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Thursday, 29 March 1979
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Mr WILLIS (Gellibrand) - I second the motion, Mr Speaker. The motion which the Opposition has moved reads as follows:

That this House deplores and condemns the wilful misrepresentation of the Prime Minister on tax matters as part of an obvious tactic designed to conceal the fact that the Government will have to increase direct personal tax and indirect tax as well as substantially reducing existing benefits to the community in order to fund a $ 1,000m revenue shortfall arising because of firm commitments by the Prime Minister already announced to the electorate to be funded in the forthcoming Budget.

The first point to be made in respect of this matter is that the motion specifically points to the Prime Minister (Mr Malcolm Fraser) who is not in the chamber and who is apparently squibbing this debate. I think that is a particularly important point. The Opposition has not raised this matter lightly. We have raised it because the Prime Minister- the Treasurer (Mr Howard) also but the Prime Minister in particular because of the particular opportunity he is afforded during Question Time- has, time after time, sought to misrepresent the situation in regard to taxation. We are sick and tired of his misrepresentation of the realities in regard to income tax and taxation generally. We have raised this issue specifically so that he can stand up in this chamber, if he has the courage and the guts to do so, and defend the matter in debate rather than just using the particular advantage he has at Question Time. But apparently he is refusing to take up the challenge. He will leave it to his Treasurer while he skulks in his office. Well so be it. That is the sort of Prime Minister we have.

Mr SPEAKER -Order! The honourable gentleman is not entitled to use the language: Skulks in his office'. I ask him to withdraw.

Mr WILLIS -I rephrase it, sir, to say while he sits in his office.

Dr Klugman - You wouldn't go real well in the Queensland Parliament.

Mr SPEAKER -Order! The honourable member for Gellibrand will resume his seat. The honourable member for Prospect will withdraw that remark.

Dr Klugman - Sorry; I will withdraw.

Mr SPEAKER -I have had the necessity to warn the honourable member for Prospect on an earlier occasion. I will not warn him again.

Mr WILLIS -The fact is that the Prime Minister is particularly sensitive on this issue of taxation because he came into government posing as a Prime Minister who would provide a low tax system for the people of Australia. He continually spoke about the way in which this Government would be a low tax government- small government, low taxes. This was something that would be tremendously attractive. We all recall that during the 1977 elections the major focus of the Government's election policy was that it would bring in substantial income tax cuts. The reality is that this Government has, since that time, had to reverse substantially its original ideas in regard to taxation and break its fundamental pledge made to the Australian people in respect of income tax at the 1977 elections. It has had to substantially increase income taxes through the income tax surcharge and also through various increases in direct taxation. The result of this is that the Australian people are far less well off than the Prime Minister promised they would be.

The reason that the Government has had to break its promises in this way is simply because its economy policies in general have failed. They have failed, in particular, in respect of stimulating the economy. As a result of that, the Budget deficit has continued to blow out. The Government has been unable to reduce the Budget deficit in the three years that it has been in office. Therefore it has had to resort to breaking its pledges on taxation in an attempt to do that. The irony of the situation is that by increasing taxes in this way the Government has further recessed the economy and therefore locked itself into a downward spiral which involves a continual resort to higher taxation, continual blow outs of Budget deficits and higher levels of unemployment. I remind the House about this matter of the deficit. Today the Prime Minister said that there were large deficits under the Labor Government. In the three years the Labor Government was in office total deficits amounted to $6.4 billion. That might sound like a lot of money but in the three years of the Fraser Government, total deficits amount to $8.9 billion. So where is this big cut in the Government's Budget deficit which we were promised in 1975? Where are the horrors of large deficits about which we heard when Labor was in government? They have been much larger under this Government. Of course the Government is embarrassed by that situation as I have mentioned. Therefore it has had to resort to increasing taxation in the way that I have already described.

Now, those increases in taxation have also been made on a very inequitable basis. Not only have the increases made taxpayers generally less well off than the Fraser Government promised the people they would be, but also they have been done in such a-way that people on ordinary incomes- ordinary wage and salary earnershave received no benefit from the income tax cuts which were promised in 1977 and introduced in February 1978. But people on high incomes have received substantial benefits. With the introduction of the income tax surcharge 40 per cent of the benefit went to the top 10 per cent of taxpayers. Those top 10 per cent are still much better off, whereas 55 per cent of taxpayers lost everything they gained out of those income tax cuts. The whole process has been done in a totally inequitable way as well as being a fundamental breach of a promise made to the Australian people. Of course it is not just something that is in the past.

What the Prime Minister is concerned about is that this is something which is here now and which is facing him in the next Budget, because in this year, 1978-79, we find that the deficit is blowing out again. It is $70m higher than it was at this time last year despite the fact that we have been promised a Budget deficit of $500m less for this financial year. Therefore the Government clearly is faced again with a blowing out of the deficit to some order. The Government has immense problems in terms of what it will do in 1979-80 because on top of that situation it has made all sorts of promises as was mentioned by the Leader of the Opposition in respect of the various tax concessions that it will make in 1979-80. Those are very important. It has promised to abolish the coal export levy, death and gift duties and to reduce the incidence of the crude oil levy. All of this will cost $230m.

Three years ago the Government promised full stock valuation adjustments over a threeyear period. That matter comes up in 1979-80 and will cost $300m unless the Government breaks its promise. The Government has promised full tax indexation in this coming financial year which will cost $400m. It has also, of course, promised that the income tax surcharge was only for a one year period. That amounts to a $570m loss if the Government does not go on with that surcharge. Now all that means that the Government has tremendous and very expensive promises to recoup to the Australian people. We frankly think that it will not be able to keep all those promises. The one that it is least likely to keep is the one relating to the income tax surcharge.

