tax system to payable benefits. So these tables do not take account of the family tax benefit system. It is a tax benefit, but for accounting purposes and for the benefit of recipients it is paid through the expenditure side of the budget.

The ALP have also conveniently ignored the fact that in many of the tables there is a spike when you get to 2002, because the OECD for some reason then decide to include in the measure of income tax state payroll taxes. They do not include them up to 2002, nor should they. But, for reasons beyond explanation and beyond human understanding, they have included state payroll taxes. The ALP then attack us on tax when in fact it is the state Labor governments whose tax has been included to render this outcome.

In the minute remaining I point out the table on page 94 which refers to the income of married couples where both are earning an income—one at 100 per cent of average earnings and the other at 33 per cent, including income tax, plus employee contributions, less cash benefits, which is a pretty good measure for Australia. The table shows that in fact the tax burden on such a couple as a percentage of gross earnings has gone down since we were elected in 1996. (Time expired)


Senator SHERRY —Mr President, I ask a supplementary question. Wasn’t the minister lauding OECD reports yesterday and the day before? Isn’t the minister aware that the OECD report shows that, over the last eight years of the Howard government, a single parent with two children, earning $35,000, has seen their tax bill increase from 12c in every dollar to 21c in every dollar? Is the minister also aware that a similar family in the United Kingdom would be receiving a rebate of 17.3 per cent on every pound they earned? Minister, isn’t it the case that not only are Australian families paying record mortgage bills and rising medical insurance premiums but their already record tax bills have risen to new heights?


Senator MINCHIN (Minister for Finance and Administration) —I think it is staggering that the Labor Party has the gall to criticise us on tax. This was the party that promised the l-a-w law tax cuts—the greatest fraud ever perpetrated on the voters of Australia and, when we introduced into the Senate the biggest income tax cuts in Australian history, this party opposite voted against $12 billion per annum in income tax cuts. So the Labor Party has no grounds to come in here and criticise us on tax cuts. This OECD table shows that we have cut taxes.

Honourable senators interjecting—


The PRESIDENT —Order! I would remind senators that chattering and shouting across the chamber is disorderly.