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Monday, 16 September 1985
Page: 569

Senator CHILDS(4.51) —We are discussing an Opposition matter of public importance which seeks to frighten Australians about proposed taxes on fringe benefits and capital gains. In particular the Opposition is seeking to frighten small business people, yet it knows that it is very clear that there will be no overall increase in taxation. So we are talking about how this Government plans to introduce equity into our tax system. Opposition senators have shown audacity in speaking here today-particularly the Leader of the Opposition, Senator Chaney. He was a Minister in the Fraser Government. He, with his deputy, for a period of seven years, assisted by Mr Howard as the Treasurer for most of that period, set out to divide and destroy small business, in effect, with increasing bankruptcies during their period of office and with vast increases in unemployment. The Opposition has been sprung today by our colleague Senator Siddons, who was here during that time. Because of his business background, he remembers that time, and he drew attention today to the fact that Opposition senators do not come here with clean hands. When they talk about the prosperity of small business. But I think it is much more than that, because we have just had a Budget. The only reasonable thing one can say is that this matter of public importance is a giant smokescreen, as the Opposition attempts to move people's attention away from the positive environment that that Budget gives to continue the progress that small business has made, under the Labor Government, for some time.

We know, as Senator Chaney said, that one out of two people in the private sector work in small business. We have not just found them. This Government has worked over a period to introduce stability into the decision making process. Unemployment is down from the Howard peak of 10.4 per cent to 8.2 per cent. That is a significant figure for all small business people. More significantly, industrial disputes are at the lowest level for 16 years. That is particularly important for small business people because it gives them predictability. The Opposition cannot take that record from the Labor Government. Certainly, it is a great bonus to people working in small business and trying predict in a very difficult area what will happen to them. Most importantly, in our period of office we have halved the deficit as a share of the total economy.

Senator Messner —What rot you are talking.

Senator CHILDS —That is on page 3 of the Treasurer's Budget Speech, if Senator Messner wants to look up the detail. I can only refer to it as being a fact, and a fact that gives the lie to what has been said. Despite the figures cited by Senator Chaney and Senator Messner, we have given that factor of growth to the small business sector in this economy. The broad support that we have given means so much to people in small businesses.

The Leader of the Opposition, Senator Chaney, has disparaged the democracy that we have seen in Australia, whereby Australians for the first time have been encouraged to debate taxation. What a strange thing that is. It is too much for Senator Messner; he cannot take it. He was a Minister in the Fraser Government, as were Senator Chaney and his deputy Senator Durack. They are all guilty men, because they were there when there was no light on tax avoidance and evasion, compared with what we have had in the last year. We had then an atmosphere more conducive to mushroom growing in regard to tax avoidance and evasion. This matter is very important, because thoughtful people in small business will know that the contrast exists. We had then no moves to prevent the haemorrhage that was taking place among the smart people. Ordinary people in manufacturing and in the service industries, to whom Senator Messner has referred in detail, battled to keep their heads above water during the Fraser years. When we came to power, one of the issues about which the Liberal Party had talked for years but had done nothing was deregulation. We now have an ongoing program, as announced last October, to identify regulations that are considered to impose substantial unnecessary cost on business, and we propose to modify and amend such regulations.

I restate what some of my colleagues have already indicated, that is, that Australians must remember the Fraser Government's record, and the record of Senator Messner, sitting on the Opposition front bench with the dried blood on his hands from that period of Government.

Senator Kilgariff —How ridiculous!

Senator CHILDS —The honourable senator should ask Andrew Peacock if he thinks it is ridiculous. We also have the other promise about which people must be told if they want to get a balance on the matter of public importance which the Opposition has put forward. We must look at the industrial climate which the Opposition would generate if it came to power. Although such an event is extremely unlikely, people must remember that what was started by Mr Viner in the Fraser years has now been adopted by the Leader of the Opposition, Mr Howard, and a Liberal-National Party government would be a threat to the stable atmosphere that we have had in this country. One of the reasons for that stable atmosphere is the accord between the Government and the trade union movement, which has meant that not only have we had planning since the Hawke Government took control, but also we now have a projection for the next couple of years of calculated growth in all areas of economic activity, so as to allow people to do things that they could not do in the Fraser period.

