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Tuesday, 8 October 1985
Page: 776

Senator COLLARD —I address my question to the Minister representing the Treasurer. The Minister would be aware that all the Premiers have now voiced their opposition to the Government's proposal to tax fringe benefits enjoyed by State government employees, and that some States have threatened a constitutional challenge. What legal advice has the Government sought or received about the legality of the fringe benefits tax as it applies to the States? Will the Government agree to Mr Wran's suggestion that the States should be compensated at the next Premiers' Conference for any loss of revenue because of the new tax?

Senator WALSH —In determining the tax reform policy, the Government applied a number of guidelines, one of which was that so far as is possible the same rules as apply to the private sector will be applied in the public sector. That is a view with which evidently some people-and by implication, Senator Collard is one-disagree. Notwithstanding that, the Government committed to a belief that so far as is possible the same rules that apply in the private sector should be applied in the public sector, making special allowance for isolated areas. One of those rules is the preference that income to employees should be paid as wages and not paid in kind. As we all know, in recent years in particular there has been an explosion in the amount of income paid in kind rather than paid as wages.

I think Senator Collard said that all Premiers have challenged these measures, or something like that. I do not think that is quite true. I realise that most have. I have noted over many years that Premiers and State governments in general have a propensity to complain about any measure which a Commonwealth government adopts to raise revenue while simultaneously holding out their hands for the revenue which those measures finally raise.

On the constitutional question, so far as I know no opinion has been sought but I will refer the matter to the Treasurer or the Attorney-General. Personally, I do not see it as a real problem because the Commonwealth makes payments to the States and, if the States refuse to divulge the information on which the notional liability can be calculated, the option is always open to the Commonwealth to deduct a Commonwealth-assessed amount from the State payment.