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Wednesday, 17 November 2004
Page: 81

Senator BARTLETT (Leader of the Australian Democrats) (2:29 PM) —My question is to the Minister representing the Treasurer and it is regarding calls for further changes to income tax policy. Does the minister acknowledge that, without indexation of income tax thresholds, a worker on a low income whose salary merely keeps up with inflation always pays more income tax over time? Is the government giving consideration to the Democrats' position, supported yesterday by the Australian Chamber of Commerce and Industry, that tax thresholds should be indexed to reduce bracket creep?

Senator MINCHIN (Minister for Finance and Administration) —I have not yet read the detail of ACCI's contribution on tax but, obviously, in the context of our preparations for the forthcoming budget we read all such submissions with great interest and care. ACCI is a fine organisation which makes a tremendous contribution to policy debate in this country. Indeed, it would do the opposition much good in their new-found enthusiasm for economic management and economic credibility to read a lot more of what ACCI puts out and less of the material that comes from their left-wing union base. I cannot comment specifically on ACCI's particular references to taxation. We have done a lot in relation to tax reform consistent with good economic management and the maintenance of budget surpluses, consistent with being able to pay for our comprehensive social welfare system in this country, but we are always interested in keeping the tax burden on Australians to the bare minimum consistent with those other objectives. We will obviously consider what ACCI has to say on that matter.

The issue of indexing the tax scales is a regular issue for debate in this country. It was tried once and abandoned. There are many pros and cons to the introduction of such a policy. Our present position is that it is better for the government to maintain the scales with the current arrangements but then from time to time to adjust the thresholds as economic circumstances permit. That is the current government position.

Senator BARTLETT —Mr President, I ask a supplementary question. Isn't it the case that a significant proportion of the budget surpluses that the minister refers to are built on wage inflation and the impact of bracket creep? Isn't the reality of government practice in this area not periodic readjustment of the tax scales but regular use of returning the proceeds of bracket creep via pre-election tax cut bribes? Wouldn't it be better for the wage earner as well as the reliability of revenue to take a fairer approach and a more honest and open approach of maintaining regular indexation of those thresholds?

Senator MINCHIN (Minister for Finance and Administration) —I will make two points. Our success in controlling inflation is the reason that bracket creep is nothing like the problem that it was in the 1970s and 1980s when indeed inflation was driving people into higher tax brackets. Controlling inflation means that this is much less of an issue. In terms of budget surpluses, the point should be made that the growth in corporate profits and the taxes paid by the corporate sector in Australia are the fundamental drivers of the additional revenues available to the government. Interestingly, a consequence of our reduction in the corporate tax rate to 30 per cent has actually resulted in increased revenue from the corporate sector.