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Monday, 14 March 2005
Page: 44


Senator ALLISON (Leader of the Australian Democrats) (3:32 PM) —This matter was also the subject of a question that I asked today, so I am happy to comment on it. The Democrats were disappointed in the response by the Minister for Finance and Administration, and particularly disappointed that the government is not admitting that, in relation to the cash surpluses which were estimated in the Mid-Year Economic and Fiscal Outlook to be $6.2 billion for 2004-05 and $4.5 billion for 2005-06, the fact is that those estimates were put together after all the election commitments were considered and before improvements that should have meant that that surplus would be even higher. Company profits have been higher than expected and unemployment is now steady at 5.1 per cent compared with 5.5 per cent at the time of the mid-year statement and estimate. It is also true that participation rates in employment have increased. They are now 54 per cent rather than the estimated 63.5 per cent. That means there are more people in the work force paying income tax and fewer people receiving unemployment benefits.

As has already been said, the OECD report last week showed that low- and middle-income families in this country face unfairly high effective marginal tax rates. That, of course, takes away the incentive people would have to get off welfare and back into the work force. For every extra dollar that a middle-income earner gets, the OECD report recognises that they will only receive 40c. Of the dollar they earn, over 60c goes to federal government income tax and the clawbacks of family payments. In last year’s budget, the government gave $14.7 billion in tax cuts to the wealthy—that is, those people earning over $52,000 per year. Our preference would have been that tax cuts go to all taxpayers, particularly those people on low incomes. It is absurd that our tax system starts taxing people as soon as they earn $6,000. That is just half of the poverty line figure. We think it is ridiculous that the Australian government imposes tax on people who live below that poverty line of around $12,500. With the $14.7 billion given to high-income earners we calculated that every Australian could have received $10 a week in tax cuts, but instead the government, supported by the ALP, gave $42 a week to the highest income earners and nothing to low-income earners, as I said.

It was interesting to hear Mr Malcolm Turnbull’s comments at the weekend, urging the government to address tax avoidance to fund tax cuts. We agree. Treasury figures show there are many tax concessions existing within our convoluted tax system. Based on Treasury figures, we believe that over $5 billion a year could be collected by cracking down on what is legitimate tax. The tax concession for company cars, for instance, costs us around $1.2 billion. It works in such a way that, the more you drive your car, the more tax you save. It is very bad for the environment and bad for the tax system. Capital gains tax concessions are costing around $2.6 billion every year. Limiting negative gearing could save about $1 billion a year. The Ralph review of business tax has estimated that $2.3 billion could be raised over four years by taxing companies as trusts.

The Democrats support Mr Turnbull’s remarks. We suggest that the government should cut back on the legitimate tax minimisation strategies and, if they did so, significant tax cuts could be provided to all Australians, including the high-income earners. By cutting the top tax rate, we can reduce the motivation for tax avoidance as well. Today it was useful in question time to receive the minister’s responses to these questions of tax and fairness in tax, but his responses have been disappointing, to say the least. I do not know what happened to the $6.2 billion for 2004-05 but, when you add to that the expected $4.5 billion for 2005-06—that is on conservative estimates—it adds up to $10 billion. (Time expired)

Question agreed to.