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Thursday, 30 April 1987
Page: 2079

Senator FOREMAN —I refer the Minister representing the Treasurer to a report in the Age on 28 April that the Leader of the Liberal Opposition, Mr Howard, had indicated that he would include a promise to restore negative gearing tax concessions on rental housing. Has the Government calculated an estimate of the cost to revenue if such a proposal were implemented? Would the benefits of such a tax concession necessarily flow through to people seeking rental housing?

Senator WALSH —Yes, I did read-with some astonishment, if I may say so-the report in the Age of last Tuesday that Mr Howard had promised to reopen the negative gearing tax rort for residential property, thereby adding a further $100m to his credibility gap. Perhaps he is working on the assumption that if he already has a credibility gap of $14 billion to $16 billion, another $100m is neither here nor there and, therefore, he is not at all worried about it. I have been asked what the cost of implementing the proposal would be. Based on previous experience, the short term cost would be about $100m a year, as I have indicated.

However, it could be confidently predicted that that cost would grow rapidly because whatever inhibitions may once have existed about the exploitation of the negative gearing tax loophole would no longer exist once the Government had legislated to open up such a loophole, thereby giving the exploitation of the loophole its explicit blessing. There would be a massive escalation in the cost of that loophole if it were to be explicitly reopened in the way Mr Howard has promised to do.

I was also asked what benefits would necessarily flow on to people seeking rental housing. The answer is that no benefits would necessarily flow on. What Mr Howard proposes to do is to restore the old situation, albeit with the important difference that it would have the explicit blessing of the Government, under which it was not necessary to construct new rental accommodation to exploit the loophole. Indeed, round robins were operated between a group of high income people negatively gearing--

Senator Elstob —Like those greedy doctors.

Senator WALSH —I will come to that in a minute, Senator-and thereby wiping out a good deal of their personal tax liabilities. At the time, because of repayments and inflation, when the project ceased to be negatively geared to the extent thought desirable, they just swapped them around; they bought each other's blocks of flats, houses or whatever. Therefore, there was no increase in the available stock of residential accommodation. As Senator Elstob indicated a moment ago, if the loophole were to be reopened, right up there at the front of the queue-if they were successful in getting their greedy $350 a week increase for a part time job-would be the Australian Capital Territory doctors union. That draws attention, I think, to the extraordinary influence which the Australian Capital Territory doctors union seems to have over the Opposition in that, on the one hand, the Opposition is eager to give the doctors a $350 a week pay increase for a part time job and, on the other, it would set up a tax shelter so they can avoid paying tax on it.