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Tuesday, 8 November 1983
Page: 2391


Mr HOWARD(4.46) —I second the amendment moved by the Leader of the Opposition (Mr Peacock). I am delighted to follow in this debate my old friend the honourable member for Hunter (Mr Robert Brown). One thing that one can say about the honourable member for Hunter is that many of his views on this subject are fairly predictable, but they are delivered with great gusto and enthusiasm. I do not want-I do not mean this disrespectfully to my honourable friend-to spend a great deal of time this afternoon on what he said. I will deal with one aspect of his speech concerning the figure of $7,000m that kept popping up. The honourable gentleman was saying, if I understood him, that because we were so negligent, tax avoidance was costing the Australian economy $7,000m a year and that if we had been more efficient that amount would not have been costed to the Australian economy. We went out of office eight months ago. One would have concluded, therefore, that given the opportunity, given the alleged mandate to do something about this haemorrhage of revenue to the tune of $7,000m, the Australian Labor Party would have swept in and said: 'We will do this and this to recoup that $7,000m'.

I have before me a Press statement dated 10 August 1982. It was put out by the Minister for Foreign Affairs (Mr Hayden), who was then Leader of the Opposition, and the honourable member for Gellibrand (Mr Willis), who was then Opposition spokesman on Treasury matters. They listed 15 things that they would do. They said that if all of those things were done, the Government would save about $6, 000m a year. I ask one simple question: If we were losing all of that money because of our alleged negligence, and the Government has been in power for eight months, why has it not done something to collect that $6,000m or $7,000m? The fact is that an amount of that order was never lost. The honourable member for Hunter knows that as well as I do. That was a bogus figure, and every time he used it, he blushed a little more brightly. If he goes on using it, next time he will blush even more brightly. The fact is that the combined effect of Part IVA of the tax Act and the Crimes (Taxation Offences) Act of December 1980 stopped tax avoidance in its tracks in this country.

The one remaining major evasion problem in this country relates to, as the honourable gentleman said, the cash economy, I agree with him on that point. The withholding tax measure-I leave aside for a moment the teething troubles involved in its introduction-is only a stop gap response to the problems in relation to the cash economy. I believe, as the honourable gentleman knows, that the only real answer to the cash economy problems in this country is to have a broadly based consumption tax, because broadly based indirect taxation is harder to dodge.


Mr Robert Brown —It is regressive.


Mr HOWARD —It is not regressive. It is regressive only in its present form. What makes indirect tax regressive in Australia at the moment is that it is narrowly based on a few items. A person on an income of $15,000 a year drinks as much beer as somebody on $100,000 a year and pays a darned sight more excise, proportionately, for the privilege of doing so. It is only by expanding the indirect tax base, by picking up services as well as goods, and having it broadly based, perhaps excluding food, that in my view we will reduce the incidence of problems associated with the cash economy. Who dodges the petrol levy? Nobody. Indirect taxation is infinitely harder to dodge. I say to the honourable gentleman that there still remains a problem with the cash economy. We will never totally eliminate it. Even in those countries which have broadly based consumption taxes it has not been totally eliminated, but we would stand a far better chance of reducing its incidence if we had a broadly based consumption tax.

I would like to say three things very quickly about three aspects of this legislation. I endorse everything that the Leader of the Opposition said about the Government's decision to phase out the taxation concession for the Army Reserve. This really is a bottler of a decision! It is an inspired decision! Only a short while ago the Prime Minister (Mr Hawke), in concert with my colleague the former Minister for Defence, Sir James Killen, was running those very good joint advertisements encouraging people to join the Reserve. They enlisted the aid of a broad spectrum of the Australian community, trade unionists, business people-everybody. It was a totally consensual approach. We were appealing to a sense of purpose and commitment in young Australians and saying to employers: 'Let these people off. Give them a bit of help. Do not hold the time they spend in the reserve against them as far as promotion is concerned '. In other words, we were saying: 'You do your bit'. There was in that appeal an implied covenant that the Government would continue to do its bit. Its bit was to continue this concession. Oh, no, that was too much. I regard this as one of those silly and mean things which I am afraid all governments do on occasions . This is one of this Government's decisions which will come back to haunt it. Government members know that this is a very silly decision. It cannot be justified and it is regarded as a very uncharitable and mean decision.

The second aspect of the legislation I refer to is the decision to reduce the minor's tax threshold from $1,400 to $416. This decision means that from now people who have about $4,200 in a savings bank or building society account for one of their children will have to prepare and file a tax return-


Mr Ruddock —A separate one.