We have challenged the Treasurer time and time again to say to the Australian people that an income tax surcharge would not be levied again in 1979-80. He has consistently refused to make that promise. Now I challenge him again. Will he say to the Australian people today that he will not renew the legislation for an income tax surcharge in the next financial year? I ask the Treasurer not to say that the legislation runs out at the end of this year. Will he tell us what he intends to do about the matter for the next financial year? That is the important issue. If he is not going to renew that income tax surcharge, then can he tell us what other taxes he will put up in order to bring the Budget deficit down? This morning's Press reports that the Department of Finance estimates the Budget deficit at something like $4 billion for 1979-80. Clearly it has taken into account these various taxation promises of the Government. Therefore the Government will have a much higher deficit than it will have this year, unless it again resorts to increases in taxation. So the fact of the matter is that the Government has not been a low tax government at all. Its ecomonic policies have locked it into a situation in which it has had to resort to continual increases in taxes to try to keep the Budget deficit within some sort of proportion. Therefore the Government is extremely sensitive about the situation.

The Prime Minister keeps distorting the realities of what has been done. It is simply absurd to keep arguing, as he does, that the Australian people have been saved $3,000m by the introduction of tax indexation by this Government.

He says that if we had the Hayden tax scales for 1975, if there were no tax indexation on them and if there were current incomes, then $3, 000m more of income tax would be levied. That is absolutely an absurd and ridiculous argument. Firstly, although tax indexation did not apply when the Labor Government was in office, on two or three occasions substantial changes in the tax schedule resulted in this reduction in the impact of taxation. There was not a formal indexation system but there were substantial changes in the tax schedules to reduce the incidence of income tax. Secondly, since that time it has become Labor Party policy to have tax indexation. I have referred the Treasurer to this policy before but he continually ignores it. I repeat that the Labor Party policy -

Mr Kevin Cairns - When did you pass that policy? You rejected that in 1975.

Mr WILLIS -Oh, will the honourable member please be quiet.

Mr SPEAKER -Order! The honourable member for Lilley will remain silent.

Mr WILLIS -The Labor Party policy as adopted at the Perth Conference in June 1977, under the heading of 'Taxation', states: . . adjust the personal income tax schedule and tax rebates for changes in the Consumer Price Index.

Now, it is ridiculous to assert that there would have been no changes to the income tax schedule. They occurred when we were last in office and we now have a policy which formally accepts the system of adjustment of the tax system for changes in consumer prices. So, I ask honourable members not to keep on with this nonsense, this ridiculous and entirely misleading argument- fraudulent argument almost- that a Labor Government would have raised $3, 000m more in taxes if it had remained in government. That is utterly ridiculous and cannot be substantiated. Of course, the Prime Minister does not just do it on this broad scale. He tries to do it on a personal scale as well. We heard him again argue today, as he has argued before, that under the Labor Party taxes would be $15 a week higher for a person on an average income with a wife and two children than would be the case under the present tax system. Now that is just a ridiculous argument because again it ignores the fact that there would have been adjustment of the tax scales.

Mr Hodgman - Oh!

Mr WILLIS -Do not just say, oh. The fact of it is that that is our policy and it would have happened.

Mr Howard - It was not your policy when you went out of office, and you know it.

Mr WILLIS - It was our policy to adjust the tax scales.

Mr SPEAKER -Order! The debate is not advanced by cross-fire in the chamber. I call the honourable member for Gellibrand.

Mr WILLIS - As I mentioned, it was our policy to adjust the tax scales periodically. That has now been formalised. There would have been adjustment of the tax scales. I remind the House that the tax indexation introduced by this Government, has been anything but full tax indexation. Last year it was 33 per cent. It was 90 per cent in the first year and 80 per cent in the second. In three years we have got nowhere near full tax indexation. If we had had tax indexation under the Hayden tax scales to that degree in the last three years people would still be better off. A person on $220 a week would be $3.00 a week better off under the Hayden tax scales than under the tax indexation that is applying at present. If full tax indexation had applied that person would be even better off, The whole assertion of the Government in this respect hinges on the point that there would be no adjustment of the Hayden tax scales. That is an absurd and ridiculous argument.

One further point to make is that this Government, being locked into a situation of having to increase taxes, has done so, as I mentioned previously, in an inequitable way. That inequity is exposed not only by the fact that the Government resorts to increasing income tax in an inequitable way but also because it refuses to look at alternative means of raising taxes. Ways are available- we have pointed to them- to raise tax revenue in a way which would lower the burden on the Australian people generally. It would put the burden where the capacity really resides. A resources tax, for instance, would tax the windfall and super profits of mining companies which such companies can well afford to pay and would reduce the burden on the Australian taxpayer. There should be some form of taxation of capital in this country. It is highly inequitable and unfair on taxpayers generally to allow those who earn their income from the ownership of capital and through the buying and selling of capital to avoid taxation on that income.

Most countries in the Western world have a capital gains tax. The fact that such a tax does not apply in this country is a massive inequity and increases the burden on the ordinary Australian taxpayer. The fact that this Government, despite introducing various measures to reduce tax avoidance, refuses to crack down on family trusts, for instance, is also another indication of the way in which the Government refuses to pursue a tax policy which would be equitable and fair. As its own taxation officers pointed out, refusal to crack down on family trusts as tax avoidance measures means that a substantial inequity is allowed to remain in the tax system. The Prime Minister has been massively distorting the truth in respect of taxation. It is a pity that he will not come into the House and debate the matter. It is highly objectionable when the Leader of the Opposition moves a motion condemning the Prime Minister for his misrepresentations that the Prime Minister leaves his defence to the Treasurer and has not the courage to defend his own actions.

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