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Wednesday, 17 November 2004
Page: 96

Senator BARTLETT (Leader of the Australian Democrats) (3:31 PM) —I move:

That the Senate take note of the answers given by the Minister for Finance and Administration (Senator Minchin) and the Minister for Immigration and Multicultural and Indigenous Affairs (Senator Vanstone) to questions without notice asked by Senator Bartlett today relating to income tax thresholds and to asylum seekers.

I asked Senator Minchin a question, which is a legitimate issue for debate, about further changes to the taxation system and making our income tax regime fairer. The Democrats have long held a position on the need to address bracket creep—that is, where the proportion of income tax paid by people continues to go up because of inflation but the overall value of their wages does not increase purely by virtue of inflation. The minister says that it is less of a problem than it used to be because inflation is more under control. That is true, and that is why it is now clearly affordable for the government to deal with it.

It is a simple fact that a person on an average wage will over the course of three years pay about $400 a year more in income tax, even if their wages keep pace with inflation. That is a little more than the fabled milkshake and sandwich income tax cuts that low-income earners received in the life of the last parliament. People on average weekly earnings went backwards over those three years, despite getting that sandwich and milkshake tax cut. They got a tax cut, yet they still went backwards.

The reason for that is bracket creep. That is why the Democrats believe it is appropriate to introduce indexation of the income tax thresholds so that when you get a tax cut you will know that it will maintain its value. You will know that it is not a facade whereby the government gives you a tax cut—usually just before an election, as has happened with the massive income tax cuts this year—only to quickly claw it back through bracket creep so that it can give it back to you again in three years time, just before the next election. Properly indexing or even partially indexing those scales would be a clear and positive reform. It would ensure greater openness in our tax system.

The minister said in his answer that the reason we were getting so much surplus these days was not because of bracket creep but because of the increase in company tax receipts. Again that fits in the fine old tradition of this government being misleading, of not really giving an accurate representation of the truth. According to the government's own budget documents and cash revenue statistics and history, the facts are that in the financial year just gone, 2003-04, the estimated receipts in income taxation went up over $6 billion. An extra $6.2 billion was received in the last financial year in income tax compared to the year before. Contrast that with company tax receipts, which have increased by only half that amount.

Similarly, the estimates for the current year are that income tax receipts will go up by $5 billion and company tax will go up by only $3 billion. That is because of bracket creep, and that is why this government is able to generate surpluses which it can then give back down the track when it suits it electorally. This is something the Democrats pushed before the election, along with raising the bottom threshold for low-income earners, to ensure that people get the assistance they deserve rather than income tax relief going to the highest income earners. We will continue to push that policy approach. If there was one change to the income tax regime that this government could make that would be assured of Democrat support and that would clearly be fair it would be indexation of the tax brackets; it is also known as the elimination of bracket creep.

I also briefly note the extraordinary confirmation by the Minister for Immigration and Multicultural and Indigenous Affairs that Australia is currently paying the government of Nauru to challenge the constitutionality of an Australian act. The Australian government itself will not be a party to the action—even as an observing party—on the constitutionality of that act currently being challenged in the High Court. It is extraordinary that extra funding is being provided by Australia to enable Nauru to challenge an Australian act. The only reason for this situation is that the case in question relates to the legality or otherwise of the detention of asylum seekers on Nauru. They have been there for over three years and are still there. Our government is funding another government to detain people—probably illegally—indefinitely and without hope for the future. Now we are funding them to challenge the law—(Time expired)

Question agreed to.