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Wednesday, 27 September 1972
Page: 1246

Senator WEBSTER (Victoria) The Government decided in the Budget which was brought down in August last thai drastic changes would be made to the income tax burden which falls on various sectors of the community. It is a credit lo al! sections of the Senate - the Opposition, the Democratic Labor Party and certainly supporters of the Government - that they applaud this action. I would see it as an obligation to make known the quite drastic changes that have taken place and the very great effect that will be felt by the community in this year and into 1973 following the easing of the income tax burden. The Income Tax Bill 1972 does 2 things. It indicates that a minimum income shall be earned by a person before he shall pay tax and it sets the rates of taxation to be applied to other incomes. This is the Bill to which 1 wish to direct my main comment, though I appreciate that just before the second reading debate began the Minister for Civil Aviation (Senator Cotton) took the opportunity to say that 4 Bills would be dealt with as cognate measures.

In his Budget Speech the Treasurer (Mr Snedden) gave a number of reasons why the Government had taken this action and he showed where the benefits would flow. Any thinking person who has paid tax, and that applies to every wage earner in the community, has had the incidence of tax emphasised to him or her every week of the year. When one completes a taxation return and realises the volume of income tax that is paid into the Commonwealth coffers for the benefit of the community in general, one realises that the personal rates of taxation have become burdensome over recent years. Great credit must go to the Treasurer and to other members of the Cabinet for having taken action this year to see what could be done as an initial step to make the burden of taxation more equitable. I believe that to a great extent this abjective has been achieved. All of us would wish that those who receive less income should not find the incidence of taxation heavy.

The Treasurer gave 5 reasons for this decision having been taken, explaining that an enormous sum of money should be returned to the taxpayer's pocket by the Income Tax Bill 1972. He said:

First, the personal income tax burden is becoming more and more severe.

He said also that because of the impact of inflation on a tax scale basically designed for another level of incomes, the burden of taxation was being felt more severely. That point needs to be evaluated first. That is, there has been an increase in the average wage and increases in salaries which have to a great extent gone beyond the rate of inflation. Indeed, the average Australian wage earner today is pretty well suited for the volume of costs he has to meet. We have a particularly wonderful country in Australia, which fact is reflected in the very high standard of living by comparison with nearly every other country. This Parliament has discussed many times the impact of the rate of taxation as an annual salary grew, it being agreed that that impact was becoming greater and that something had to be done about it. The first action has been taken in this Bill.

The Treasurer said, secondly, that the family man, with all his other commitments, is finding that the income tax burden is looming ever larger as a problem and that in relation to his income on the question of fairness, the volume of taxation which he pays, should be re-evaluated. Again, this is being done under this Bill. The Treasurer made a further most important statement; he referred to a fact which has not been generally recognised in the community but which has an impact on many people. He said:

Thirdly, rising taxation is affecting incentives and encouraging tax avoidance.

Everyone should realise that there does come a point when a man says, 'What is the use of my trying further?' In my experience of various industries I have seen employees ranging from the humble working man to the main executives who wish to take action which would reduce their taxation the incidence of which would in normal circumstances affect the individual's incentive to work. We have all heard someone say: 'Why should 1 attempt to gain a higher position? I will gain extra money but 1 will pay a greater proportion of it in taxation.' There is always a temptation to take a second job under a different name. What is the reason for that? lt is for no other purpose than to avoid the incidence of taxation. The incidence of taxation has that effect on an individual's incentive to work harder. I have great sympathy for many young men who 1 know in our affluent society. They have their permanent jobs, but when they knock off at 5 o'clock in the afternoon they go and work in a transport depot or in some other place in order to earn extra income so that they can maintain their cars, spend money on their girl friends or save money for a house which they propose to build. This is the very point outlined in this measure. The disincentive applies not only to the wage earner but also to the man in the higher salaried position. Here we find an inequality and it can be applied to members of Parliament as well as to business executives. The fact that companies can supply individuals with vehicles - this comment applies in the various areas which I have mentioned - provides a wonderful tax-free advantage. What is the reason for supplying a vehicle instead of adding an amount on to a person's salary? lt is to avoid the incidence of taxation. A person's incentive to work harder is lessened because of the increasing burden of taxation.