Mr HOWARD —A separate one, and pay some tax on it.


Mr Robert Brown —It was being rorted, and you know it.


Mr HOWARD —It was not. All jokes aside, we can all use rhetoric, but it is surely not rorting and avoiding tax for elderly grandparents to put some money in a building society or savings account to earn a little income for their grandchildren. As many supporters of the Government would do that as would supporters of the Opposition. For anybody to suggest that that is some kind of dodging or avoidance really defies common sense and logic. It is properly described as a piggy bank tax. It is one of those mean, silly little things that this Government has done which will haunt it.

Finally, I would like to observe that this measure increases that concessional rebate block of $1,590 to $2,000. If one has concessional expenditure of more than $2,000 one can claim the excess over $2,000 at the standard rate of taxation. I put it to the House that, in view of some other decisions that this Government has taken, there is a very strong case for this Government to increase the component of that concessional rebate block appropriated to education expenses, because this Government's education policies are striking at the heart of the freedom of choice in education which previously existed in Australia. It is no accident that last night 5,000 people attended an overflow meeting in the Sydney Town Hall at which strips were torn off the education policies of this Government. It is simply not good enough for the Prime Minister to say truculently, as he did at Question Time today, that the people organising that meeting were misguided. He will find out how misguided many of those people really were, because the fallacy that the Prime Minister advances that all the independent schools represented at that gathering last night are the preserve of the wealthy and the rich in our community-


Mr Robert Brown —He did not say that.


Mr HOWARD —I know that you are not guilty of that.


Mr DEPUTY SPEAKER (Mr Mildren) —Order! The honourable member will direct his remarks through the Chair.


Mr HOWARD —I apologise, Mr Deputy Speaker. I know that the honourable member for Hunter was not himself guilty of that slur on the people who attended last night , but the Prime Minister was saying: 'Do not take any notice of them. They are just the representatives of the lucky people in our community'. Of course, many people in our community who are well off send their children to independent schools. Nobody denies that. But many well-off people send their children to government schools. The Prime Minister, the Minister for Education and Youth Affairs (Senator Ryan) and the honourable member for Hunter do not say that we ought to charge fees to those people, the wealthy people who send their children to government schools; somehow or other need does not come into it. I am not advocating that we should, but the Government has the burden because it has destroyed the basic concept that every school attended by an Australian child is entitled to receive a basic amount. The honourable member should not shake his head because it was in his colleague's announcement that every single child, under the Government's policy, was entitled to a basic element of support.

Although it is correct that in the first year there have been some increases in the allocations to category 3 schools in the independent sector, the real danger that lies behind what has been done in this area and why I believe that the Government should consider some increase in that concessional deduction component-the $250 we are talking about-is that, instead of these being an automatic increase in the basic component of support from the government sector to the independent sector, that increase will now be made at the whim of the Education Minister each year. That is where the real threat is posed. That is why so many parents-not all wealthy people-make enormous sacrifices to send their children to independent schools. Many of them do it not because they have a family tradition of going to independent schools but because they are concerned about the trends developing in some of our State schools. Many of them do not believe that standards of discipline and attitudes in some of our State schools are what they were in those State schools a generation ago. It will do nobody any good to deny it. When some of the teacher unions of this country take their members out on strike, caring not for the educational interests of their children but for their own industrial motives, it is not surprising that so many parents around Australia are joining their ranks. How else does one explain why, in a time of economic recession, enrolments for non-government schools are burgeoning? That did not happen in the early 1970s, when enrolments fell and many independent schools found it very difficult to fill all their available places. That is no longer the case. There is now an excess of children wanting to go to independent schools. It is not because the resources of those independent schools are, on the whole, necessarily better than those of government schools. Some of them are of course, but the resources of some independent schools are deplorably poor and they need additional assistance. The report of the Karmel Interim Committee for the Australian Schools Commission indicated that the resource use targets set by the Schools Commission had been exceeded by 90 per cent of government schools but were substantially still not met by the independent school sector.

There is a great demand in the Australian community at the moment for greater freedom of choice. The Government is going in the wrong direction in the policies it is adopting in this area. That is why 5,000 people were prepared to go to Sydney Town Hall last night. That is why I say to members of the Government that this issue strikes very deeply into the hearts of many ordinary middle ground voters in Australia. We are dealing with a whole new generation of parents who are worried about the quality of the state education system. They went through the system themselves. They were proud of it, but they are worried about the quality of some of the things that have been done in the state education system. They are worried that the teachers unions in Australia contributed $750,000--


Mr Braithwaite —How much?


