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Wednesday, 9 October 1985
Page: 916

Senator BROWNHILL(4.16) —The matter of public importance we are discussing today is as follows:

The destructive effects on enterprise and employment of the Government's tax package.

There can be no doubt that enterprise and employment have and will be affected by the Government's tax measures, although I believe that in the debate today the Minister for Finance (Senator Walsh) has not addressed at all the problems the tax package is causing in the community. We have already heard the very strong concerns of the restaurant industry whose representatives are meeting in Canberra tomorrow. It will be interesting to see whether any of its invited guests-apparently Canberra's Australian Labor Party members are going-will be game enough to attend and try to defend their Government's attacks on this sector of the economy.

I restrict my remarks today to what effects the tax package will have on the rural sector of Australia. Clearly, the rural sector has been the subject of a long and sustained attack from this socialist Government. The rural sector bore the brunt of the May mini-Budget, the slashing of the fuel freight subsidy scheme, the scrapping of the liquefied petroleum gas subsidy and the cuts to roads funding and the local aerodrome ownership scheme-cuts amounting to over $180m which affected all rural Australians. The Government knew the wrath of the rural sector. Over 100,000 people in cities all around Australia have protested recently. In Canberra alone, 40,000 people came to tell Prime Minister Hawke personally what they thought of the Government. Whilst Mr Hawke called these people `my friends', it was laughable to see that he was surrounded by dozens of police. He obviously does not have too much trust in his friends if he needed such a large bodyguard.

At that rally the Prime Minister told those people to be patient, that the August Budget would provide relief for them. They were patient. Budget night came and went without any more than a handing back of some of the things that the Labor Government took from farmers in the first place. But farmers are patient people. They are a trusting people. So they waited some more, hoping that the tax package would provide relief for them and, more importantly, would not penalise them. After all, the Prime Minister told farmers, and indeed, all Australians, in 1983 that he would not introduce a capital gains tax.

As I said, farmers are a trusting people. So they believed that, whatever the tax package held, there would be no capital gains tax. But of course we now know just how much notice any Australian, any farmer, can take of our Prime Minister. Only this morning we heard just how hollow are our Prime Minister's words and promises on the Army base issue. Farmers and others living in rural Australia are starting to wonder about our Prime Minister and his promises. They are starting to see and feel the effects of the tax package. The first effect is the capital gains tax; the tax we were promised we would not be having. Of course, the Federal Government has been at great pains to explain how no one will be affected adversely by this tax. If the predictions that it will raise only $5m are true one wonders why the Government intends to introduce it at all. Treasurer Keating has told us that there is no death duty element in this capital gains tax. Of course, if one examines it, quite obviously there is. Treasurer Keating has assured us that this tax is not discriminatory, but of course it is. Already land prices are falling as a result of this element of the tax package.

One of the reasons people move into farming and persevere with it year after year, with low returns on investments and long hours of work, is the benefits they receive if and when they decide to sell. Not only is the worth of the property important then, but it is also a valuable lever in the farmer's ability to raise borrowings for operational and essential capital purchases for the farm, and we must not forget that those purchases create jobs. The death duty element is very clear. It is all very well to say that no tax will be payable if a farmer dies and leaves the property to his spouse, but what happens if the surviving partner decides, after a period of 10 or 20 years, that she cannot cope and decides to sell and live elsewhere? Tax will be payable on that property which was received originally through the death of a partner. Obviously farmers and others are meant to be grateful to the Government for not taxing the property from the original transfer on death. Perhaps this Government has forgotten that the rural community provides over 40 per cent of our export income. That income is provided by people who live on the annual returns from their investment, which are often as low as nil per cent. Over the past five years those people have received price increases on their goods of only 12 per cent while their costs have risen 44 per cent and they have battled to pay interest rates on borrowings of 18 and 20 per cent.

It is interesting to note how the Canadian Government regards capital gains taxation. Earlier this year, the Canadian Government moved to allow an exemption from capital gains tax up to a limit of $500,000 for every Canadian. The aim was to encourage Canadians, who save a very high proportion of their disposable income, to invest in risk-oriented new ventures. The Canadian Finance Minister, Michael Wilson, said at the time that it was through capital investment that new ideas are implemented, new activities are generated and new jobs are created. With the paranoia that Senator Walsh has about this capital gains tax, he has a different version of it altogether. The Canadian Finance Minister said that he wanted to let the investor choose where to invest; to have individual Canadians pick the winners within a tax framework that rewards success. Obviously this Government does not want that to be done. The Canadian Finance Minister went on to say:

I do not want to further distort the tax system by measures that tell Canadians how and where to invest.

How different that approach is from the approach of this Government, which wants to stifle initiative, penalise success and flatten enthusiasm. Compare that with our own Finance Minister Walsh, who was quoted last month as saying, on the subject of capital gains tax:

A tax on fringe benefits and a capital gains tax could be used as a trade off with the ACTU in negotiations over wage discounting.

