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Tax and food: why should we give a big tax break to the rich?



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Peter Reith DEPUTY LEADER of the OPPOSITION PRESS RELEASE SHADOW TREASURER

TAX AND FOOD: WHY SHOULD W E GIVE A BIG TAX BREAK TO THE RICH?

The Australian Catholic Social Welfare Commission's call today for the removal of tax on essential food items fails to adequately take into account the need for an equitable tax system.

The Commission argues against imposing a GST on food. It argues in its press release that:

'Any form of taxon food directly disadvantages the poor an d low income famines.'

This proposition completely ignores the fact that the Coalition's GST proposals are inextricably linked to a major compensation package which delivers the greatest proportionate benefits to the lowest income earners.

We appreciate the Commission's concern about 'human dignity*. Fightback! is aimed at creating two million jobs. We believe that this is a laudable objective that will enhance human dignity.

In deciding on the GST base, the Coalition really had a choice between having a narrow base (excluding things like food and clothing) and a very high rate of tax or a broad base with a lower rate of tax.

The advantage of the second option is that, even though more compensation is required to cover the moderate, once-only increase in prices (4.4%), it can be more fairly targeted to those most in need than is possible with blanket exemptions.

Thus, in the case of food, we believe that the fairest and most equitable treatment is to make food subject to GST and provide compensation for any price increases through the social security system, substantial personal income tax cuts (including an increase in the tax free threshold from

$5400 to $7000) and the system of GST tax credits.

As Bureau of Statistics data shows, the richest group of Australians spend around three times as much on food as the poorest group. To have exempted food from the GST would be equivalent to a $3 tax cut for the better-off for every $1 cut for the less well-off.

While disagreeing with the Commission's conclusions, we acknowledge that it has tried to produce a balanced report and does not wish it to be turned into a political football.

I look forward to meeting with Father Cappo of the Commission in the near future to discuss with him the matters raised in the report.

29 September 1992 Gladstone

Contact: Hugh Logue (06) 2774030 D152/92

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