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Thursday, 25 November 1999
Page: 12617

Mr ALLAN MORRIS (10:03 AM) —We are speaking this morning on A New Tax System (Indirect Tax and Consequential Amendments) Bill (No. 2) 1999 and amendments to the bill to be moved on behalf of the government. So we actually have here amendments on amendments. Of course, we previously had 750 amendments on the original legislation. I would defy any member of this House to try and work out what is going on here and to tell us they know what this is about.

This has been a much vaunted simplification of our tax system. Remember that last year the government spent some $25 million of taxpayers' money, one way or another, on promoting the advantages of an open, transparent and simple tax system. Yet we have here the most amazingly complex, obscure and opaque set of proposals that one could imagine. It takes a special kind of imagination and skill to generate the kind of obscurity that we now have.

This tax has been described as a dog's breakfast. Let me tell you there is enough here to feed a thousand dogs not just breakfast but lunch and dinner as well. This is an absolute feast for the dog population of the country. Is it simple? No. Is it transparent? Not at all. This is the biggest hidden tax of all time in any country. I defy the government to show us a country in the world that hides away such a major part of its revenue raising.

We are talking about $30 billion of revenue to be raised by this tax that is being hidden. People will not know whether they paid tax or not. They will have no way of telling whether the goods have gone up in price, whether there has been profiteering or whether it has been fairly applied, because it is hidden. It will not be displayed on the sales docket. It is not required to be.

We had several months and millions of dollars spent on railing and pillorying about hidden taxes, yet what do we end up with? A $30 billion hidden tax. Why is it hidden? That is now becoming obvious. The embarrassment of this tax is so massive for the government that they do not want it to be known. They realise that every time it is on a docket it is going to be a reminder to the community of their duplicity and their hypocrisy.

Every member of this House is now aware that the community at large is finding this tax hard to come to grips with. We are getting inquiries on a constant basis and we are having examples brought to us of anomalies and misconceptions. I expect that more people would go to the government members than to opposition members because people recognise that we oppose the tax and we do not profess to be the experts on it. So I do not doubt that government members will be getting more people coming to them seeking clarification and assistance.

Some of the reasons for this would include the example of prepaid funerals, which has come up again just this week. We had the Prime Minister last year tell this House that prepaid funerals should increase by about four per cent. We now have people paying the tax—and people have been paying it for some months—and the amount they are paying is 10 per cent, which is the full GST. An example was raised this week in the House of a lady in Perth paying $500 tax on a $5,000 prepaid funeral. The point of the question was that this was at odds with the Prime Minister's assurances to the community of Australia last year that the tax increase would be about four per cent.

If one talks to a funeral director to try to clarify these issues, as some of us have done, we find that there is very little in a funeral cost that is not taxable. Perhaps the medical certificate is non-taxable, but that is questionable because it is not necessarily for medical purposes. If the service is conducted by a clergyman, it would be non-taxable, but GST is applicable to all the other things. As for possible savings for a funeral director—the so-called hidden taxes being removed, and what a joke that has become—there are actually very few. They are very hard to find. So a funeral director would be most unwise to charge less than the full 10 per cent. That gives the lie to the Prime Minister's assurances last year when he was seeking to placate those who were concerned about the effect on their prepaid funeral costs.

Of course, a similar thing occurred with air fares. We were assured that air fares would not go up at all and might even go down, but the increase imposed just a few months ago was in fact eight per cent. So we are now getting example after example of charges going up at a greater rate than that which the government assured the community they would go up at. So the charges in most cases will be hidden, and working out the GST is going to be incredibly complex. So small business people are now approaching us in a serious way.

My experience is no different from that of everyone else in this House, except that I think government would have more experience in this than we have. The feedback that I am getting from people who are attending the so-called information sessions is that they do not answer the questions. To a lot of the questions that are being raised, they are being told, `I'm sorry, we don't know that yet. That isn't resolved yet.' The answers from these seminars to questions on the most important areas are, `We can't tell you; that's yet to be resolved,' or, `We're not sure.' So the whole point of those seminars is lost because all they do is leave more questions than answers. The confidence of the small business community who have been involved in them is being destroyed.

They fell for the line last year—who wouldn't when there was $25 million worth of advertising?—that it was going to be simple and easy, with no more hidden taxes and with lots of savings. They got a big shock, and those small business people who acted in good faith and went along to these seminars to try to clarify the tax for their own purposes are finding that they cannot. I have talked to some accountants who have been to those seminars and they are saying, `Unbelievable!'