Mr HOWARD —They contributed $750,000 to the Australian Labor Party's campaign funds. Yet the Labor Party has the hide to talk about multinationals contributing to the funds of the Liberal Party or the National Party. I say to honourable members opposite that on this issue they are very badly wrong. The destruction of that percentage link is something that politically they will live to regret, and regret very deeply.

But that is not the end of the matter and that is not the only reason why I say what I say about the expenditure rebate. The other element is contained in what Senator Ryan has said-that from now on a new independent school will not automatically attract Commonwealth capital funding if it is likely to take children away from a government school in the same area. Let us just analyse that statement. She is really saying that if in any given area people would rather send their children to an independent school than to a government school, the Commonwealth Government will not help them. That is what she is really saying. One has only to analyse that statement to realise that what is involved is a deliberate clamp on the expansion of the independent school sector. Why would people want to build an independent school unless they were dissatisfied with the government system? They would want to do it only because they wanted to exercise their freedom of choice as Australian parents. Let me say to honourable members opposite that that decision will not affect the so-called wealthy schools of the Australian community. It will not affect the well known GPS schools around Australia that are so often the butt of criticism and cynicism from those who sit opposite, although they have been known on occasions to patronise those establishments themselves. That is their free choice as Australians and I do not criticise them for it.


Mr DEPUTY SPEAKER (Mr Mildren) —Order! I wonder whether the Deputy Leader of the Opposition would keep his remarks a little more relevant to the debate.


Mr HOWARD —Mr Deputy Speaker, I am mindful of relevance as always. However, the nexus is that I am arguing that one of the measures before us deals with the increase from $1,590 to $2,000 as the point at which one can claim a concessional rebate under the Income Tax Assessment Act. Part of that $1,590 is the $250 rebate per pupil for education expenses. I am saying that because of the changes made by the Government in education funding, it should really consider increasing that $250. I think there is a very substantial nexus.


Mr Carlton —They saw that.


Mr HOWARD —They saw it. I am very indebted-


Mr DEPUTY SPEAKER —Order! I am prepared to allow a certain degree of latitude but I ask the Deputy Leader of the Opposition not to go too far.


Mr HOWARD —I appreciate that, Mr Deputy Speaker. As I was saying, if we were to increase that $250 some of the more perverse effects of these changes that I have been talking about would be alleviated. The fact that if one is dissatisfied with a government school in a given area one can no longer expect Commonwealth government support to establish an independent school is a restriction on freedom of choice, and parents denied that freedom of choice will naturally, in growing number, call for an increase in that $250. That is why it is very relevant to the legislation that is now before the Parliament, Mr Deputy Speaker.

I conclude my remarks on this group of Bills by saying something general about the volume of taxation in our community. The honourable member for Hunter (Mr Robert Brown) said that when the former Government left office, taxation as a proportion of gross domestic product was higher than it was as a proportion of gross domestic product in 1975. That is a correct statement. It is there for all to see and I cannot dispute it. I can say, as is proper in any of these comparisons, that one of the reasons for that increase was that in 1975 the then Government had been providing child endowment and concessional rebates for children, and we introduced a family allowance system that had the effect of artificially swelling taxation receipts as a proportion of GDP. I accept what the honourable gentleman has said. I just say to him that when he leaves office in a couple of years taxation as a proportion of GDP will be very much higher than it was when he came to office. I also state as a fact that since the end of the Second World War there has been a steady rise in taxation collections as a proportion of gross domestic product in Australia and, indeed, in the United States of America, the United Kingdom and most countries of Western Europe. It has varied in momentum, and success can never be measured in absolute terms. The fact is that the Government does darned well on the expenditure side, as did the former Government, to hold outlays down to a very small percentage increase, and that applies equally on the taxation side.

I say to honourable members opposite that the real reform that, in my view, remains to be done to our taxation system is to shift the burden away from excessive reliance on personal taxation. I have believed for many years, including when I was Treasurer, as those opposite and those on this side will know, that that is the single great reform that ought to be undertaken. I believe that we would have a more efficient and a more respected taxation system , one that was likely to produce more incentive and one that was less susceptible to dodging and avoidance-


Mr Carlton —And less regressive.


Mr HOWARD —And less regressive, if it applied to services. It would not be a perfect taxation system, it would not be a simple one. There is no such thing as a totally simple taxation system anywhere in the world but I believe that such a taxation system would be infinitely superior to and infinitely more respected than our present one.