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Tuesday, 11 September 1984
Page: 1066

Mr EWEN CAMERON(1.20 a.m.) —Mr Deputy Chairman-(Quorum formed) I would like to refer to two matters affecting tax revenue, that is the proposed changes in the income equalisation deposit scheme and the wine tax. In this Budget the Government has neglected to recognise the important role played by the rural sector in the economic recovery brought about largely by the breaking of the drought. With this attitude it is not surprising that the Government has also ignored the real position relating to income equalisation deposits. The same principle is involved. The income equalisation deposit scheme was introduced by the Fraser Government and gave Australian primary producers the opportunity to average their incomes over a period. This helped balance the bad seasons with the good seasons.

One of the basic planks in the income equalisation deposit scheme is that income deposited in good years does not attract tax at that time. The primary producer can draw on this money in bad years paying the income tax due at that time. It is obvious to any thinking person that the incentive provided by this scheme has encouraged a great many farmers to put money away and to provide for lean times. It has provided them with a very useful method of hedging against drought, flood and things over which they have not control. The Government has stated its intention of presenting to Parliament legislation which will destroy the very basis of the income equalisation deposit scheme. The Government is aiming at removing the taxation concession which is the very thing that makes the scheme so attractive to the farmer. As with any scheme there were a few who abused it but this is not a good enough reason to dismantle this most important aid to primary producers. Previous changes in the legislation have done much to obviate loopholes and abuses are now much less likely to occur. The legislation will rob the scheme of its major benefit reducing it to an alternative form of holding government securities. The deposits will become no more than ordinary savings bank deposits and provide little or no incentive for bad times.

The Government will also reduce the interest rate applying to income equalisation deposits made before 1 September 1983 to 5.5 per cent. This will be effective from 1 September this year. Just compare this with the Commonwealth Savings Bank passbook interest rate of 6 per cent for deposits over $4,000 and a building society passbook interest rate of 8 per cent. It is absolutely iniquitous. I understand that in May this year the amount of IEDs was $160m. Since that time deposits have dropped to approximately $3m. Some of this could be put down to seasonal fluctuation but it would seem obvious that the reason for this dramatic drop is the realisation among the farming communities that the scheme, under the new guidelines, is virtually useless.

I now turn my attention to the wine tax. Small family wine producers in north east Victoria are being severely discriminated against because of the 10 per cent tax imposed by the Government in this Budget. Wine makers in the Indi electorate produce top quality table and fortified wines.

Mr Hodgman —The best in Australia.

Mr EWEN CAMERON —That is right. These are the wines which will experience the largest price increase as a direct result of the tax. It has been estimated that approximately 50 per cent of Australian wine is sold in casks. Is it mainly produced by the larger wine companies and is of a lower quality than bottled wine. A five litre cask of wine retails at approximately $5 and will attract a 50c tax, or 10c a litre. A 750 gram bottle of better quality wine from Indi, retailing at $5 a bottle, will attract 50c or 66c a litre-over six times as much , which is grossly unfair. It seems the Government has failed to take into account the long lead time of about five years which is required by grape producers to produce a good wine.

Most wine producers appreciate that they could not expect to escape forever the imposition of a tax or excise on wine, but feel that the imposition of such a large levy without warning is unjustified, particularly following the recent drought which affected production so drastically. The Minister for Primary Industry (Mr Kerin) has already admitted that many individual grape growers will be potentially battered, but he does not seem able to see that the wine industry is completely different from the beer brewing industry. Wine making is a primary industry which requires a long term commitment and capital investment and is subject to seasonal risks. As I have already said, it suffered considerably as a result of the recent drought. In a recent speech at the Rural Press Club in Victoria, given the day after the Budget was brought down, the Minister for Primary Industry said that many sections of the Australian grapegrowing industry had been in a lot of trouble for a long time and would continue to decline, even if there were no sales tax on wine. It was a singularly insensitive statement when one considers the number of people-little people-who are likely to become unemployed and face financial ruin because of the imposition of this tax.

Australian wine companies normally buy grapes from many hundreds of small growers. Many are soldier settlers who were established by former governments in irrigation areas and many growers are migrants who brought considerable expertise to the industry. As larger wine makers scale down their requirements, these people, who also provide employment for unskilled and seasonal workers, are being told that not as many grapes will be required for the next vintage. It seems very strange, to say the least, that the Government, which is so vocal in expressing its concern regarding employment opportunities, should in one fell swoop threaten the jobs of an estimated 10 per cent of workers in this industry.

Grape growers and small wine makers are also at risk because of the glut of wine in Europe. European wine is heavily subsidised by governments to encourage export income and full employment. The European Economic Community gives subsidies for shipping, insurance and other related export costs. Good quality European wines are being dumped on the Australian market and can be purchased at minimal cost. Apart from the actual sale of this wine to the consumer, the danger is that larger wine companies can take advantage of the cheap cost of the wine, blending it with Australian wine and thus diminishing even further the amount of grapes they would normally buy from Australian wine growers. This will create an even greater crisis in the wine industry.

The DEPUTY CHAIRMAN (Mr Keogh) —Order! The honourable member's time has expired.