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Monday, 16 September 1985
Page: 553

Senator CHANEY (Leader of the Opposition)(3.12) —I do not think there would be any doubts in the Australian community as to the area of government activity and policy that is the focus of public interest. The Government's weekend-long Cabinet meeting on the taxation decisions that it must make has reminded us that the Government is coming to grips with an area that is very close to the hearts of all Australians. We bring forward this matter of public importance knowing that it is unlikely that the Government will be promoting debate in either the Senate or the House of Representatives on this very important issue. As the Government has indicated its timetable, the statement on taxation changes will not be brought down until next Thursday and that, of course, is the day on which the Senate will rise to consider Estimates committees and the House of Representatives will rise for a fortnight's recess. Thus, the Government has timed its announcements on taxation in a way which will not permit public debate in this Parliament until some weeks after the public has been subjected to debate in other forums.

The first thing that needs to be said about taxation is that the great public interest is generally in seeing a lessening of that tax burden rather than the imposition of new taxes. In respect of the Government's tax proposals, we have reached the unhappy situation where it is basically considering the imposition of new taxes on a public which is already of the view that it is overtaxed. Last Friday when I was talking to a Minister from the previous Government about this Government's proposed Cabinet meeting on Saturday, he made the point that when a Cabinet starts meeting on Saturday it is an early indication that the Government is getting into trouble. He went on to say, in the context of the meeting lasting only through Saturday, that we would know the Government was in real trouble when it started meeting on Sunday. Of course, this Government was unable to complete its meeting on the tax proposals on Saturday and it had to continue sitting on Sunday. From all reports it had to sit again on Monday morning. Since the unexpected extension of the meeting, which ran through until today, occurred I feel I should issue some warning to members of the Labor Party, including those who are taking part in this debate, that they will be called upon to consider decisions which have been made obviously with very great difficulty by their elders and betters. I would suggest that they should watch very carefully the outcome of the weekend deliberations because, if the principles that the Government wants to apply are so unclear, the decisions are likely to reflect that lack of clarity and we are likely to get, in the decisions the Government has put down, a glorious appreciation of the trees and no vision at all of the wood. I commend to Labor senators and members the prospect of a very careful scrutiny of the decisions which have been taken.

Senator Teague —What is good about the trees?

Senator CHANEY —I am sure the Ministry thinks that these are very good decisions and that on close examination each is worth while. After all, Ministers spent 20 hours of the weekend considering them.

It is the clear view of the Opposition that the way in which the Government is moving is not in the interests of the broader community or of Australia. It is certainly not in the interests of the small business community, which is specifically mentioned in this matter of public importance. I hope that some very careful consideration of this will be given by back bench members of the Government Party as well as that being given by Government Ministers. After all, how far have we moved on tax in these recent chaotic weeks? Just a few months ago we had a Treasurer who was setting out to effect fundamental reforms to the Australian taxation system. He picked up the challenge. He spoke about it in a very bold manner. I can remember referring to his chest beating and expressing some doubt that that was quite the tactic to pursue if he wished to get this tax package through the Cabinet and the Caucus. In any event, he undertook to do a substantial remake of the Australian taxation system.

We know that the Government held its tax summit-something that was again an on-the-run decision made by the Prime Minister (Mr Hawke) during the election campaign-and that out of that summit came an ignominious collapse on part of the Government. That was universally described as a backdown, as a failure. The term `a hollow victory' was used by one newspaper; `the big daddy of all backdowns' by another. It was described as `Hawke's tax fiasco' in another, and the Leader of the Opposition, John Howard, in his role then as shadow Treasurer, referred to the Treasurer's taxation announcement as a monumental loss of nerve by the Government, a collapse and a failure.

We have a situation where the Government took this critical issue of tax to a summit and purported to consult with the representatives of the trade union movement and the business community. It purported to confer with the community through spokesmen who had been appointed by the Government. It purported to confer with the welfare community, which was represented at the summit. What is universally acknowledged is that the Government collapsed in the face of the attitude of the Australian Council of Trade Unions to taxation. We found that the fundamental reforms the Treasurer (Mr Keating) set out to achieve were largely ditched and we were left with those elements of change that had the blessing and endorsement of the ACTU, which are largely those based on cutting people down and on ensuring that the tax burden lies somewhere other than on the great mass of the people of Australia who, in the end, are the only people who can pay these taxes. The remnants of the Government's tax policy pay no regard to the interests of employers and, in particular, they pay no regard to the interests of small business. In my view and in the view of the Opposition, that is a significant difficulty and a great concern, not just for those individuals in the small business sector or who are playing the role of employers in our community, but for the rest of the community, which has a basic and fundamental interest in employment and in the promotion of employment in Australia.

