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Wednesday, 21 June 2000
Page: 17808


Mr CREAN (9:54 AM) —The A New Tax System (Tax Administration) Bill (No. 2) 1999 covers three broad areas of tax law: firstly, the rationalisation of administrative penalties across different taxes; secondly, the rules governing who can advise and prepare and lodge business activity statements on behalf of taxpayers, and, thirdly, a plethora of miscellaneous amendments in areas including the new pay-as-you-go scheme, the rounding down of tax debts, discretions concerning lodgment of business activity statements and the imposition of the general interest charge on outstanding debts.

The legislation is not opposed by the opposition. Essentially it continues to reflect the botch-up of the government's tax package implementation, a government so inept that in the implementation of their tax package they are making it up as they go. In the process this is just adding to the complexity. This is more of the rush to legislate, with just 10 days to go until their tax package comes into place and still so much unresolved.

These proposals before the House today are not the only aspects of issues unresolved. Only the week before last we had a bill containing 211 more amendments to the GST. That bill is still before the parliament. A total of something like 1,500 amendments have had to be moved to this `simple' new tax, even before it is in place. Legislation with major changes to the diesel grants scheme is still before the parliament. We get told how important this is for regional Australia and the government still has not got it right. More importantly for the broader consumers, we have the legislative framework but not the details of the boundaries for the fuel grants scheme for regional petrol stations. Nor have we had an indication as to what the excise cut will be on fuel.

The government promised that the GST would not result in an increase in the price of petrol. The only way the government can do that is to have an excise reduction that equates to the GST impact. But we know that the price of petrol varies all around the country. Until we know what the excise reduction is and what the boundaries are, how can people have confidence that the government will deliver on its promise? We do not believe it can deliver on the promise. We believe it is such an ineffective promise, such a deceitful promise, like so many others made on the GST, that when the time comes, 1 July, we will see petrol prices go up as a result of the GST all around the country. If the government thinks it has had problems with caravan parks—I mention this specifically to the member for Richmond, the Minister for Community Services, at the table—just wait until it gets the complaints about petrol.

How is it that with only 10 days to go we still do not have that detail, Mr Speaker? I know that in your electorate this is an issue of great importance, as it is in all regional electorates. I drove up to Canberra last weekend. I came up the Hume Highway. I saw the significant differences in the price of petrol along that Hume Highway. At Avenel the price was 92.1c. If the government reduces the price of petrol by 7c a litre—as we were told previously, but it is still not confirmed—that reduces the price of petrol at that service station to 85.1c. But, if you add 8.5c, you get an increased price of 93.6c. In any event, it is higher than the price currently being paid at Avenel. And why? Because of the GST. That is 1 July, but you also have on 1 August the indexation double hit and another one in February. In other words, petrol is going to be slugged three times in the next three months due to this GST.

The government promised the electorate that the GST would not put up the price of petrol. We will wait and see, but the important thing to underscore in the context of this debate at the moment is that the government still has not produced the details by which it can deliver on that promise. We still have not seen the complexity of the new alcohol taxation arrangements which are yet to be legislated. We have seen the hundreds of pages of business tax proposals, but they are still before the House for debate—and we have a large amount of other tax legislation before the Senate. How can a government botch implementation so badly? This is a tax that John Howard has had an obsession with all of his life. He has had only two obsessions: one is busting unions and the other is to give this country a GST. He has lived his whole life on it. Yet, having planned for a lifetime, 10 days before implementation he still does not know how to do it. What a shambles. The simple fact is that this legislation before the House is part of the broader complexity, the broader confusion and the broader inability of the government to introduce its final tax package.

It is impossible in the time that we have had available to properly analyse all of the proposals in this bill. Whilst complex and rushed, it is essential legislation, and in the last desperate rush—and according to other professional bodies which are still trying to cope with the implementation phase of this new tax system—no industry body could spare the time or personnel to attend the planned Senate hearings on the details of this legislation. They are all struggling to keep up with the massive complications of the new arrangements. These supposedly simpler new arrangements have got the whole business advisory industry completely absorbed, simply trying to follow the changes. According to the government, under the new tax system things are supposed to be getting simpler. This bill is more conclusive proof that they are not.

The conclusive piece of evidence about the increased administration burden is this legislation dealing with business activity statements—BASs. Business taxpayers will interact with the Taxation Office by way of this business activity statement. This is effectively a summary statement of taxation liability to be provided regularly by the taxpayer. It will generally be quarterly for most businesses. We have the circumstance of the Treasurer coming into the House and holding up the simple two-page form, supposedly as evidence of the simpler, new system. This legislation reinforces the falsity of this claim. It is true that there will be a rationalisation in the number of payments made to the Taxation Office for some taxpayers. They will make four payments whereas now in some cases they make more. The government keeps on saying that this is an integral part of the GST. It is not. It is a result of the PAYG system—the pay-as-you-go system—and the Australian business number. These two factors can stand completely separate from the GST, as has been confirmed by Charlie Bell, who came up with the ideas and who was appointed by the government to advise them in this area.

