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Wednesday, 21 June 2000
Page: 17819


Mr EMERSON (10:55 AM) —I begin my contribution to the debate on the A New Tax System (Tax Administration) Bill (No. 2) 2000 with a question. Who said this:

I honestly think now it's receded from consciousness it's being invested with some snake oil qualities. ... It has certain advantages, but you wouldn't want to overclaim it. They're at the margin.

The answer: the Treasurer. Yet less than four years later this snake oil is about to be inflicted on the Australian people. I note from a poll published in today's Australian that an increasing number of people seem to believe that the GST will be good for the economy. That is partly a function of the fact that Australians were told before the last election that the GST would be good for the economy through a $19 million publicly funded misinformation campaign. On the eve of the last election, on 25 September, after saying a few years earlier that the GST was snake oil, the Treasurer said that the GST meant `bigger exports, more trade, more jobs and more growth. This is a proposal to boost economic growth and jobs'. How about that, because on 14 August 1998, just before the election, when he was addressing the National Press Club, he was asked `Have you done some modelling?' and to tell us what these great employment effects were going to be. He said, `Look, we've done lots of modelling.' As it turns out, the only modelling that had been done was by the Prime Minister's preferred modeller, Chris Murphy, and that was on a hypothetical indirect tax change. So, in terms of the macro-economic impacts of this tax, the employment effects of it, it turns out that no modelling was done and the only macro-economic modelling that was done was on a hypothetical tax by the Prime Minister's modeller of choice, Mr Murphy.

It was Mr Murphy who yesterday let the cat out of the bag on the impact of the GST on rents—an impact which the Treasurer has tried to keep secret for many months now. This is the same Mr Murphy who produced a paper before the last election asserting that the maximum impact of the GST on average living standards would be $1 billion after five to 10 years—just $1 billion. That assumed away all compliance costs and it assumed away lots of things that would have led to a more adverse result than that. After the election, Mr Murphy produced new estimates, including ones published as part of a release from the Australian Competition and Consumer Commission, that now reduces that small amount of $1 billion to just $500 million after five to 10 years. So we are going through all this pain, all this snake oil, for a maximum positive impact on living standards of $500 million. As Professor Dixon of Monash University says, it is not enough to run one university. It is the same Mr Murphy who after the election said:

So the GST itself is not so much about generating jobs as putting all industries on the same footing in terms of how they're taxed.

Journalist: So the ... aren't actually in themselves creating jobs?

Murphy: They don't create jobs but they do make people better off.

Better off to the tune of a maximum of $500 million after five to 10 years and assuming away all compliance costs. It is compliance costs about which I will be speaking further today. Also after the election, in an interview with Mr Murphy, journalist Kerry O'Brien said:

Six hundred million dollars a year ...

his revised estimate was down to $600 million—

Now, in isolation, that might sound like a fair bit of money, but set against the total economy, GDP or the amount of money that consumers spend, it's really small beer, isn't it?

Chris Murphy: It's not small beer; it's not huge—you're right, it's not huge—but it's not small beer either.

So much for the purported economic benefits of the GST. Dr Neil Warren is fairly well known because he helped put together the Fightback package and, along with Professor Anne Harding, has done a lot of modelling of the distributional impacts of the GST. On ABC television on 18 May 1998, Dr Warren said:

Oh, I mean people are saying the GST will solve all our ills. I mean, the GST will not, and I think it's a mistake to say that it's going to cure our foreign debt and create thousands of jobs. It's just not going to do that.

In the Australian on 18 May 1998, the Secretary to the Treasury, Ted Evans, was reported as saying:

Every economic text that I know of will tell you in principle that shifting the tax burden towards further reliance on indirect taxes will significantly aid national savings.

But he added:

You won't find that convincingly demonstrated in studies in international tax reform experience.

That was the Secretary to the Treasury saying that claims of great economic benefits of the GST are exaggerated.

What has happened here today is quite remarkable. A further 195 amendments to the GST legislation were introduced. These are amendments which, earlier this year, the Treasurer said would not occur. He said:

It means that we are not changing the legislation and that we have it right. As you implement these things, there have to be further rulings—they are just rulings as to how the tax office applies the concepts—but we are not changing the legislation.

Since the Treasurer made that statement, there have been massive changes to the legislation. In the previous sitting week, we debated 211 further changes. Of those, a number were brought into the House while the debate was going on to amend the government's amendment bill. We may have a sense of déjà vu because today 195 amendments have been the subject of the debate that is now occurring, but after the shadow Treasurer left this place, after he gave his speech, another 34 amendments were circulated. I calculated that a total of 1,026 amendments had already been made by the end of last year. So with 1,026, plus 211 in the last session of this sitting period, plus 195 today, plus 34 that are now being brought in, that is now a grand total of 1,466 amendments to the legislation which the Treasurer said would not be needed because this is a streamlined new tax system for a new century.

Mr Deputy Speaker, I will not ask you to endure a further weigh-in of the legislation. The scales that I brought in here last time are now broken because the legislation weighed in at 6.1 kilograms. We have in front of us 195 further amendments, on top of the 1,026 and the 211, plus 34 which have been brought into this place just now. How can we possibly debate this legislation properly when, in the middle of the debate, 34 extra amendments are brought in? It is a joke. So much for the Treasurer's claims that this is going to be a streamlined new tax system for a new century.

When we look at the true economic impacts of this tax package, it is worth remembering that Mr Murphy is not the only commentator and the only economic modeller. Another economic modeller is Professor Peter Dixon, who was commissioned by the Senate GST inquiry to do an analysis of the true economic impacts of the GST package. He has concluded that, far from even the meagre increases in living standards that have been modelled by Mr Murphy, this GST package will in fact lead to a reduction in average living standards for Australians. It absolutely bewilders me how the Treasurer and the government can proceed with this legislation in the full knowledge that it will have negligible or even negative economic impacts. In a paper produced after the changes that were agreed by the Democrats with the government, which forced the GST through, Professor Dixon said:

Even ignoring compliance costs, the MONASH results indicate that the Democrats' changes will reduce Australia's overall economic welfare by about 0.3 per cent (approximately $1 billion a year).

Compliance costs are conservatively estimated at another billion dollars a year, so that would take us to minus $2 billion a year. Why are we doing this? The same Professor Dixon described the GST as a job destroying tax. Mr Murphy said it will not create jobs. Professor Dixon said it will not create jobs. The only person who is saying that it is going to create jobs is the Treasurer who, when asked about the impact on jobs, said, `We've done lots of modelling,' but it turned out the government had done no modelling at all.

Where does that leave us? It leaves us with this compliance nightmare. This is the business activity statement. I remember the Treasurer standing up in the parliament and waving around a two-page document saying, `This is the simplified, streamlined, new tax system for a new century. All business has to do is complete this two-page business activity statement and they will have discharged their obligations under the legislation.' What he neglected to say—and I have just downloaded this from the Internet—is that the hitchhiker's guide to the two-page business activity statement runs to 148 pages. So much for a streamlined new tax system for a new century. Small business people are going to have to go through 148 pages of instructions in order to complete this business activity statement. And the Treasurer says, `This is all very simple—a streamlined new tax system for a new century.' It is nothing of the sort. This tax is bad for the economy, this tax is unfair and this tax is very bad for small business. It is a dog's breakfast of a tax and it should be rejected by this parliament.