That confirms what Senator Chaney has said-a trade-off by this Government with the Australian Council of Trade Unions. It is evident where the priorities and the master of this Government are, but I wonder where it intends to find the initiative and finance to expand Australia. Certainly it will not be in the trade union movement. Unfortunately, if the Government keeps penalising business there will not be any business left to provide it either.

The Government has argued that rural property sales will not be affected adversely, yet it has said on several occasions that one of the desired effects of the tax package will be the reduction in the value of rural land. I cannot understand how making a property less valuable today than it was yesterday is a benefit to anyone. The Government has argued that farmers will not be forced to pay capital gains; that land prices move at the same rate as inflation. That is wrong and Senator Siddons is wrong, because I do not think he understands the land and how people put extra effort into the land to produce more and improve the land to make it better for future generations. Independent studies over the past decade show clearly that rural properties have consistently realised capital gains above inflation. This is not something to be penalised. Very likely the land has become more valuable because of the hard work and improvements made to it. Why should any government try to discourage anyone from improving and making more productive a natural resource? I thought that people on the other side of the chamber were interested in conservation.

The second aspect of the tax package that concerns me is the discriminatory quarantining of farm losses from off-farm income to a limit of $15,000. This is supposed to be a trap for all the so-called filthy rich, tax evading Pitt and Collins Street farmers who are ripping off the Government for millions of dollars, which honourable senators on the other side of the chamber refer to all the time. This measure is supposed to provide the Government with an additional $105m in the first year and $75m per year after that. Well it might, but what it will do for rural industry will cost far more. Already land prices are falling because rural property has been singled out as the one area in which people will not be allowed to offset losses.

A number of aspects of this move concern me. Firstly, many thousands of people buy rural land for a wide variety of reasons. People who are not lucky enough to inherit property very often buy land while they work in another occupation, which is sometimes rural related, such as shearing or contracting, but sometimes not. Over a period they build up equity and make improvements to that land until such time as they have sufficient size and improvements to make a viable living without outside assistance. Others own land which, for one reason or another, over time has become unable to support adequately the family. It is not an uncommon occurrence for a farmer's wife also to be the local school teacher, nurse, secretary or shop assistant. Both these groups could hardly be called Pitt Street farmers whose aim in life is to defraud the Australian Taxation Office. They are genuine, good and deserving Australian people.

A third group of people are Pitt and Collins Street farmers. The Labor Government has painted these people in the blackest of colours, labelling them tax cheats and rip-off merchants; yet it is these same people who have brought new enterprise, development and industry to this country. They have been responsible for the introduction and development of the angora and cashmere fleece industries, the expansion of the gene pool in the traditional cattle breeds and the introduction of new breeds such as charolais, maine-anjou, simmental and limousin, all of which have improved the quality of Australian beef. They have been responsible for the expansion and introduction of new and existing nut varieties, such as macadamias, cashews and almonds.

This group of people has been responsible for the expansion of such fruits as avocadoes. Ten and even five years ago avocadoes cost over $2 each, when one could get them; today avocadoes are available almost all year round. This must please the Labor Government, which has a paranoia about producing cheap food at the expense of primary industry. The Federal Government tells us that these people are evil, ruining the country and exploiting the system. It is the Pitt and Collins Street farmers who have the financial resources to be able to buy and develop large properties, providing enormous wealth in crops and livestock. In drought times it is those people with off-farm incomes who are able to keep country towns going. It is only those with off-farm incomes who can afford to keep developing and keep the money circulating in the towns.

The quarantining of off-farm incomes applies to no other sector of the Australian economy. Why is one form of investment penalised while others are not? For example, Broken Hill Proprietary Co. Ltd can offset its steel losses against oil profits. How can that but not have a destructive effect on enterprise and employment? What other effect can it possibly have? The Government clearly has not thought this tax package through sufficiently. Already Senator Walsh has admitted that business goodwill will be affected and he has already said that job losses will occur.

The third element of the tax package that concerns me and which will cause job losses and stifle enterprise is the fringe benefits tax. Car manufacturers are already claiming that car sales will fall from 1 July next year. That is a great way to give incentive to an industry that is already struggling! Again, the Government forgot-or chose to overlook-how this element of the package would affect the rural sector. Most employees on farms are employed on the basis that whilst farmers cannot afford to pay them large cash sums, they often provide housing, vehicles, meat, electricity and sometimes other benefits. That situation has worked for years with the full support of all parties.

How this tax package will improve productivity or indeed give additional revenue to the Government eludes me. It will simply mean cutting back on productivity instead of expanding it. The same applies to the decision to change the write-off ability of 100 per cent in the first year for water conservation. By the time the tax cuts are introduced by this Government I believe that this country will have turned the clock back many years. Of course, those who still have jobs will pay more tax. However, there will be significant numbers who will be paying much less tax because they will be jobless. They will be the ones who are put out of work by these great reforms of this Government!