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Monday, 14 October 1991
Page: 1885


Dr CATLEY(10.35 p.m.) —-I would like to point out to honourable members what great pleasure I had reading the commentary of the greatest Liberal of his generation, Malcolm Fraser, on the proposed GST, in the newspapers yesterday and today. The Canberra Times version of this article is entitled `Disadvantages of a GST should not rule it out'. When one comes to examine this article one sees with what lukewarm support the former Liberal Prime Minister of this country greets the proposition for a goods and services tax.

Firstly, he says that one cannot argue for its introduction on the basis of the need to lower taxation in this country since we have the lowest rate of tax of any OECD country except the United States, which is the same, and Turkey, which is lower. This, of course, is the result of the reduction of the bloated government expenditure patterns that this Government has been able to trim, the bloated patterns which we inherited from the Fraser regime.

Secondly, he points out that, in order to get any serious reduction in income tax as a result of the introduction of a consumption tax, it would have to be introduced at between 10 and 15 per cent, with no exemptions. He goes through the possibility for exemptions and points out that one cannot have them if one wants to reduce income tax at the same time.

The arguments that he goes through concern housing and the finance markets, but he makes it very clear that a government has to tax the common everyday items that everyone buys because, if these are exempt, revenue falls dramatically. There cannot be exemptions.

Thirdly, he points out the difficulty of collecting such a tax and argues, quite correctly, as do we on this side of the House, that there are now over 60,000 registered wholesale taxpayers and there would be not less than 10 times that number under a GST. Fourthly, he looks at the wholesale sales tax and points out:

To suggest that we need to change the system because there is a 20 per cent sales tax on tooth brushes and none on caviar, is not realistic. Anomalies creep into any system.

That is what Malcolm Fraser said. The article goes on to say:

Till now, governments have believed that luxury goods should attract a higher rate of tax than so-called essentials, some of which may not be taxed at all.

Listen to this:

I still hold to that view.

If there are anomalies in the system the responsibility of government is to remove them, not to go to a much more regressive system of taxation.

Fifthly, will this new goods and services tax introduce the increasing level of savings and investment that this country needs? We on this side of the House agree that that is a recognisable and needed policy objective for government. Fraser says:

Unless the balance is altered in other ways there is no real reason why we should get that increased investment and reduced demand for imports.

That is, from a GST. He is quite correct. That in itself will not do it.

Sixthly, he goes on to say that the governments that introduced a VAT or a GST introduced it because they were strapped for cash. He states:

They regarded such a tax as an easy way of raising revenue.

It is worth noting that in New Zealand total tax has risen about 4 per cent of GDP since the introduction of a GST.

In other words, the GST-VAT system has been introduced and an increasing taxation level as a whole has resulted and we at the present are among the lower level of taxed countries in the OECD. Finally, he says:

If such a proposal is to succeed it will need to be explained in detail and argued with intellectual clarity and strength. The reasons for delaying that debate are not convincing.

We on this side of the House, of course, look forward to a further exposition of the need for such a tax, particularly in light of the most successful political Liberal leader of his generation having argued about it in such a way that it has to be titled `Disadvantages of

a GST should not rule it out' and then having spent most of his column in the national newspapers itemising why the difficulties have not been explained by the Opposition but need to be.

Finally, I would like to make the point that, during adjournment debates, during Question Time and during 60-second statements, we have had the back bench of the Opposition saying that we intended in 1985 to introduce a VAT. Not only did we not introduce a VAT, not only did we reject a VAT, but it was not on the agenda. What was on the agenda was a retail tax, which is quite a different proposition, collected by retailers and not collected by all distributors and producers in the economic system as is a VAT, which will involve a horrendous number of tax factors.(Time expired)