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Monday, 14 March 2005
Page: 27


Senator SHERRY (2:22 PM) —My question is to Senator Minchin, the Minister for Finance and Administration. I refer the minister to his response to my question last week when he sought to argue that the OECD’s claim that Australia was only one of two countries that had seen their income tax burden increase between 1996 and 2004 was incorrect. Does the minister recall that he claimed the OECD data was misleading because their measure of the income tax burden included state payroll tax in 2004 but not in previous years—a claim he repeated on yesterday’s Meet the Press? Minister, isn’t it the case that page 26 of the OECD’s report clearly shows that payroll tax is not included in the OECD’s definition of the income tax burden? Isn’t the minister for finance just trying to verbal the OECD to hide from the fact that this is the highest taxing government in Australian history?


Senator MINCHIN (Minister for Finance and Administration) —It is always surprising to hear the Labor Party complaining about the level of taxation, given that they are the party who constantly argue for much greater spending by the federal government. Indeed, after every budget, they come out and say: ‘Spend more, spend more. You’re a stingy government. You’re not spending enough.’ They have a standard press release from every shadow minister saying, ‘The federal government is not spending enough on X, Y and Z’—fill in the blanks. They are the party that constantly believe we should spend more money. Indeed, now Mr Swan and others are out there saying we have to spend a whole lot more on infrastructure. They are attacking us for not spending a whole lot of money on infrastructure. Then they, of course, cynically and quite hypocritically, turn around and say, ‘By the way, you’re also taxing too much.’

The path that they would lead us down, apparently, is to spend more and more and tax less and thus drive the budget back into the sorts of deficits which we had under them and build up $96 billion of debt as they did when they were in government. We are very proud of our record on taxation. We are very proud of our capacity to meet the expenditure needs of the community—the community’s demands for investment in education and health, which we have done to a considerable degree. We are proud of our record of ensuring that we continue to run budget surpluses to pay off the debt that Labor left to us, as well as keeping taxes at moderate levels. Of course, in the tax cuts we have made since the massive tax cuts of the GST, revenues from tax to the Commonwealth in 2005-06 will be $6 billion less than they otherwise would have been. In effect, there is a $6 billion tax cut in the 2005-06 budget.

With respect to the OECD report to which Senator Sherry refers, we made it clear that we thought that misrepresented the picture in relation to Australia, and it does so on several counts. As Senator Sherry and others know, the OECD itself says that we are in the lowest quartile of taxing economies in the OECD. We are the eighth lowest—22 of the 30 OECD countries have a higher tax burden than we do. Comparisons between all these countries are not easy because of the different ways they tax, and it is complicated by the fact that in some of the tables the OECD has included state payroll tax. That is why the Secretary to the Treasury, Dr Ken Henry, wrote to the OECD last week to complain about their presentation of the position. As I said last week, when you remove the effect of employer contributions, you find that tax less cash benefits has fallen since 1996 for single persons without children at 100 per cent of average earnings; it has fallen for single persons without children at 167 per cent of average earnings; it has fallen for one-earner married couples at 100 per cent of average earnings; it has fallen for two-earner married couples at 100 per cent and 33 per cent of average earnings; and it has fallen for two-earner married couples at 100 per cent and 67 per cent of average earnings. You can go through all these cameos and you will find that, for many of them, there have in fact been real cuts in taxation after you allow for, and remove from the system, the payroll tax which the OECD has included. They concede that you have to be very careful when reading their tables because of the fact that Australia, in bringing in the FTB system, moved the mechanism by which we allow for the cost of children from the tax side to the benefit side. So we stand by, very proudly, our record on keeping tax low and we want to continue to do that.


Senator SHERRY —Mr President, I ask a supplementary question. In reference to the OECD report, doesn’t it show that the parents of two children with combined earnings of $88,000 take home only 38c of each extra dollar earned compared to 51c for a single person with no children on the same earnings? Is the minister aware that the OECD report also shows that, in 29 other countries, such a family would take home between 45 per cent and 88 per cent of any extra money earned? How can the minister justify penalising Australian families who want to get ahead? Isn’t this exactly the sort of taxpayer that Mr Malcolm Turnbull is advocating for in his public and private jockeying on tax?


Senator MINCHIN (Minister for Finance and Administration) —I have not had the pleasure and privilege of reading all that Mr Turnbull had to say about tax, but I did read what Mr Swan had to say about tax. Mr Swan made the outrageous claim that the tax grab is 51.1 per cent for a family with children earning $50,000. That is an outrageous claim. The average tax paid by that group is only 12.8 per cent when family benefits are taken into account. We have a very proud record on supporting families, and our $600 is a real $600. It is not the unreal $600 which the Labor Party tried to pretend about.