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Monday, 26 November 1973
Page: 3804


Mr EDWARDS (Berowra) - This Bill seeks to introduce a number of changes designed, in effect, to increase taxation. The situation is an interesting one in that the Government was elected on a program involving a vast range of expenditure proposals which, to the understanding of the lay voter, was to be achieved without an increase in taxation. lt is true that under, I think, clause 6 (1) of the cognate income Tax Bill the schedule of rates of personal income tax is unchanged. In that sense, there is no increase in personal income tax. The effect of the situation with which we are confronted is vastly different from that. What is significant in this context is what economists would call the real rate of taxation. This refers to the income tax which a taxpayer actually has to pay as a proportion of his income.

The effect of the policies of this Government in contributing to a rate of inflation, of price increase and associated increase in earnings, is that the impact of the unchanged schedule is to lead to a vast increase in personal income taxation. Indeed, the increase projected in the Budget papers - if I recall correctly - is $l,089m, a total increase in this taxation area alone of the order of fully 27 per cent. The total of taxation on individuals has increased gradually over many years, but in this one year there is an increase of the order of 27 per cent. I repeat, this has happened in the context of the understanding by the lay voter - if I may put it that way - that the proposals foreshadowed by this Government were to be financed without an increase in taxation. The fact is, of course, that the Government in its Budget, the enabling measures of which we are debating now, implemented a record increase in expenditure and of course it has come up against the difficulty of finding adequate means to finance it.

I have stressed the effective increase in the personal income tax rate where the proportion of taxation to personal income projected in the Budget papers increases significantly. We previously debated, in the context of this 'no increase in income tax' Budget, measures to increase indirect taxes - the excise taxes on the ordinary man's petrol, cigarettes and drinks including, as it will work through the system, his beer. I take this opportunity of reminding the listening public that if it was, as I believe it was, the impression of the lay voter that the proposals of the Government were to be financed without increases in taxation, not only is there this increase in the personal tax when expressed in the only way that is really meaningful - that is as a proportion of his income - but also there are these previously debated increases of excise tax on petrol, cigarettes and on some drinks.

The consequence of the policies of the Government and particularly its budgetary policy has been to foster rather than to restrain inflation in this country and inflation is now proceeding at a record rate. Let me recall to honourable members another facet of this situation and that is that to compensate for a Budget where there is agreement on all sides that it contributed to the acceleration rather than to the restraint of inflation it has been necessary to have supplementary measures on monetary policy. One result of that was that I received through the post the other day a notice from an insurance company from which, when in financial straits a little while ago, I was obliged to borrow some money. The notice stated, in effect: 'It is herey notified that the rate of interest on those loans is to be increased H per centage points'. That increase has a direct impact on me. But many other members of the Australian public at this moment are paying higher charges for their hire purchase contracts. What does that mean to the ordinary man in the street who is unable to purchase a large expensive item in any other way? It is simply an increase in the price he pays. In other spheres such as building I am not quite sure what decision this Government of great decision, speedy decision and compulsive decision when it comes to airports, has yet arrived at in relation to finance for home purchase - but many people are already paying for bridging finance and other supplementary finance higher rates of interest for their loans. These are major imposts on the man in the street - the average voter - in addition to the direct imposts I have mentioned on his petrol, cigarettes and drinks which are for all practical purposes equivalent to increases in taxation.

The Government has chosen in this clandestine way to make up for the obvious deficiencies of the Budget pointed out, I might add, by no less a person than Dr H. C. Coombs, the economic adviser or assistant to the Prime Minister, and I might also mention Mr R. J. Hawke, the Federal President of the Australian Labor Party. Therefore in the Bill before the House is a variety of measures designed to increase the revenue. Among these is a provision to do away with the age allowance relating to income tax on persons aged 65 years and over. The effect of that measure is that it is put forward in a context where the Government is removing the means test in a limited area on pensioners aged 75 years and over and at the other end is making some provision by way of tax rebate to reduce this impact. But for a considerable range of taxpayers in the age group 65 years to 75 years taxation by this measure is being increased. Is there any justice in a measure of that nature?

We have had reference in this House today to the impact on wineries One could go down the list. There is the position in relation to the investment allowance on new plant being installed in manufacturing industry and in rural industry. This particular measure is not a short term measure designed to be turned on and off in accordance with current business conditions. The purpose of the investment allowance in a competitive world is to provide an offset to high labour and other costs and to foster the investment in plant and equipment and the mechanisation of production with a view to increasing productivity. It had been my intention in speaking to this measure to table certain figures prepared by an economic task force of inquiry set up by the United States President which show the amount that can be written off after various periods - the table in fact shows the amount that can be written off after 3 and 7 years - in most countries of the world. The fact is that, even with the investment allowance, the extent to which investment in new plant and equipment can be written off after 3 years and then after 7 years in this country is one of the smallest in the world. Provision made in other countries for the writing off of new investment at a more rapid rate - it can be done at a very high rate in Britain, for instance - is the sort of provision made in those other countries to stimulate mechanisation and investment in new plant and equipment, thereby raising productivity and international competitiveness.

This is the long run purpose, the important purpose, of such an allowance. Its removal at this stage is, I believe, simply a matter of dogma, and it is inappropriate in the context in which we find ouselves. In fact, it fits in as one ingredient of the whole program of management of the economy by this Government. Not only is the appropriate control of demand on the one side not carried through and notable in this respect is this Budget, but measures are taken which inhibit and will inhibit the proper development of supplies, looking at the matter of inflation not from the demand side but from the other side. We have a situation to which I previously referred as perhaps the 'chaos theory' of managing the economy. The Government makes a variety of ambiguous, equivocal, qualified statements and combines these with arbitrary and unpredictable actions such as the 25 per cent tariff cut, and in this way inhibits industrial planning and creates uncertainty. The export incentive grants scheme was a case in point. The Treasurer said: Yes, we will renew it for 12 months. After that we may or we may not. It may take this form; it may take that'. Where does industry stand in this situation? At that time there was the same uncertainty about the investment allowance. In one sense that uncertainty has been reduced. The investment allowance has now been removed by this legislation.

As I said previously, it was understood by the lay voter that the Government would proceed without an increase in taxation. But although the schedule of rates of personal income tax remains unchanged the Government, by the variety of measures contained in these Bills, proposes to raise substantial additional taxation revenue. A few days ago the Prime Minister (Mr Whitlam) said that his Government would be proud if its record in relation to the Aborigines was remembered. As a member of this Parliament I would like to be associated with that statement. But the Government will be remembered for less worthy achievements. It will be remembered for creating the circumstances for an acceleration of inflation in this country not previously known in a time of peace. It will be remembered as the government which presided over the highest interest rates ever to prevail in this country - a good record for a party pledged to low interest rates! It will be remembered as a government which has brought the state of the defences of this country to perhaps the lowest point within memory. I would say that the members of this Parliament and the members of the Press should honour the Opposition this day that has opposed, as we do oppose, measures as inequitable as the abolition of the age allowance and other measures in these Bills, and yet inappropriate, and indeed in many cases irresponsible, as the total Budget strategy is, these measures to raise additional revenue are not opposed by us to the point of refusing this Bill a second reading.







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