The fourth point which is noted in the Treasurer's comments is that there have been demands for excessive increases in money wages and salaries during past years and I doubt whether anybody in the Senate can disagree with that. Wages have gone far ahead of the general rise in the cost of living and undue pressure for higher levels of wages is being applied by unions and other bodies. The proposal which the Government has introduced will reduce, we hope, the pressure for higher wages. Indeed, as from the date of the introduction of this legislation every salary earner found that his weekly pay packet contained more money. That is a major achievement of this Government. The Treasurer expressed it in these terms:

We believe our measures will provide ground for moderation.

It has been said - and I referred to this matter when I spoke in the Budget debate - that very little has been done in the Budget for industry generally and that greater emphasis had been placed on providing benefits to those people in less fortunate circumstances, and for that I congratulate the Government.

The fifth point is the one which, to some extent, pours some balm on that troubled water. The Treasurer stated that a reduction in personal income tax will put more money directly into the hands of consumers. He said that their take-home pay and their capacity to spend will be enhanced. He also said that there will bc a real lift to community and business psychology and that that is what is needed at this time. In short, I suggest that the business community will find very quickly that between now and Christmas there will be an impetus in the general level of business, and I hope that that will lead to greater efficiency so that the business community can take advantage of that increased spending.

There is a major point associated with this Bill which, in view of the wording which the Treasurer used in his Budget Speech if I might say so, was quite clouded. But if it was clouded, the outcome is of far greater credit to the Government than was apparent at the time when the Budget was introduced. One of the matters associated with the taxation proposals in the Budget was the reduction in the levy which was applicable to all incomes during past years. Honourable senators will recall that an impost of 5 per cent was placed on every income tax return so that no matter what amount of tax was payable under the income tax return, an extra 5 per cent tax was levied. Last April the Federal Government took action which reduced that impost by 2i per cent, or by 50 per cent of it. The Treasurer in his Budget Speech said:

In April we reduced personal income tax by 21 per cent; the reduction I now propose is on top of that.

He did not say in that Speech that what the Government proposed was the complete abolition of the 2i per cent levy that remained. That is what has happened. Not only has there been an average reduction of 10 per cent in the rates of taxation, as was stated, but also within the last 6 months there has been a further 5 per cent reduction in income tax. That is one matter that should have been spelt out quite clearly.

Senator Gair - The Gorton Government reduced tax by 10 per cent and gave pensioners a rise of 50c.

Senator WEBSTER - Senator Gair makes the point that governments of this complexion have been alert to their responsibilities so far as taxation is concerned, I stress the point that the public should be made aware of the fact that there has been a 5 per cent reduction in the tax which applied 6 months ago, and on top of that an average reduction of 10 per cent over the whole range of income tax. Senator Guilfoyle referred to the various levels of tax which will be paid and I do not wish to reiterate some of the figures that she gave. The main point that comes to my mind, and the main point that should be made, is that those on the higher level of income have been less suited by what the Government proposes to do. For instance, it can be said quickly that a single person with a taxable income of $18,000 a year will receive a reduction in taxation of 6.8 per cent. For a person with a taxable income of $18,000 a year, who has a wife and 2 dependent children, the reduction will be only 8.1 per cent. The point I wish to make is that those on the lower scale of income are very well suited under this measure. A person with a taxable income of $7,000 a year, who has a wife and 2 dependent children, will receive a reduction in tax of 12.8 per cent.

Senator Gair - So it should be.

Senator WEBSTER - So it should be, and Senator Gair agrees with this philosophy. Indeed, it was spelt out by the Treasurer. We find that a quite amazing situation arises in relation to the lower level of income. Perhaps we can refer here to what is the average wage level. For a man with a taxable income of $4,296 a year, who has a wife and 2 children, the reduction in taxation will be 19.6 per cent, and for a man with a wife and 4 dependent children the reduction will be 25.4 per cent. The figures indicate that some lower income earners will receive a reduction in taxation of 34 per cent. So I think it should be made known that the Government has acted in a most responsible way in attempting to effect a fair and equitable reduction in taxation.

