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Government fails fiscal responsiblity test

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Peter Reith


The Keating Government has a $50 billion funding hole up to the year 1995-96 and yet it's new tax package is a wish list to increase tax revenue through so called tighter "compliance".

The fact is that the Government is between a "rock and a hard place" of monumental proportions because it has promised inequitable income tax cuts in 1995-96. They cannot pay for them.

And even if they could, they are clearly inequitable because 47 per cent of all taxpayers, being those on the lowest incomes, will receive no tax cuts at all. This is because the tax cuts do not, as Fightbackl does, reduce the lowest marginal tax rate

from 20 per cent, nor does it increase the tax free threshold of $5,400.

Therefore, no-one under $20,700 would get a tax cut under the Keating Government.

However, the big problem with today's taxation statement is that it shows the Government can't fully fund its tax cuts.

Principal amongst the Government's problems is that it cannot justify its revenue estimates.

How is it that after 10 years of Government, and apparently based on one minute to the Treasurer from the Tax Commissioner, dated YESTERDAY, the Government now thinks it can raise $1.7 billion over two years from compliance measures by expending only $114 million on the Tax Office.

Further, why if the Government can identify a potential $1.7 billion in revenue through increased compliance measures, won't it introduce the legislation until the 1993-94 financial year.

This is a total joke.

It also shows the hypocrisy of Mr Dawkins who has been attacking the Coalition's Fightbackl proposals to raise revenue from the black economy, even going so far as to quote with favour a

Treasury minute to his predecessor dated 16 December 1991 which said:

"... any attempts to quantify the size of the black

economy is subject to significant uncertainty and it is not possible to produce a reliable revenue



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However, if the Government is now saying it can raise enormous amounts of money from the black economy, where in fact is this money going to come from?

Isn't the bulk of the increased revenue coming from compliance measures on individuals and small business?

How, for example, does the Government plan to raise $600 million over 2 years in tax from small business by:

"... a strategy for improving small business recordĀ­ keeping."?

Further, if, as the Treasurer announced;

"A significant share of the revenue yield of the

changes will come from tax exempt government sector employers who have benefited from lower taxes on

fringe benefits until now,"

can he explain what is the increased cost to State Governments of FBT increases? How does he expect State and local governments to pay for this? Will it mean cuts in State services in

education, health and law and order?

What, for example, is the proposed extension of the Tax File Number system to business supposed to mean?

Will plumbers have to quote the TFN to people when they do work?

Will dentists, doctors, lawyers, carpenters etc also need to quote their TFN when they do work?

The Government's tax announcement raises more questions than it answers. Where is the necessary funding?

When a person considers that the billions to be raised by the tax measures compares with the fact that the Government's revenue estimates for the 1991-92 financial year was wrong by $3.5 billion, not much faith can be put in the Government's estimates.

16 September 1992 Canberra

Contact; David Turnbull (06) 277 4277 D146/92