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Tuesday, 23 November 1971
Page: 3492


Mr CREAN (Melbourne Ports) - The Opposition does not oppose this measure, which is fairly technical. In a sense it is a re-enactment of something that has applied for a number of years. This legislation was related to the payroll tax which the Commonwealth Government formerly collected but which it now has relinquished in favour of the States. By relating this legislation to that tax it was possible to give rebates, mainly to manufacturing industries in Australia, for improvements in export trade. One of the reasons that it was done in this rather curious fashion was that Australia, as a contributory to the General Agreement on Tariffs and Trade arrangement, was not permitted to make certain kinds of inducements for export trade. Apparently under the conventions of that agreement one cannot make rebates of direct taxes, but seemingly there are loopholes with respect to indirect taxation. This is the reason why this legislation has been hinged to the payroll tax.

Now, as a result of certain rearrangements which have been made whereby the payroll tax has been handed over to the States - quite a retrograde step in my view, but nevertheless it was done because it gave to the States something which is described as a growth tax - we have to go through the subterfuge- of conceding what would have been paid in payroll tax had this payroll tax been collected by the States. The purpose of this Bill is to reenact for a further period - for the financial years 1971-72 and 1972-73 - the provisions that formerly applied. In fact, as the Minister for the Army and Minister assisting the Treasurer (Mr Peacock) said:

The Bill proposes that direct Commonwealth grants be payable in respect of increases in exports during the financial years 1971-72 and 1972-73, the years for which the payroll lax rebate scheme was to remain in force.

This was a scheme that had been introduced some years ago and which has been renewed periodically but which would not have been renewed until 1972-73. What will happen to this kind of thing after 1972-73, like a lot of other things, the Government leaves completely up in the air. I presume that the same sort of inducement in a different kind of way will still be forthcoming. Certain details are contained in the taxation statistics supplement to the 49th report of the Commissioner of Taxation who administers this legislation. The last available figures are for 1968-69 and they show that in that year the rebate allowed to those entitled to it was about $33m. For 1970-71 - I quote from page 71 of the statistics attached to the Budget - the figure had increased to $47,750,000. For this year the projected estimate is $53m.

This has always been a fairly messy way of encompassing the objective which the Government had in mind. 1 should like to quote again from a document to which I have referred on a number of occasions in this House. It was produced in 1966 some 5 years ago and is entitled 'A Report With Recommendations on the Australian Taxation Incentives for Manufacturing Exporters'. It was prepared and presented by the Australian Manufacturers' Export Council, Industry House, Canberra. The section I shall quote is still relevant even though it is 5 years since the document was prepared. The Council had made a survey and under the heading 'General Observations' the following comment appears:

The survey reflects a trend towards significantly better export performance by the smaller firms than by many of the larger ones. This confirms an observation in the Report of the Commonwealth Committee of Economic Inquiry (Vernon Report) that 'such firms apparently have exhibited more flexibility in taking advantage of export markets more quickly than their larger counterparts'.

One of the reasons why some of the larger firms have not taken this advantage is because of the existence of what are known as export franchises with some of the larger companies in Australia which are dominated by foreign ownership. The document continues:

The survey illustrates the grave anomaly that the smaller manufacturers, who achieved the better export performance, received the lesser benefit from the payroll tax incentive.

I suggest that that kind of difficulty still applies. The document notes:

As well, it is clear that the present scheme gives greater encouragement to the labour intensive industries than to the capital intensive ones

Surely if there is any country that should be devoting itself to what might be called capital intensive industries rather than to labour intensive industries with respect to export trade, it is Australia. This afternoon honourable members have spoken of the awful mish-mash which faces Australia's economy at present because of growing unemployment, but if our economy were properly planned and if there were some sense of priorities, as there should be, we would not be in this situation. What we face is a shortage of skilled manpower. One of Australia's besetting evils at the moment is that we use wastefully what is a short supply commodity - skilled manpower. One reason why we cannot get the best out of our economy is that we cannot employ our unskilled people sensibly unless, firstly, we have deployed our skilled people successfully. Undoubtedly if we are to expand our economy we must expand our export sales. Our traditional export industries are passing through a critical stage. One need not dwell on the difficulties confronting our rural industries both by reason of Common Market problems and the fact that our principal export industries - the wool industry is an example - are in a critical condition. Our export earnings have been maintained at the sort of levels Australia requires only because of our mineral exports. I have noticed one thing, and I quote from page 2 of the explanatory memorandum which accompanied this Bill wherein it is staged:

In broad terms, a grant-

That is, a grant for export rebate in terms of payroll payment - is available, as was the payroll tax rebate, for increases in exports of all classes of goods other than minerals (as defined).