More importantly, Labor offered bipartisan support for these measures without the GST. Unfortunately, the government rejected that proposal. We demonstrated our bona fides on bipartisanship to tax reform in the business tax context, and in those circumstances we have not faced anywhere near the complexity, confusion or other problems associated with the GST package. Let us be clear that not all small businesses will face only four payments. If firms have a pay-as-you-go liability of $25,000 per year, which roughly means having five employees or more, then they will have to make payments every month in addition to their quarterly business activity statement liabilities. So many firms will still face multiple payments. Of course, the rationalisation of the number of payments is not indicative of the actual level of compliance burden. The issue is the work that goes into the calculation of the payments. Businesses are now going to have to prepare accounts on a quarterly basis; many now only do it annually. This will mean a quadrupling of the compliance burden, plus a significant ongoing increase in costs—and, of course, this is all before managing taking the GST into account.

The GST is imposing many billions of dollars of cost on Australian businesses. By the way, the government have never provided an estimate for the initial costs of the GST, but Dr Binh Tran-Nam of ATAX at the University of New South Wales has estimated these costs to be $4.3 billion—not an insubstantial amount of money. There are private sector estimates upwards of $20 billion. These are the initial start-up costs of the GST. These costs, of course, were ignored by the government when they did their modelling. We have just seen how some more of that modelling has been exposed for its shonkiness. Econtech, the Prime Minister's preferred modeller, produced a report that said that rents were going up more than double the amount the government told us. And what did the government do? They hid the report. They hid the report because it was more embarrassment for the member for Richmond in his pathetic efforts on behalf of constituents in the Richmond and Tweed. It was a demonstration of this government's shonky modelling in other areas.

In the case of the costs of business tax implementation for the GST, the government just assumed they were nil. In addition, the government had admitted in the regulation impact statement to the legislation that the recurrent costs—not the initial ones—would be more than $2 billion a year. That is just $2 billion to comply with the GST. It then goes on to net these costs out. It claims that the net costs are actually $385 million. These figures appeared over the weekend in the Sydney Morning Herald. That is a $385 million net increase in taxation compliance costs because of a supposedly simpler model. So here we have $4.3 billion in start-up and $385 million annually, ongoing, that the government has wished away. I think it is important to spell out here that it gets to the $385 million by starting with the $2 billion in gross costs, reducing them by $450 million to take account of the amount recouped through tax deductions for the costs, a legitimate expense, and claiming a gain to businesses through the abolition of the wholesale sales tax of $830 million—and we will be interested to see whether all of that fully flows on—a further $165 million for state taxes and a $200 million cash flow benefit. That is how it arrives at the $385 million net compliance costs.

Even if you accept that figure, it is a massive new impost on businesses. But Dr Binh Tran-Nam, whose figures were used by the government in its analysis, is himself reported in the Sydney Morning Herald of 17 June 2000 as saying that the Treasury analysis `underestimated the net compliance costs', and he gave his own figure not of $385 million but of $657 million per year, ongoing, implementation: start-up costs of $4.3 billion and ongoings somewhere between $385 million and $657 million—figures the government wishes away. So that is the tax expert the government used to derive its figures. He has repudiated them, just like Chris Murphy repudiated the government about its rent assessment. This is another modeller repudiating the government's own figures.

As I said, the government pretends that these costs are nil. All of its modelling assumed that there was nil cost to business, either in start-up or in ongoing. Not only is a massive cost to business involved here, as well as the complexity associated with it, but these costs can, of course, be passed on to consumers. The ACCC confirms this. So not only are Australian small businesses going to have to face higher costs, we know that the government estimates of the costs are too low. We know they will be passed on to consumers and we know that will result in higher inflationary pressures and, if there is more inflation in the economy, that, in turn, will put pressure on interest rates.

Let us go back to the business activity statement. It is a short document of a couple of pages. The key question is: how much work does it really take to properly fill in the form? How easy it to comply with the simple new tax? The government produced a guide for the two-page simple document that the Treasurer waves around this chamber. Do you know what the guide looks like? Have a look at that, Minister. The thickness of this is probably like a telephone book in the Tweed. This two-page document needs a 159-page guide. Some simple tax! Some simple, easy to adjust to system! You tell people all they have to do is fill out a two-page document, but when they ask, `How do I do it?' You say, `Refer to our guide,' and it is 159 pages long. Simple? No. Complex? Certainly. But it gets worse. What I have just held up is simply a guide. But, as my colleague the member for Rankin has demonstrated in this House, the legislation is more than three telephone books thick. So how can the government claim that this is a simple new tax? No one believes them when they say it is simple. They also know that there have been around 20,000 requests for private rulings on this simple new tax system. Most business people do not have the time to read the guide, let alone fully understand it. They are trying to run their businesses and build some wealth for the nation. They have better things to do than be swamped by the paperwork. Yet the government have the gall to pretend that it is a simpler, new system.