Under the Fraser Government, I remember very clearly small business people and the Council of Small Business Organisations of Australia pointing out to me the tremendous difficulties they had in getting finance. It was one of the problems that small businesses had in that period-it is a perennial for small businesses. They were too new, too small or had difficulties getting finance from banks. This Government has tried to make sure that our banking system is more flexible and open so that small business will have the opportunities that it certainly did not have during the period of the Fraser Government. That is the contrast between what small business faces today and what it faced in the Fraser period.

The proposed capital gains tax is absolutely necessary if we are to introduce equity and if we are to make sure that different forms of income are taxed so that wage and salary earners are not put at a tremendous disadvantage. We have seen the recent example of the ineffective legislation, as it has been over the years, under which income derived from capital gains by Mr Robert Holmes a Court enabled him to make a tax-free profit of $27m overnight through share trading. That is only symbolic of a perversion in our tax system, in which we have not adequately balanced the needs of people each to be treated fairly in our economy at present.

In contrast, I felt a tear come to my eye when Senator Messner talked about the problems of doctors, accountants and other typical people about whom he was concerned. I realise that he has been an effective advocate for some of the elite of small business. But when I speak of small business, I have in mind the people sweating in factories, the people battling in shops and service industries. Those are the people that I know our legislation will help. It is not designed to hurt small business people but it certainly will make it very difficult for doctors who are not doctoring. It certainly will make it very difficult for accountants who are making sure that people do not pay their fair share of tax because this Government is putting together a net that will make it impossible for people not to pay their fair share. As my colleague Senator Maguire pointed out, only the Netherlands and Australia do not have a capital gains tax. The latest country to accept such a tax is Ireland. It is some sort of Irish joke that it has taken us so long to conform to the standards of a modern society by introducing a capital gains tax.

I turn to the question of fringe benefits. While Senator Messner said something nasty about the speech by Senator Richardson, the fact is that on the subject of fringe benefits Senator Messner and his colleagues have said nothing. They are not game to open up that story. They are not game to talk about the reality of fringe benefits. In the short time that I have left I shall remind them of the facts about fringe benefits. A study carried out in 1981 by the Social Welfare Research Centre of the University of New South Wales stated:

The contribution to employment benefits by the Commonwealth Government through taxation revenue forgone is difficult to assess because of the lack of relevant data.

The study went on to say:

. . . from the the available data it can be deduced that the cost of that contribution for the year 1980-81 would have been in the vicinity of $5,000 million.

In other words, $5,000m in revenue was lost in the various costs of fringe benefits. Indeed, that amount was half of the vote that was being expended on welfare payments in 1980-81. That shows how far in the Fraser years this avalanche in the development of fringe benefits got out of hand. The study went further and stated that the distribution of benefits correlates particularly with the vertical division of the labour market and that the higher an employee's position on the occupational ladder, the higher is the level of benefit both in relative and absolute terms. That sums up why the Opposition is squealing today about fringe benefits and will not accept that reasonable taxes should be paid on them.

Taxpayers cannot afford to subsidise the meals and perks of the wealthy friends of the Liberal Party. All the Government intends to do is to introduce a moderate proposal that will address the distortion that has occurred over time. As I have just stated, one of the problems with fringe benefits is that significant amounts of money are lost to State revenue. This often results in higher costs to the community. Statistically, almost invariably male middle and upper salary earners are those who benefit. It is for these reasons that the Government is addressing a problem that has existed for some time. The Opposition is frightened to know the reasonable proposals that will be unveiled next Thursday, and it has attempted to create a smokescreen to take people's attention from the Budget that we have brought down and from the general prosperity that this Government has given to small business in Australia.