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Tuesday, 7 October 1986
Page: 1582


Mr CARLTON(9.56) —Once again we are debating taxation laws. It seem that we debate little else these days. That, of course, derives from the Government's demand for more and more money from taxpayers to pay for its excessive spending. The Opposition will not oppose the revenue measures in the Taxation Laws Amendment Bill (No. 3) 1986 and the Bank Account Debits Tax Amendment Bill 1986. However, as an amendment to the Taxation Laws Amendment Bill (No. 3) 1986, I move:

That all words after `That' be omitted with a view to substituting the following words: `whilst not declining to give the Bill a second reading, the House condemns the Government for-

(1) its failure to control Government spending to the point where it has broken its `Trilogy' commitment to hold taxation to no more than 25 per cent of gross domestic product and proceeded to tax Australians to the highest point in our history;

(2) its contempt for ordinary taxpayers, illustrated by its decision to charge a $200 fee for appeals against rulings by the Commissioner of Taxation regardless of the size or complexity of the claim;

(3) its incompetent handling of the withholding tax issue, where the Government changed the tax rules, caused a run on the dollar, and retreated 27 days later, and

(4) its disgraceful treatment of the Defence Forces Reserves, by withdrawing the tax free status of reservists' pay thereby causing a grave rundown of reserve forces and damage to their morale and effectiveness, and now having belatedly to restore the concession'.

The first item I shall deal with, which is in the second Bill, is a straight tax increase. Bank account debits tax is up from 1 December to bring in an extra $90m of revenue in a full year. This extra $90m is part of the $1,500m extra tax levied in this 1986 Budget. It is a further burden on taxpayers either directly through their bank accounts or by additional costs, charges and prices that go through the community as a result of the additional burden on business. The reason we must have, under this Government, an extra $90m drawn out of our bank accounts is that the Government is spending too much. The degree to which it is spending too much is shown up in the degree to which it has been forced to increase overall levels of taxation.

In the last election campaign, the Prime Minister (Mr Hawke) promised that government spending would be held in check and that, as a result, taxation on the Australian people would be kept within a limit of 25 per cent of the gross domestic product. In this Budget, for the second year running, that trilogy commitment has been broken. It has already been exceeded by $1,400m in extra tax. Part of that has come from a three-month delay in the cuts in personal income tax, costing taxpayers on average $110 each. In other words, because of the delay in the tax cuts for three months, the average taxpayer will pay to the Government an extra $110 over the next three months.

In addition to that, there have been increases in sales tax, which we debated in the last sitting week, and increases in the petrol excise which are a very severe burden particularly on lower income families. The House may wish to be reminded that, since the Hawke Government came to office, the petrol excise has risen from 6.2c a litre to 20.2 cents a litre. It has risen by a total of 14c a litre. That represents $6.30 a week for the average motorist. For a low income family with a car and living in the outer suburbs, that represents an extra $6.30 a week in petrol tax since the Hawke Government came to office.

Of course, the Government says that individual taxpayers will be assisted by the tax cuts that they will get, though belatedly, on 1 December. But one has to be pretty sceptical about this because, if one looks at the overall amount of income tax collected by the Hawke Government, it has risen from a 1982-83 figure under the Fraser Government of $23 billion to $38 billion in the 1986-87 Budget. In other words, total taxation revenue has risen from $23 billion in the last year of the Fraser Government to $38 billion under the Hawke Government. The Hawke Government is the highest taxing government in Australia's history. It has almost doubled the total taxation take from the Australian people in its four years in office-from $23 billion in the last Fraser Budget year of 1982-83 to $38 billion in the 1986 Hawke-Keating Budget.

During the period of the Hawke Government there has been an overall increase in inflation of 30.5 per cent but the increase in taxation on individuals has risen by 60 per cent, by twice the level of inflation. So inflation has risen by 30 per cent and taxation by 60 per cent. That is what is happening under this Government which has promised taxation cuts to people. In fact, the taxation cuts that people are to get will not reduce the amount of tax paid by average taxpayers, but will increase it. At the time that the Hawke Government was elected in 1983, the average rate of tax paid by a single person was 22.9c in the dollar. After all of these so-called cuts have been given, that average rate will have risen from 22.9c to 24.5c in the dollar. Even after all of these changes and after the cuts promised for next year-which we probably will not get because we are threatened with a mini-Budget to take them away-a single taxpayer will still pay a higher average rate of tax. A family will be even worse off. In March 1983 when the Hawke Government came to office a family taxpayer on average weekly earnings would have paid 17.5 per cent of income tax. That figure will rise to 20.5 per cent after the so-called Keating tax reforms.

What we are seeing is a desperation for taxpayers' money. That is why the Government desperately hangs on to its absurd, lousy fringe benefits tax. The Government is desperate for revenue to cover its excessive spending. Under the Government's changes, two million taxpayers will move from a 29 per cent top tax rate to a 40 per cent top tax rate. It sounds good when one says that the top marginal rate under the so-called tax reform will be reduced from 46c in the dollar to 40c in the dollar and that the 30c rate will be reduced to 29c; but, when one realises that over the course of the two years because of inflation two million taxpayers will move from a 29 per cent top tax rate to a 40 per cent tax rate, one realises that the whole thing is a massive swindle.