So just what is the current compliance burden of the wholesale sales tax for almost every retailer? The answer is nothing. There is no compliance burden. The tax is collected at the wholesale level. There is generally no paperwork for retailers. They are not in the system. They can run their businesses without the hassle of being an unpaid tax collector—that is, they can do that for the next 10 days until they become Peter Costello's volunteer tax collectors, with a $200 voucher for the privilege. Farmers, charities and others who are entitled to an exemption simply quote their exemption and that is it. That is truly a simple system, but it is being brought to an end. If it were simpler, the aggregate costs of compliance would be going down. Even the government admit that they are going up; we know they are going up massively.

The workload for professional advisers on the supposedly simpler new system is going to be massively higher than the current workload. This, then, raises the issue of who will be able to advise, prepare and lodge the business activity statements for taxpayers. Currently it is restricted to tax agents and lawyers. This bill proposes to open up that ability and for members of accounting bodies and tax practitioners, bookkeepers working for those people and persons who provide payroll services to be involved in the business activity statement advice, preparation and lodgement. So what we are seeing is a broadening of the category of those who are allowed to fulfil taxation compliance tasks, simply because the existing framework cannot cope with this simple new tax.

The need for broadening arises because there are not enough tax agents in Australia to deal with the reporting requirements of the government's simplified tax system. The simpler new system has produced a work overload for accountants and tax agents, and they simply cannot cope. Members should be aware of the record number of accounting businesses reportedly already up for sale. The industry simply cannot keep up. It is unclear whether the proposed mix of personnel to perform the advisory functions is completely appropriate or not. As the bill currently stands, some existing work by lawyers and sales tax specialists will not be allowed on the BAS. It is unclear whether this was deliberate or not, but we are expecting some amendments to be moved by the government later in the debate to address even more anomalies. Here we have, 10 days before the new system is implemented, a piece of legislation trying to clarify things, and we think they even have to clarify the clarifications. Again it is evidence of the massive administrative botch-up. Many people involved in providing advice, such as lawyers, will not be allowed to continue under the bill as originally drafted, but it could be corrected later. Labor will not oppose these amendments, but we are concerned about the regularity with which the significant legislation has to be amended.

On the rationalisation of administrative penalties, the bill proposes to amend various pieces of tax legislation and introduce a uniform regime that will impose penalties relating to statements and schemes, penalties for the late lodgment of returns and other documents, and penalties for failing to meet other taxation obligations. Labor support, in principle, a consistent regime across taxes for similar behaviour; however, whether or not the penalties proposed by the bill strike an appropriate level of penalty for the various categories of offences and circumstances is a very difficult judgment to make from the position we are in. Compounding this is the short time between introduction—on the last sitting day in the last sittings—and the proposed debate in the House. There has not been adequate time for briefing from the government or for consultations with stakeholders. Accordingly, whilst we give in-principle support for the notion of a uniform approach, we will wait and see how this unravels.

Finally, on top of the matters that I have mentioned, the bill contains 195 amendments in schedules 2 to 5—many of them complex—concerning the pay-as-you-go provisions, the Australian business number provisions, the running balance and general interest charge provisions. The changes to the simpler new tax system, it would seem, are endless. Earlier in the year we heard the Treasurer say that he had the legislation right. Since then we have had an unending torrent of amendments in almost every area of the tax system. The system is not simpler, it is not fairer, and it is nothing like Australians were led to believe before the last election.

Every time we have put the government's claims under scrutiny, they have been found to be misleading. This week we exposed the deceit about caravan parks and boarding houses. In the process, it was uncovered that normal rents will go up by 4.7 per cent due to the GST, not 2.3 per cent as the government told us before the last election. But it is not just rents. Every price is going up more than the government said it would: clothing, footwear, gas, electricity, public transport, beer and now rent. The list is endless. Because of the botched implementation, there is insufficient time to properly debate this legislation. We have been cooperative, on this and other bills, in accepting that the debate will be cut short. The government have been totally unreasonable.

The Labor Party are trying to assist small firms to cope with this administrative nightmare, but I am sure that they will continue to struggle under the weight of this botched, inappropriate system for the nation's future. Therefore, it is our intention to move a second reading amendment. I move:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House:

(1) condemns the Government for its continual amendment and complication of the New Tax system, especially the GST;

(2) notes that the Tax Office is now swamped by the requirements of implementing the largest tax change in the history of the country;

(3) notes that the Government is trying to rush through another 195 amendments in a very short time, without proper consultation; and

(4) acknowledges that the Government has wasted over $430 million selling a tax that the majority of Australians do not want”.


Mr DEPUTY SPEAKER (Mr Jenkins)—Is the amendment seconded?


Mr Emerson —I second the amendment and reserve my right to speak.