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Wednesday, 6 October 1971
Page: 1986

Mr BUCHANAN (McMillan) - As usual, the honourable member for Cunningham (Mr Connor) has not said very much about the Treasury estimates. One little bit of his speech I did not understand, doubtless because of the words used; but no doubt he thought he was giving us an empirical improvisation to fill in the 10 minutes he devoted to the subject. To come to my own part, I was rather surprised that this year's Budget did not have anything in it in connection with sales tax. Sales tax is always a bit of a problem. There are always people who are trying to get changes in rates. There is always some talk that an increase in this area or in that area will take place. But in his Budget Speech this year the Treasurer (Mr Snedden) said that rather than increase sales tax he proposed to increase the existing 2± per cent levy on income tax to 5 per cent. The Treasury still has the idea that to allow people to have money in hand is to encourage them to spend it. The reverse argument that Treasury uses is that to curb spending - what it calls damping down demand - taxpayers must be required to contribute an extra 2J per cent in income tax.

These tax deductions from lower incomes do not really amount to very much. The increased tax reduces the take home pay by whatever extra amount is taken out of the pay packet. But the impact on the individual spending of people in this category cannot be regarded very highly. Such an increase makes no real difference to the purchasing ability of people in higher income groups. If they wish to buy they have the assets and they are able to obtain whatever they want. So, I do not really follow the idea that the level of spending is damped down by these methods. Salary earners in the top group these days get so much money that a few dollars here or there does not amount to very much.

I bring to the attention of the House a little fact in regard to something that happened this week. The associations representing officers in the second division of the Commonwealth Public Service rejected an offer of a 15 per cent increase in salaries which would have brought the minimum salary level to $14,300 a year. That is a pretty reasonable sort of salary. The offer was rejected because the second division officers want an increase of 19 per cent which would bring their minimum salary to $14,875.

In these days, by the method of increasing salaries by flat percentages, the whole range of salaries has been distorted. Wage earners at the lower level of the earning scale - those who receive $4,000 or $5,000 a year - naturally have a need for additional money if they are to have more of the things that they would like to buy. Not all of the people in this category give sufficient returns to justify a payment which would enable them to buy these items. Salaries at the higher levels are distorted by the fact that the same percentage increase is adopted with respect to them. A realistic assessment is not achieved when the same percentage increase granted to lower income earners is passed on to those in higher income groups.

Returning to the subject of sales tax, I point out to the Treasurer that while sales tax does provide a lot of money to the revenue - it is anticipated that $695m, which is a substantial contribution to the revenue, will be collected this financial year - it is spread over an amazing and crazy list of items. I do not intend to go into all the anomalies because I am aware that the officials responsible for administering sales tax know them much better than I do. Sales tax is imposed on toilet soap but not on dog soap, to give an example.

Why cannot the field of sales tax be tidied up? I can remember, many years ago, sitting up until 3 o'clock or 4 o'clock in the morning making out a sales tax return. The same work is required to process tiddly invoices as is needed for large invoices. It costs as much to process an invoice for 50c or $5 as it does to process an invoice for $500. Let sales tax be collected on motor cars and other items that cost similar amounts where a reasonable amount of money is obtained in one decent whack. The need to process sales tax returns in respect of goods with a unit value of anything less than $5, involving the making out of those returns in triplicate, submitting them within a certain number of days and paying the taxation before any return from the sale of the goods involved is received, is annoying and costs money. I do not believe the Treasury would lose very much revenue if sales tax was not imposed on lower units of sale. Obviously the Government finds that sales tax is a very convenient method of collecting money. Sales tax which is collected from the sale of motor cars is a simple example which comes to mind. The Government can obtain a decent sum of money by levying sales fax on large items such as. this. An amount could be budgeted for and in this way the procedures would be simplified.

I would like to refer to the example of a piece of hose purchased for use in a cowshed. This hose has been specially prepared for the purpose. However, of course, the same piece of hose can be used for other purposes such as watering a lawn. Nevertheless a primary producer has to apply for sales tax exemption if the hose is to be used for primary industry purposes. I believe that the classifications are wrong. In the limited time available to me I would like to point out that someone in the Department has to go to a lot of trouble and sometimes honourable members have to make representations to the Department when sales lax is not allowed. They have to ask why so and so has not been allowed his particular items without sales tax. I have quoted the case of a piece of hose that has been specially prepared for use in a cowshed because it has to stand up to a certain amount of work and to alkalis. An ordinary garden hose is not subjected to this sort of treatment. Because of the work to which the hose is put it should be free of sales tax, although it could be used for ordinary watering purposes.

Another matter which 1 wish to bring to the attention of the Committee concerns sales tax on oral contraceptives. I cannot imagine what happened to the thinking of the Treasury official who, when this drug first came up as a new product, because it was called an oral contraceptive at the time decided that it did have to carry the sales tax imposed on the other known contraceptives of the day.

Mr Birrell - What classification is it?

Mr BUCHANAN -It was put under the amusement tax. I have representations in my hand from a very important family planning association. The oral contraceptive, along with other luxury items, is taxed under the amusement tax scales. But that is not the point. This item was put in with rubber goods which were carrying that rate of tax. In the whole range of pharmaceutical preparations this is the only ethical item obtained by prescription from a doctor which carries sales tax. I submit that whoever made the mistake at that time should be reprimanded. Indeed, instead of just reprimanding him it would be much better if the Government said that from now on it will remove the sales tax on oral contraceptives in the interest of the people of Australia.

Progress reported.

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