Mr Deputy Speaker, I have a really interesting story which I am sure you will enjoy. A person I know well who as an accountant has specialised in wholesale sales tax for many years was concerned last year about the possible change in taxes. His view was that the wholesale sales tax was a really interesting piece of legislation which everyone could work with very easily if they knew what they were doing. It did not put costs on business or on exporters at all, as long as people went about it properly—including all the things that you would normally give people in professional advice. On the other hand, the GST was going to be `a very boring tax'. Those were his words to me in March or April of last year: `a very boring tax'.

I bumped into him around May and I said, `How's business?' thinking that his business would be destroyed because the GST was now coming in and the WST was going out. He said, `It's terrific. You know, this GST is absolutely terrific. It is absolutely fascinating. It is so complicated—I'm just loving it!' He thinks that it is very complicated. It is not the boring, simple tax that it was said to be; it is actually a very complex, highly difficult tax to understand, and from his point of view it is absolutely fascinating. He is loving it. He is very grateful to the government because he is loving his work now when he thought he would be hating it and would be retiring as a special tax consultant on these kinds of taxes.

I think that is a wonderful example: if he is loving it, we are all going to hate it, because his kind of mind and the kind of work he does thrive on complexity, difficulty and obscurity. He was absolutely exultant when I spoke with him. I have not seen him since then, but I do not doubt that by now he is even happier and enjoying it even more. For him, it is not the money that is involved; it is the challenge. He sees a tax that is so complex and so difficult and it makes his day. So all those stories about boring accountants are not true in this case. This man is far from boring and the kind of mind he has got beggars description.

Mr Melham —He sees the dollar signs.

Mr ALLAN MORRIS —That is there as well, but he does not need the money. He likes the challenge of pitting his wits against the tax system and against the tax commissioners. I must give him a call to get his opinion on all these amendments. What are we up to now—1,100 amendments? And we have only just got started! Within the first six months of the legislation being passed, we have got over 1,000 amendments already. How many will there be by this time next year? It beggars the imagination. I must give him a call, because I do not doubt that he is in seventh heaven right now as these amendments come through.

Can I give some examples of the uncertainties that are going to be caused by some of the complex areas in the legislation. Let us take the example of the small business person who buys a car for their business. Of course, part of the car usage will automatically be private because, for a small business person, that is their only vehicle. So part of the usage is for business and part is private. When they buy the car they have to pay the GST, but part of it will be for business, so that is rebatable, they can get some of that back, and they have to work out the proportionality. If 20 per cent of its usage is private, they get back four-fifths of the tax. Apparently, what they have to do as well as that is to report again on the proportionality each year for five years, to report on how much was used each year for five years. In other words, they have to revalue and review their vehicle usage each year. And it is not just their vehicle usage; apparently it applies to a range of other capital items as well. There is going to be a constant valuation process going on so that they can adjust upwards or downwards the amount of GST that they pay or are required to pay.

I do not profess to be an expert on this stuff—in fact none of us could even hope to profess that. I doubt that anyone in the community could profess that. When the tax experts at the seminars cannot give answers, I do not see how any of us can profess to do so. But from what I have been advised by some accountants, that particular part is just one example of the complexity that small businesses are going to face, and it is one of the reasons why accountants are warning small business people to be very wary of what they are doing and of every decision they make and of every transaction they undertake from July of this year. They cannot wait until next year when it comes in. These things are there here and now. They are not things that are going to occur in the future alone.

The previous speaker had some comments about issues in the insurance industry, which is such a broad industry. Life insurance policies, for example, will not be taxable but will be input taxed. In other words, the provisions for life insurance look like being different from those for other types of insurance, yet most companies have a range of products. Does that mean that the life insurance companies are going to have to quarantine their costs and not pass those on to their client base as a whole? Do they have to run separate businesses, with some kind of firewall around each type of business so that they do not bleed their taxable and non-taxable items across those different business areas?

The same will apply, I think, to a lot of financial services, like banks. Financial services are in general not taxed. Many of those organisations do offer other services of a non-financial nature, which have normally been a part of their overall general business profile. Will they need to pull those out and keep them separate so as not to be seen to be misapportioning, for example, business expenses such as vehicles between areas where GST is chargeable and areas where it is not? I can see enormous difficulties for these organisations, but I also see great difficulties for the consumer trying to evaluate which businesses they should deal with and how those businesses handle GST.