For the most part minerals do not attract this concession. Certain minerals that are defined attract it, and one of those is gold. I am sure that my colleague the honourable member for Kalgoorlie (Mr Collard) is happy that at least gold in its industrial uses attracts this rebate. This is a measure, introduced some years ago as a kind of piecemeal device, which has been allowed to grow rather lopsided and in a topsy.tervy manner without much attention being given to the fundamentals involved. It would seem that in its present form the rebate will cease to be paid by 1972-73, because the payroll tax will no longer be a tax which the Commonwealth can command. I hope that the Government will give serious consideration to devices of this kind in the future.

There is no doubt that Australia's export trade needs to be stimulated and encouraged, but it does not require encouragement quite of the kind envisaged in this legislation. My Party in particular would like the Government to consider the tact that the present Act does not make any kind of reservation about the countries to which export trade goes, and because of that it appears that a rather peculiar anomaly exists. Among the beneficiaries under this legislation are some of the Australian breweries whose export trade is not going to what normally we would regard as an overseas country; it is going to the Territory of Papua New Guinea. In one sense Australian trade going to Papua New Guinea should not be regarded as being very much different from trade crossing the Murray River. I know that in years ahead Papua New Guinea will become somewhat different from the Murray River area - I do not deny that proposition - but nevertheless I am sure that when this legislation was introduced it was never intended to aid sales of beer from Australia to Papua New Guinea.

After all. as we know from our own economic history, the brewing industry is one of the industries that a country can best encompass for itself, and there is such an industry in Papua New Guinea. 1 do not argue about the relative merits of one kind of brew compared with another, but t suggest that as far as the future welfare of Papua New Guinea is concerned, if it is to have a local brewing industry I am not too sure that there should not be some barriers set against the import of the product from outside Papua New Guinea. I suggest that this is one area in respect of which the law ought to be reviewed. 1 am not quite sure that that may not apply also to some industries in Australia which apparently are aided and abetted by the legislation as it stands. I think that most Australians, when they talk about export encouragement, are thinking about export from Australia to some of the new markets where we must make an impact in the future. I refer to countries such as Indonesia and to other countries in South East Asia, and to countries in the Commonwealth - to name only a few. We are reasonably successful, I suppose, in our trade with Japan which is our principal partner in this area. But if there is to be expansion in the future, then I think that there needs to be a lot more selectivity in the kind of measure that is introduced to encompass that expansion.

I see that the Minister for the Army and Minister Assisting the Treasurer (Mr Peacock) is sitting at the table. At one stage we had intended to move an amendment which provided that the legislation ought not to apply to Papua New Guinea, bt,/ perhaps in general terms that might have been a bit sweeping. The definition of 'prescribed goods' is to be found in clause 4 on page 6 of the Bill. I hope that perhaps some attention might be given to altering the definition of "prescribed goods' in order to exclude at least certain kinds of products which are favoured because of a strict interpretation of the Act as it stands at present but which we do not believe were intended to be favoured in the original Act. Whilst our trading performances have been quite satisfactory in Australia, I doubt whether companies such as Tooth and Co. Ltd and Carlton and United Breweries Ltd need succour from legislation such as this. I hope that consideration might be given perhaps to modifying this legislation if the Government recasts it, as it will have to do in the future. We honour some of our international obligations more in the breach than in the observance. 1 think that this is one of the difficulties with the arrangements under the General Agreement on Tariffs and Trade, which was one of the things hopefully started nearly 20 years ago in the post-war era wilh a view to securing better trading relationships between the developed and the undeveloped countries, and Australia in a sense in those days, 1 suppose, fell somewhere between those 2 categories.

Australia has now a relatively developed economy, compared with most countries with which we like to compare ourselves, and I think that probably now is the time to review the real import of some of the legislation that has been on the statute books for a considerable number , of years. This legislation has been quite successful in its operation. One needs only to look at the statistics that are contained in the table to which I have referred to see that approximately two-thirds of the benefit that is provided by this legislation is given to the export of manufacturing goods, such as machinery and other like components. That is the kind of area into which Australia has to expand its overseas trade in the future. 1 think that in that field at least the legislation has been successful. But the Government might have to find a quite different hook on which to hang this benefit now that it has handed payroll tax over to the States, "because apparently the difficulty is thai concessions of this kind must somehow be aligned to indirect concessions rather than to direct ones. I am sure that that will throw up some problems for the Government when it revises this legislation which expires in J 972-73.

Question resolved in the affirmative.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.







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