Why is it that the Opposition has said today that it is a matter of public importance that the Government is proposing tax changes which will have a devastating impact on small business and employment prospects if it goes ahead with its proposed tax on fringe benefits and capital gains? Are we simply reflecting our constituency in putting the emphasis where we have today? The Opposition is enthusiastic about supporting the constituency which is made up of small business. That is not a narrow or small group of the Australian community. We find that the great bulk of the Australian work force is in fact employed by firms which can be described as a part of small business.

If we look at the document put out by the Small Business Research Unit of the Bureau of Industry Economics, under the heading `Small Business Review' we find that there are 660,000 small firms in Australia and that these firms contribute in excess of 50 per cent of private employment and about 40 per cent of industry value added. So we are talking about the employment of half the privately employed people in Australia. We find in that same document that 95 per cent of Australia's manufacturing enterprises employ fewer than 100 people. We also find that they play a very important role in many of our basic industries and that they account for a major part of the value added in manufacturing in Australia. We find that in the services sector-I will be talking a little later about the significance of that sector in contributing to employment growth in Australia-small firms account for 97 per cent of the enterprises in the surveyed service industries and approximately 40 to 50 per cent of turnover and value added, and between 50 and 65 per cent of employment.

What we are examining is the business sector, which, in fact, provides about half of the private employment in Australia, and which provides a great deal more than that in terms of the employment growth which has been achieved, and which we expect to go on achieving through that sector given reasonable policies on the part of the Government. We have a very great concern for the small business constituency. We believe that it is a constituency which is not represented by this Government, which has chosen to ally itself with big business and with big trade unions through the Australian Council of Trade Unions. Our concern about this sector has been reflected in our appointment of a shadow Minister for small business to ensure that our own policies have a focus in that area.

Beyond the small business constituency, there are important implications for the whole community in actions which have been taken and are to be taken by this Government which will damage that sector. The Budget is, after all, predicated on increased private sector activity. It is quite clear that the Government expects the bulk of the growth in the Australian economy this year, growth which it regards as essential, to take place in the private sector. The Treasurer's Budget Speech makes that quite clear. He refers in a number of places to the fact that, if there is to be a full sharing in the benefits of economic recovery and growth, the most substantial way that they can be assisted is through the creation of lasting jobs in the private sector, and the Speech claims that the whole thrust of economic policy is directed to that end. It claims that, whereas last year over a third of Australia's economic growth came from the public sector, this year the Government expects less than a sixth to come from that source. So we have a Budget brought down by this Government which is predicated upon the promotion of private sector growth. That is why the small business sector is just as important to the community and to this Government as it is important to this Opposition.

I said earlier that if one were looking to employment growth-and after all, we had the dramatic reminder the year before last from Mr Wran when he said that the original summit held by this Government should have been about `jobs, jobs and jobs'-one would find, in fact, that it is the small business sector which is contributing and can contribute to employment growth. In Australia, as in our competitor countries, we do not expect to see substantial employment growth in the area of big business and big manufacturing industry in particular. In the United States the traditional smokestack industries have been found to contain a declining share of the work force, notwithstanding a considerable revival in many of those industries. What we find is the creation and growth of employment in the small business sector. When we look at the figures which are available from the Australian Bureau of Statistics about employment growth in Australia, we find that there was a drop in employment in the manufacturing sector between 1966 and 1984 of 7.4 per cent. We find that in the traditional manufacturing sector employment is declining and not growing. If we look at the policies which are being put forward by Senator Button on behalf of the Government, we find that he is advocating higher and higher levels of efficiency, and he concedes that there will be employment reductions in most areas of traditional manufacturing. If we turn, on the other hand, to recreation, personal and other services, including restaurants, we find employment growth of 46 per cent over the same period.

In Australia, as in those countries with which we would compare ourselves on an economic basis, it is in these areas of services that we find the employment growth which is so important for our society and economy. There has been a 7 per cent reduction over 18 years in manufacturing industry. We find an increase of 46 per cent in recreational, personal and other services, and nearly 28 per cent in wholesale and retail trade.

So it is quite clear where we can have employment growth in Australia. It is quite clear what sectors we should be seeking to encourage, just as it is quite clear that the taxation proposals which have been brought forward by the Government will, in fact, not encourage those sectors, rather the reverse. If the Government is relying on the private sector and small business in particular to get Australia moving, it has to be acknowledged that the Government is proceeding with its taxation arrangements in precisely the opposite direction from that which has been sought by small business and by those who understand what motivates small business.

