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Wednesday, 11 November 1998
Page: 205

Mr HOCKEY (Financial Services and Regulation) (4:27 PM) —I would like to thank the member for Wills and the member for Boothby for their contribution to this debate. Despite the fact that this is essentially an uncontroversial bill, I join with the member for Boothby in welcoming the fact that hopefully this will be one of the very last times that this parliament should have to debate a bill proposing general purpose grants to the states. That is because, as both speakers pointed out, under the coalition's tax reform package, the states will, for the first time, have access to a new national, aggressive growth tax.

The growth tax comes from not its level of application, or the issues to which it applies, but from the simple fact that there is always going to be an ever increasing—or we would expect ever increasing—amount of consumption by the Australian people. Therefore, the net revenue collected from the tax will obviously continue to grow. That is one of the most significant gripes that the states have: the fact that they have a deteriorating taxation base; that the stamp duties that they collect are under very serious challenge from various aspects of globalisation; and that FID and BAD taxes are exactly that, bad taxes, because they are in fact handcuffs on the flow of money within the economy. When you have other transaction based taxes such as stamp duties on marketable securities, particularly stamp duty on the transfer of shares, then what you have in place are serious disincentives to international investment in our financial markets.

One of the most significant benefits of the government's tax reform package is the fact that we are removing the shackles from the movement of money in the Australian economy and therefore making it a more attractive place. In fact, we are reinforcing the idea that we are a haven for the flow of international money.

Most speakers referred to the fact that we continue to endure the unfortunate aspects of vertical fiscal imbalance—that is, that the Commonwealth collects significantly more revenue than it spends in terms of direct services to the community. That situation will change. Technocrats can argue forever and a day whether the clear definition of vertical fiscal imbalance will change, given that the Commonwealth will collect a GST, but the revenue will go to the states. I am sure the debate on the theoretical aspects of that will continue for years to come.

However, the fact is that the states will determine the rate of the GST, in consultation with the Commonwealth and both houses of parliament, and they will receive the full benefit of the GST collected. In that sense, it is clearly arguable that the vertical fiscal imbalance problem is addressed. Of course, it will never resolve, and we will never resolve, the horizontal fiscal equalisation problems that occur. That is the imbalance in the amount of revenue paid by the people in New South Wales and Victoria to the states but primarily to the Commonwealth, and the fact that through the Grants Commission process the money is reallocated to the benefit of some of the other states. I think there is a stranger in the House.

Madam DEPUTY SPEAKER (Hon. J.A. Crosio) —No, I am sure there is not, Minister.

Mr Sercombe —You're the strangest one here.

Madam DEPUTY SPEAKER —Order! The minister has the floor.

Mr HOCKEY —Thank you for reassuring me of that, Madam Deputy Speaker. Following on from some of the comments from the member for Wills, I do want to point out to him that the most significant threat to services provided by the states—and I want to emphasise this—is not the amount of revenue that they receive but, at the moment, the quality of the revenue that they receive and the fact that the taxes that the states rely on, such as stamp duty on the transfer of shares, get caught up in the bargaining process between, say, Queensland and New South Wales—and we saw the Queensland Premier threaten to abolish the last tranche of stamp duty on the transfer of shares only recently—and also the fact that other taxes such as FID and debits are under threat because of the significant transformations in banking and financial services.

Therefore, the Commonwealth is throwing to the states a lifeline in the form of the GST. It is throwing them a lifeline so that they can continue to deliver the same services and improved services compared to what they are currently providing. We have not heard the states. I do not think that even Bob Carr, the Labor Premier in New South Wales, has said that he did not want the revenue from a GST. He has not said that and, surprise, why not? Because he is a significant beneficiary of the new taxation system that we are proposing. If any issue is self-evident for the Senate, it is this: the Senate is a states house. It was set down by the founding fathers to be a house to represent the interests of the states. The new taxation system is the most significant saviour for the states and their ability to provide essential services to the people of Australia that have been provided in the last 50 years. If the Senate truly is a states house, it will truly support the taxation initiatives that we have put in place. This bill is an essential bill. It is a very important bill. It is the blood flow to the states so that they can continue to provide the essential services in health, education, law and order, and so on.

I do thank the honourable members for Wills and Boothby for their significant contributions to this debate and, accordingly, I seek leave to continue my remarks at a later hour.

Leave granted; debate adjourned.