As I said earlier, there are two sets of amendments before us today. We have the explanatory memorandums on those. The original memorandum runs to 48 pages and the supplementary memorandum on the same amendments runs to 76 pages. These are amendments to amendments to amendments to amendments—when will it ever stop? The explanatory memorandum, for the actual bill itself which is before the House, runs to 48 pages; the memorandum for the amendments to those amendments runs to 76 pages. We are getting a compounding, cascading effect with amendments and more amendments.

Mr Andren —The quo vadis tax.

Mr Melham —It's bigger than Quo Vadis !

Mr ALLAN MORRIS —I actually see it more as a Julius Caesar tax: `I came, I saw, I taxed.' I think that is the Prime Minister's motto and has been since he came to this House. This is his great achievement; this is Mr Howard's crowning glory. The Prime Minister says that this dog's breakfast is his greatest achievement in his political life. That is an amazing insight—but, mind you, he was not an accountant but a lawyer. Those people who think he was a suburban accountant have that wrong. It would take a certain kind of mind to claim that this tax is their crowning achievement, and I will not try to understand that.

The difficulty we have is that this tax is now law, as imperfect as we now see it to be and as the government now recognise. Every time they bring in amendments they are admitting their failure and that they got it wrong in the first place. What they will not admit is that they need to get it correct. They will also not admit the inequity, injustice and the unfairness of this tax or the unnecessary nature of it. This tax is not what the country needed at all. This was not a requirement to make us a better, more effective or fairer country. This tax is about ideology and the past.

The Treasurer has gloated here in recent days that Australia's role in the OECD and the world is somehow made more prestigious and that we have now joined the European club because we now have a value added tax. Forty years later we join the European club and put on a value added tax and somehow this makes us acceptable and puts us at the forefront of world taxing theory. What a perverse view of the world. We must be the laughing stock of the world—bringing in a tax of this nature at this time in history and then amending it as we are now, creating mass confusion and spending millions of dollars on seminars where people cannot get answers. Frankly, people are not going to these seminars now. The feedback from my community, from people who have made inquiries, is that there is no point going because you will not find out the things you really need to know. They know the simple stuff, but not the complex stuff.

The irony of it all in this time of high unemployment is that, as I was reading in the newspaper, the Australian Taxation Office is having trouble recruiting people to work in this new unit. That in itself sends another interesting message. It is pretty obvious that the people being retrenched from the tax office are not being looked favourably upon for employment in the new GST section set up to administer the tax and ensure compliance. We now have two tax offices—the old ATO, which we have all known and worked with over our political lives, and the new GST division, which clearly has a different corporate ethos and is looking for different kinds of people. That new section is not part of the same tax office apparently because you cannot transfer from one to the other. The jobs are being advertised separately. It is quite clear that people who are currently being retrenched from the tax office, particularly in places like Newcastle where we are losing our face-to-face tax support, are quite pessimistic, justifiably, about being able to obtain a position with the tax office in the GST division.

We now have two tax offices, and in a way this reflects this government. On the one hand, we have last year's $25 million promotion of the idea of getting rid of hidden taxes and introducing transparency, fairness, equity and modernity and, on the other, we have reality—complex, opaque, unfair, difficult to decipher and dishonest. It is dishonest because the things people were told about it—how much it would cost on things like funerals, air fares, education, health and a range of things—are just not true. As for being transparent, this is the biggest hidden tax we have seen in world history. This is the mother of all hidden taxes.

We have had the Treasurer and Prime Minister gloating and boasting about their tax reform. That is another great misnomer. We hear this word `reform' constantly. This is no reform—reform is about improvement and progress. Not one part of this legislation can be argued to be a reform. This is a regressive tax, not a progressive tax. It is not an advance or an improvement to our taxing system. We are going backwards. We are going back to a tax of 40 years ago, to a time when it may have been current.

I expect that we will have this issue before us again and again in this parliament, and in the next parliament and the one after. This tax will be the most amended tax of all time. It is huge already and it is going to get a lot bigger with a thousand amendments in recent times, and I do not doubt one or two thousand more before July next year. But no amount of amendments, no amount of gloating, boasting and smirking by the Treasurer can soften up the fact that this is a bad tax. It is a tax that people do not want. It is a tax that will not work in the way it was supposed to. This tax will be both the millstone and the hallmark of what history will see as a very regressive and backward looking government.