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Wednesday, 9 October 1985
Page: 896


Senator CHANEY —My question, which is addressed to the Minister for Finance, follows the question asked by Senator Sheil, which the Minister either failed to understand or chose not to understand. I preface my question by saying to Senator Walsh that the question asked by Senator Sheil was predicated on the Government's tax package being enacted and the marginal tax rates being applicable at the rates shown in the Treasurer's announcement. The Minister answered the question with respect to the 8 per cent per annum rise in wages, but I again ask the Minister: What measures will the Government take to ensure that the 1.6 million taxpayers earning less than the average weekly earnings will not move from the 29 per cent marginal tax bracket, which is the adjusted tax bracket that will apply in 1987, into the 40 per cent marginal tax bracket, which is the second adjusted rate? On the figures available to the Opposition there will be a tax creep affecting 1.6 million taxpayers and the question relates to what the Government will do, if anything, to prevent that.


Senator WALSH —I did mishear Senator Sheil's question. I thought that he referrred to a 46 per cent marginal tax rate, but it was a 40 per cent marginal tax rate. Those are the Government's projections of income which will be available. Some people will move from a 29 per cent to a 40 per cent marginal tax rate. If it were not for the tax reform package they would be moving to a 46 per cent marginal tax rate even without any further erosion of the income tax base. In other words, if the Opposition gets its way and it sabotages the tax reform package and knocks off fringe benefits, tax shelters, the non-allowability of entertainment expenses, the capital gains tax and all those things, instead of moving into a 40 per cent tax bracket the same people and a number of others as well will be moving into a 46 per cent tax bracket. If members of the Opposition are asserting that a 40 per cent marginal tax rate is too high in a particular level of income I do not know how they can defend their policy which would put the same people into a 46 per cent marginal tax bracket.

The effect of the Opposition's policies, if it was allowed to get away with them, would be to ensure that ultimately-since it refused to reform the taxation system and since it refused to support the measures which put a safety net under the income tax base-virtually all honest pay as you earn taxpayers were paying a 60 per cent marginal tax rate. Of all the humbug and hypocrisy I have ever heard, what effrontery it is for members of the Opposition who stand here representing the carpetbaggers and the tax cheats, as they have always done, to say that the 40 per cent marginal tax rate is too high for people on a particular income level when the effect of the policies which they advocate would be to ensure that the same people were on at least a 46 per cent marginal tax rate.