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Monday, 16 September 1985
Page: 567

Senator MESSNER(4.37) —As Senator Richardson rose to speak I pulled out a piece of paper and headed it `Richardson' so that I could note down some of the points of his argument. As there were none, the page remains blank. One can only assume that Senator Richardson is saving his arguments and the points that he intends to make for the debate in the Caucus room tomorrow on the capital gains tax. No doubt he will save his strongest rhetoric for the point that the Government is about to introduce a capital gains tax at progressive rates of tax, rather than at a flat rate which the right wing of the Labor Party in New South Wales has been advocating against pressure from the left wing. The Left will win tomorrow and it will be interesting to see what Senator Childs has to say to us shortly on that subject. Perhaps we can compare some of his points with those of Senator Richardson.

Senator Maguire, who has just left the chamber, at least gave us some points to discuss at this time. He got it all wrong, of course, and he told us that in fact no decision has been made. I can understand that possibly a decision still has to be made by Caucus, but that seems to be incidental as the left wing has already won. The point was made in Question Time today by the Leader of the Government, Senator Button, when he was asked whether the decision on the tax package had been made. His clear answer was that the deliberations were complete. He said that the decision had been made by Cabinet. Of course, Parliament will not be told about this until Thursday. It is quite clear why-because the Parliament gets up on Thursday night and will not sit for another fortnight. Therefore, this Government intends to get away without parliamentary scrutiny on this important legislation, in order to fool the people that it is actually achieving something. In the meantime, it will close down the Parliament so that it can get on with its sleazy business.

Senator Kilgariff —It is afraid to face up.

Senator MESSNER —That is absolutely right. Senator Maguire is delighted that we are getting a brand new direct capital gains tax and I suppose that this is part and parcel of the general feeling in the Labor Party. Yet it runs counter to the very solemn promise that came from our silver-haired messiah, the Prime Minister (Mr Hawke), during the election campaign up to March 1983 when he wanted the votes, having just hacked down Bill Hayden as Leader of the Labor Party. He said:

Let me state in language so simple that even our opponents can understand: there will be no capital gains tax.

This is what the Prime Minister said two years age. This statement joins the litany of all the other things that he supposedly did not promise. He said that there would be no assets test on pensions. He said there would be no tax on lump sum superannuation and there is. This is just a further indication of that man's lack of ability to keep the faith or at least keep his troops in order. He certainly cannot tell the truth.

Let us turn to the main point of this debate; that is, that these new measures which are part of the Government's tax package will obviously have disastrous effects for small businesses. We should remind ourselves of some of the facts about small businesses. Seventy thousand firms in this country employ fewer than 10 people, 620,000 employ fewer than five people, and 4,000 employ more than 100. It will probably surprise people in the Government that 95 per cent of manufacturing enterprises are small businesses in those categories and 97 per cent of service industries.

The most salient point I want to make today is that the Parliamentary Library estimates that in August 1984, just over a year ago, 5.7 million Australians were employed by enterprises with fewer than 50 employees-the greater part of the total working population of the country. Further statistics might make the point: From 1978 to 1982 in the United States of America-with conditions a little different from our own-the top 500 companies in fact shed 1.5 million employees while small businesses increased the number of jobs by 6.5 million-a five million difference. There was a significantly similar situation in Australia, where companies employing more than 50 people shed 288,500 jobs, while those employing fewer than 50 increased jobs by 310,000. Obviously the great generator of jobs in this community today is small business. The large industries are passe in the sense of creating new jobs. They have had to restructure and that has meant shedding labour. The difference has been picked up by small business. Yet this Government, having apparently started down that track of increasing jobs-at least that was one of its promises-through the institution of a new tax on capital gains and a new tax on fringe benefits is about to destroy all that. During the last election campaign the Liberal Party of Australia and the National Party of Australia campaigned very strongly on the point that the assets test on pensions was the first foot in the door towards the introduction of a capital gains tax. Of course we have been proven right. That point was ignored at the time by the media.

Senator Grimes —Let's have Mr Howard's views on the assets test.

Senator MESSNER —Yes. It is typical that the Labor Party at that time, during the election campaign, failed to tell us about any of the ideas it is now introducing, and it went into that campaign with no tax policy at all. On the other hand, the people of Australia knew then where the Liberal and National parties stood, as they know today-that we are opposed to a capital gains tax, that we are opposed to a fringe benefits tax, which in the end will destroy thousands of jobs in industry. Of course at that time the Treasurer, Mr Keating, said: `We have a mandate to do anything we like. We have a blank cheque on tax reform'. The people are having to pay for that cheque right now.