Over the next few months we will see an attempt by this Government to tell people that they will have reductions in tax but, because of the effects of inflation and of the excessive spending of this Government, people will be much worse off after these so-called reforms are implemented. An average Australian family will still be $23.50 a week worse off after the lousy tax cuts from 1 December this year. Since the last election a one-income family on average weekly earnings of $466 and with two dependent children has suffered a real loss in disposable income of $27 a week. The weekly tax saving for the 1986-87 year for someone on average weekly earnings of $466 will be only $3.50. This means that the average family is still $23.50 worse off since the last election. So much for the great tax reforms of the present Treasurer (Mr Keating). The Prime Minister and the Treasurer have again demonstrated their total lack of concern for Australian families by failing to give them any meaningful tax relief. The reason is that they have spent too much over four years and have almost doubled the amount of tax taken from the Australian public.

I wish to draw attention to another miserable little measure in these Bills. I refer to the introduction of a $200 lodgment fee if one wishes to appeal against a decision of the Commissioner of Taxation. Previously, if one wanted to appeal one paid $2. But, under these new proposals, the charge of $2 will suddenly become $200. I have received two letters from chartered accountants who handle the tax matters of small business clients. I will quote from them as a direct indication of the effect of this increase on small taxpayers. A chartered accountant from Canberra writes as follows:

It appears to me that the referral fee is particularly going to disadvantage those persons in the lower income group. By this I mean that it will not be worthwhile referring the matter to the Administrative Appeals Tribunal if the value of the tax involved is less than $200. A person who is in the lower income group and paying tax at the rate of 24.42c in the dollar will be most severely disadvantaged. The disallowance which represents an amount of $200 in tax in this particular case is $819.

In other words, if somebody has $819 disallowed it will not be worth their paying the fee to have it looked at again. On the other hand, a person paying tax at the highest rate, namely 57.08c in the dollar need only have a disallowance of $350 in claims to equal the $200 in tax. In other words, the higher one's income, the better off one is with his $200 fee. The people on the lowest incomes and the lowest tax rates will be the ones most disadvantaged. That is normally the case with anything done by a socialist government. It is always the people who are worse off who finish up at the end of the queue. The letter continues:

The idea of referring a taxation objection or disallowance to the Board of Review, now the Administrative Appeals Tribunal, was to provide a cheap and inexpensive way for a taxpayer to have a person or persons outside the Taxation Office review their objection. Under the new arrangement involving a referral fee, it would appear that this cheap and inexpensive method has now gone and only those with substantial claims will proceed.

My additional concern is that the Taxation Office may take the attitude of disallowing the smaller claim en masse with the object of having raised further revenue unjustly. This is something that cannot be checked by parliamentarians but the system now is certainly open to abuse by the Taxation Office.

In other words, the tax office might take advantage of this by knocking out willy-nilly a whole lot of small claims-this is what the accountant is saying-because it will not be worth the while of those small taxpayers to pay the $200 fee to have the matter challenged. I have with me another letter from a chartered accountant in Melbourne, who goes into the matter in a different way. He says:

The imposition of a fee at a level of $200 would also make referral of some matters beyond the reach of a large number of taxpayers. This fee appears to be aimed at the removal of the legal rights for a large group of the community who are `small taxpayers'. In the case of a dispute over the disallowance of a small expense item in a husband and wife partnership-

here one is talking, I suppose, about small business-

to pursue the matter beyond the objection level will cost each partner $200-that is, $400 in respect of one item in dispute.

So if in a small business partnership of man and wife there is an objection, each partner will have to pay $200. It simply will not be worth the candle, if they have to pay $400 to have a matter looked at. What sort of a government is it that brings in things of this kind?


Mr Barry Cohen —A terrific government.


Mr CARLTON —The Minister says that this is a terrific government. He says that it is a terrific government which brings in a $200 objection fee which has its greatest effect on the smallest taxpayers, those who have the least money to cope with it. That is the sort of government this Minister is proud of.

The next matter I shall deal with tonight-and I shall continue my remarks tomorrow because we are running out of time-relates to the interest withholding tax fiasco. This is an extraordinary story. On 1 July the Treasurer made the statement that to protect Commonwealth revenues the Government had decided to remove a number of exemptions from interest withholding tax. I shall not go into the complications, but it meant that a number of people who had widely held securities overseas, or if there were borrowings by Commonwealth and State authorities, rollovers and extensions of loans which were exempt from interest withholding tax-the tax paid before the interest is sent back overseas to the person who has made the loan-had those exemptions removed. That was to raise net revenue of $60m in 1986-87, rising to $175m in later years. This was a stupid, ill-timed decision. Following the decision, the Australian dollar dropped to a new record low. It went down to 55.2 on the trade weighted index, 66.5c against the United States dollar and 108.6 against the yen. It hit new record lows on 2 and 3 July following the 1 July announcement.

Over the rest of July things went from bad to worse. Despite large and costly Reserve Bank intervention, on 28 July the Australian dollar continued to drop and it plummeted to 50.c on the trade weighted index and only 60.3 against the United States dollar, a drop of 6.2c over the course of less than a month. The Treasurer panicked and, in an attempt to stem the slide of the dollar on that fateful day, he announced the reversal of the 1 July decision to close off the interest withholding tax exemptions. It was a black day on 1 July 1986 for Australia because the overseas financial markets could not understand what the Australian Government had done. It suddenly changed a whole lot of arrangements upon which people had relied for years, the dollar plummeted and over the course of a month went down 6c against the United States dollar. The Treasurer was shamefacedly forced to reverse this decision only 28 days later. It was one of the most shameful examples of mismanagement by this Treasurer during a period of office which has been marked increasingly by mismanagement in a whole range of areas.

Debate interrupted.