I do not have time to quote extensively from the representations which have been made. We know that three weeks ago 18 major business organisations went to the Government and objected to its taxation proposals and asked that they be changed. We know that last Friday major business organisations met with the Government and made the same request. I shall quote the Australian Small Business Association. In a recent letter written to the shadow Minister for Small Business, Mr Wilson Tuckey, Mr Peter Boyle said:

We are completely and utterly opposed to the imposition of selective taxes which will fall unevenly and in a discriminatory manner on the business sector and the small business sector in particular.

He went on to say:

A capital gains tax as outlined in the White Paper would discourage the formation of new small businesses; it would cause a decline in new investment by existing small business proprietors; it would retard economic growth and further diminish any hope we have of tackling the large scale unemployment problem besetting this country.

I respectfully adopt that as a sensible explanation of the attitude of small business and, indeed, of the reality which small business faces. Just today, I read that the New South Wales Chamber of Commerce surveyed 5,000 businesses in New South Wales. The survey showed that 92 per cent were against a capital gains tax and 89 per cent were opposed to a fringe benefits tax. It can easily be said, of course, that any business will be opposed to any additional burden being placed on it, whether by taxation or other methods. That is quite true. The important thing to note is that these are businesses that will prosper and grow only if the people who own and run them can see some reward for their effort. The reality is that most of the rest of the community has organised itself so that rewards can be obtained through long service leave, superannuation or whatever by imposing burdens upon employers or taxpayers. Those people who show the courage and determination to run their own businesses often do so for remarkably little reward during their working lives, but they do so knowing that they are at least building up assets which will give them some security in their old age.

One should not underestimate the psychological importance to the whole process of business in Australia of the entitlement to accrue some capital which will sustain people in their retirement. It is all very well for people to come into this Parliament and enter into generous superannuation schemes. It is all very well for people to join the Public Service and have access to taxpayer-funded superannuation schemes. The reality is that many of the self-employed in this country work their hearts out for remarkably little reward. They certainly do not expect four weeks annual leave. They do not expect or get a 17 1/2 per cent leave loading. They work because they are building up a business and an asset which will sustain them and their children. What this Government is doing is taking away one of the great incentives for that sort of business. In that regard, I do not believe that the importance of capital gains can be overestimated.

Another major concern which we have about the proposed impositions on business relates to the attack on fringe benefits. There is a genuine problem within the taxation system with respect to the spread of fringe benefits, but that problem is simply a function of very high marginal tax rates. I believe that the Government must tackle that problem not through the sort of unprincipled approach to fringe benefits which was adopted in the preferred option in the White Paper. It must not impose further cost burdens on business and on employment in particular. What has to be done is to attack the problem at its source-the very high marginal tax rates which are imposed upon people who are earning a living. That applies as much to pay as you earn taxpayers as it applies to the self-employed. The spectacle of pay as you earn taxpayers seeking to get a portion of their remuneration in the form of some fringe benefit or non-taxable benefit is simply an indication of the magnitude of the problem.

The critical point I wish to make in the time which remains to me is that in the encouragement of greater business activity and in the encouragement of the creation of more employment in this country the Government, through the measures it is proposing, will make what is already difficult more difficult. Senator Button, who has the important portfolio of Industry, Technology and Commerce in this Government, has often conceded that something needs to be done about the burdens on industry and the burdens of on-costs. For example, he talked about payroll tax in his famous Playboy interview and about that being a burden on industry which discourages employment. Why does it discourage employment? It does so because it adds to the cost of employment and, therefore, makes employment more difficult. In March this year Senator Button stated:

Insofar as wage levels and on-wage costs are concerned, of course, they are a relevant factor in industry competitiveness. I have said so on numerous occasions in this chamber and elsewhere.

Senator Button and his Government are proposing to add further to the on-costs and the cost of labour and, therefore, to reduce Australia's competitiveness and the ability of Australian employers to take on additional labour. For all these reasons-because of the impact these tax changes will have on people in business and the genuine impact they will have on their ability to build up assets and to look after themselves, because of the impact they will have on their attitude to new investment and business activity and because they will add to the cost of labour-we see them as being an utterly destructive course to be followed in Australia today. We ask the Government, even at this late stage, to step back from the remnants of its tax package, not to impose further penalties and burdens on industry and to go on with the job of encouraging employment and economic growth and trying to create the circumstances where we will have not 600,000 unemployed Australians, but will return to the 2, 3 and 4 per cent unemployment rate which I believe would be acceptable to most Australians. We must do something about the unacceptable level of unemployment. The Government is damaging its case by proposing these unacceptable changes.