Where in this community is there support for a capital gains tax and a fringe benefits tax? A survey by the New South Wales Chamber of Commerce of 5,000 businesses, reported in this morning's Press, found that 92 per cent of people were opposed to a capital gains tax. The Council of Small Business Organisations of Australia, a small business representative organisation, is opposed to it. The National Farmers Federation is opposed to it. Eighteen major businesses and industry groups announced their opposition to a capital gains tax on 27 August. The Australian Chamber of Commerce argues that it will push up interest rates, and I agree. Yet this Government goes blindly ahead with these propositions without any thought to what it is doing. It is clear that even if this is a modest tax, as it has been described by some commentators, it will certainly be immodest before long.

I suppose the truth of the matter goes back to my opening point that the left wing is pushing the Government into this decision to introduce these taxes. When Senator Gietzelt spoke at the Australian Labor Party Conference on 9 July 1984 he said:

We have in Australia some 120,000 people in the accountants, medicos, pilots and other professional people. We have 313,000 people who are self-employed and that comes to something over 430,000 people . . . as we have to raise more revenue, I think that (the) directions of the Government should be directed towards making that section of the wealthy portion of our society pay their due tax.

That is what it is all about. The Government is attacking small enterprises, including doctors, accountants, lawyers and so on-professional people-along with the corner store and small manufacturing enterprises with this capital gains tax in order to destroy their incentive to build up industry and to create jobs. That is the basic point at issue.

I now refer to one or two points of this proposed capital gains tax. The Government's apparent decision, as reported in the Press, to introduce a capital gains tax based on the progressive income tax rates scale I think is an absolute disaster, I ask the Government to contemplate the situation where the owner of a small business, which has been built up over a lifetime, 30 or 40 years, say, at retirement age decides to sell out and then finds that the whole of the value of the goodwill of his business is going to be taxed at the penalty rate of 60 per cent. That means that the whole of the effort put in year on year over 30 or 40 years will be wiped out in one year by the application of a 60 per cent tax rate. I think that is absolutely outrageous, and it is obviously intended to destroy the idea of capital appreciation and capital accumulation in this country. It is a socialist objective and it is obviously the objective of the left wing, allied with Senator Siddons, from the Australian Democrats, who made that point.

Senator Grimes —Could I point out that this is your version, not anybody else's?

Senator MESSNER —This is what the newspapers are telling us. Consider also the situation with death. It is apparently true, again according to the newspapers, that the Government intends that there will not be a deemed sale upon death. Consequently the so-called death duty will not be taken into account. That is all right, but the gifts still will be, and if there is any intention not to tax the gain until it passes out of the hands of a family, of course there will be a death duty applied further down the track, For the Government to mislead us in that way is entirely outrageous but, of course, it is typical.

Senator Maguire asked why capital gains should not be taxed as income, and of course the Democrats support that view as well. The difference is that, as even Senator Siddons in his contradictory argument acknowledged, capital is designed to be invested in order to create opportunities and jobs. He admitted that it has to be combined with labour in order to create jobs. That is the essence of what we in the Liberal and National parties stand for. We need that kind of capital development in this country, and a capital gains tax along the lines that have been described here will destroy it.

I ask the Government to explain something to me. Take as an example a small business starting from scratch, with nothing but a bit of stock and a lease on a shop or something like that, which over 20 or 30 years builds up an investment in the proprietor's own goodwill. How can the Government apply its so-called inflation rate discounter to a figure that starts from nil? If the Minister for Community Services (Senator Grimes) can explain to me how the Government can apply inflation in that fashion, I will then perhaps understand how the Government will work its capital gains tax.

I suppose there is one point on which I should finish, and that is the so-called tax on fringe benefits, Only one thing needs to be said about that: This Government fails to acknowledge that the basic root of all evil in tax avoidance and the arrangement of people's affairs along the lines of fringe benefits lies in the simple fact that we have a far too steeply progressive rate of income tax. For that reason, people will arrange their affairs in those ways. This Government fails to recognise that point and fails to do anything about that important element. Consequently, when the Caucus meets tomorrow and has some opportunity to discuss these matters, I hope it will pay attention to the proper views of the Liberal and National parties.