The other most important point relates to the minimum taxable income. For years that figures has been $417 a year. Under this proposal taxation will not be applied to incomes of less than $1,041 a year. I believe that the impact becomes apparent when, as was stated previously, because of this measure about 600,000 taxpayers will be exempt from taxation liability. If this is applied to a population of 13,000 and we calculate the number of taxpayers there would be in that population, we find that there is a substantial percentage of people on low incomes who will now receive the great benefit of not paying income tax. I noted with some interest that in the American Budget of this year there was no reduction in income tax rates. Apparently that country took the view that it could take some other action which would give other benefits to its taxpaying public. I noted also that the British Budget did not alter the rates of taxation but gave substantial allowances to taxpayers.

It was in that context, of course, that the previous speaker Senator Byrne spoke about the wisdom of directing the Government's attention and perhaps the attention of the committee of inquiry that is now looking into taxation to the argument that the cost of fares should be allowed as a deduction, as costs incurred in gaining an assessable income. It is my view, along with that of Senator Byrne, that fares should be allowed as a deduction when calculating assessable income. I believe that there are 2 other matters to which the committee of inquiry might well give attention.

Senator Milliner - You have never done anything about it.

Senator WEBSTER - An honourable senator opposite interjects: 'You have never done anything about it'. More has been done by supporters of the Government to do something about it than members of the Opposition, in their relegated position as the Opposition for the last 20 years, have ever considered doing. I will emphasise that point in a moment. I have put forward a case in the Senate previously in regard to the necessity for statutory deductions for insurance or superannuation for persons who are self-employed to be investigated immediately. There is a state of complete inequality existing. A person who works for a large corporation can reduce his taxable income by $1,200 and the company, applying the amount to the individual, can gain, for the employee's benefit a very substantial reduction in income tax. A self-employed person such as a doctor, lawyer or accountant can gain a deduction of only $1,200. I direct the Government's attention to that. Although this is not part of this measure, I say also that [ believe the time is overdue for the incidence of undistributed profits tax of proprietary companies to be investigated. I know that the Minister at the table, Senator Cotton, has indicated to me, I think in the Senate, his attraction to those 2 lines of inquiry that I have mentioned. 1 applaud the Income Tax Bill 1972.

There is only one other matter that 1 would mention in view of the fact that an honourable senator of the Opposition interrupted anil said: 'You do nothing', lt gives an honourable senator some pride when, having prompted the Government on some matter in the Senate he sees the matter achieved, even if he has to wait for some years. I comment on the Income Tax Assessment Bill (No. 5) 1972 in which it is indicated that self-education expenses will be allowed to a certain amount. 1 believe that this is a most important matter. The second reading speech of the Minister for Civil Aviation (Senator Cotton) states:

The Government has decided, however, that a concession should be available for people who set themselves the task of gaining educational qualifications connected with their careers.

I would argue with that provision to some extent. The Minister continues:

We therefore propose a special concessional deduction for expenditure incurred by a taxpayer on fees, books and equipment associated with a course of education he undertakes for the purpose of acquiring qualifications related to his employment or career.

I say only that I hope that that phrase acquiring qualifications related to his employment or career' is given a very wide brush. I prompted this matter in 1968. I refer to page 1 145 of the Senate Hansard of 28th May 1968 and the report there of question No. 240. I asked the Minister representing the Treasurer:

1.   Does the Government wish to encourage part-time study by students in various institutions, colleges and universities throughout Australia?

2.   Is it a fact that there is no provision for deductibility for income tax purposes of educational expenses incurred by part-time students?

I went on to ask whether, in view of the encouragement this would give, it would be considered by the Treasurer. Suffice it to say that the Minister representing the Treasurer in the Senate, Senator Sir Kenneth Anderson, gave quite a long reply which expressed the Government's view at the time. He said:

I shall arrange for this proposal, along with various other requests for taxation concessions, to be considered during the preparation of the 1968- 69 Budget.

This is something which has been suggested by backbench members of the Government over a period of years and has been achieved at this time to the great credit of the Australian community. I have great pleasure in supporting the 4 Bills before the House.

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