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Wednesday, 9 October 1985
Page: 921

Senator MESSNER(4.47) —I proudly support the matter of public importance brought forward by the Leader of the Opposition, Senator Chaney, today which reads as follows:

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

I address myself firstly to the question of employment because I suppose the most idiotic nonsense that stemmed from the mouth of Senator Maguire a little time ago could have come only from somebody who has the economic detachment he has and who has never taken a risk in his life in terms of business activity; nor does he know or understand the concerns of businessmen who are out there battling in the community.

Let me discuss some of the obvious questions concerning employment that arise from the tax package. We know from the restaurateurs of Australia that 10,000 people are to be retrenched as a result of the introduction of the Government's tax package. We read today that it is expected that 15,000 jobs will be lost in the motor car industry as a result of the fringe benefits tax. We could go on with other matters, but I will turn to them later. Surely that is enough to put to rest the nonsense about which Senator Maguire spoke. I remind him that his State of South Australia will be devastatingly destroyed in terms of employment in the restaurant industry and particularly in the car industry as a result of the measures taken by the Government that he supports.

The Adelaide News today quotes Mr John Spalvins, the Managing Director of the Adelaide Steamship Co. Ltd, as saying that next year his company will not be buying any new cars. How many more examples do honourable senators want me to cite? His company will be paying $15m in extra tax and he says he cannot afford this and consequently will stop buying cars. If that does not have a devastating effect upon employment in South Australia the honourable senator should tell me what will. A point that ought to be made right here and now is that 70 per cent of all fleet cars that are owned by companies in Australia fall into the Commodore or Falcon class. Only 7 per cent fall into what might be called the luxury car class. Therefore 70 per cent of the market in fleet sales comes from Australian manufactured vehicles, those which provide jobs in this country. Yet this Labor Government wants to destroy those jobs through the fringe benefits tax. We do not have to listen too hard to hear the stupidity that comes from Senator Maguire's mouth.

Let us look at the organ grinder and not the monkey and turn to Senator Walsh, who is in part responsible for the tax policy introduced by this Labor Government and which has been clearly designed to destroy jobs in this country and the effects of which clearly he has no understanding whatsoever. I refer to the capital gains tax. The media has been led to believe that this somewhat mild tax will not have any devastating effect on the community. But of course, the opposite is true.

Let us just make the first point: By deciding to introduce that capital gains tax on 19 September the Government is going to create a greater gulf between the rich and the poor, because those who already have assets acquired prior to 19 September will get to pay no capital gains tax, whereas those who are now to strive to build up their businesses and to employ more people will have to pay a capital gains tax and, consequently, they will find their assets reduced. That will create the greatest poverty trap in this country that has ever been invented. That arises from this Government's deliberate decision on 19 December to introduce a capital gains tax.

This comes from the man that Senator Walsh defended here last night when he was defeated on the Superannuation Fund Investment Trust legislation. He sought to defend the action of the Prime Minister (Mr Hawke) when he was the President of the Australian Council of Trade Unions and just about destroyed this country with inflation during the seventies. We draw attention to the Prime Minister's promise before the 1983 election. When he was asked about whether or not there would be a capital gains tax, he said:

. . . and here let me make one point so that even our opponents can understand it, and let me make it beyond all their powers of misrepresentation and distortion. There will be no new capital gains tax.

That was the Prime Minister of Australia speaking. This package we are debating today denies that absolutely. The jobs that will be destroyed as a result of the introduction of the capital gains tax will inevitably be laid at the door of the previous destroyer of jobs while he was President of the ACTU in the seventies, who brought about the greatest inflation that this country has ever seen while he was administering the powers of the trade union movement; and of course, we shall see the same result again.

Let us look at some of the fundamental fallacies of the Government's proposals. First, there are some very great misunderstandings amongst the minds of this Government about what it is trying to do. First and foremost, it is confused about speculative gains made by the turning over of assets rapidly, as against real gains that result from enterprise and effort generated by businesses and by people wanting to do their own things. The first are already covered by the income tax law. If a tax is introduced on the second, it will mean the destruction of entrepreneurial effort and fewer jobs for Australians. Government senators cannot see the distinction and, of course, they talk only in vague, generalised terms, in the way in which Senator Maguire might speak, about the impact of such decisions upon jobs. Of course they will have devastating effects right across the community.

Let us look at the question of negative gearing. Senator Walsh has said here that negative gearing was the source of all evil, it being a great tax shelter which is allowed to grow while there is no capital gains tax. Let us examine the first point about negative gearing. First, the Government's assumption seems to be that there is no economic benefit which stems from that. But of course there is such benefit. There is money expended by people with incomes, which is tax deductible through interest, to build up assets in the way of buildings, homes, and so on, which generate jobs in the building industry. Secondly, those homes and buildings provide rentals or opportunities for people to have housing, or for people to rent them for business purposes, and so on. So it is a fundamental misunderstanding that these loonies in the Labor Party have that no economic benefit stems from that kind of activity, when of course there is. The same principle applies in respect of the rural community, as was pointed out clearly by my colleague, Senator Brownhill, today. But the Labor Party sees it as some kind of tax rort. That is absolute nonsense.

But it is not only that illogicality that is at the core of the problem of the capital gains tax. This Labor Government has decided to outlaw, for tax purposes, the practice of negative gearing and, at the same time, it has introduced a capital gains tax to tax the gain which has been allowed to happen previously. The two are totally illogical. The fact is that Government members have argued in the past that there ought not to be a tax holiday for people who have exercised a tax shelter. They have introduced a capital gains tax, but they have retained the negative gearing abolition. It is absurd. It is about time they woke up to themselves.

Let us turn to the fringe benefits tax. We have seen the job destructive potential of that in restaurants, in car sales and in numerous industries. One can also see quite clearly that this will amount to a second payroll tax. It has the same kind of job destroying impact as has payroll tax paid to State governments. It is an on-cost which will be built into the cost of all goods and services in this country, which can only drive up the costs of manufacture. What could be worse than increasing costs in this country at a time when the value of our dollar is falling, when inflation is rising, and when we shall be seeing jobs under threat as a result of import competition? That is precisely the situation which the Government is pursuing and which it is putting itself into by the introduction of its fringe benefits tax. It is not only sneaky by taxing employers in the way proposed, but it is outright dangerous in terms of its ultimate effect upon the economic opportunities of employees to find alternative jobs. Senator Maguire mentioned the kinds of jobs which are going to turn up somewhere in the community; but that, of course, is an absolute nonsense. All of these things represent a genuflexion at the altar of mythology put forward by the loonie Left of the Labor Party, who have absolutely no concept of the effects of what they are advocating.

Let us just look at one or two other examples of what is included in the package. We hear of the wholesale sales tax, and the way in which it will be applied to goods such as refrigerators, and to consumer durables such as stoves and so on. One hundred and seventy million extra dollars a year will be coming from that source, while there will be some handouts at the lower end of the scales for things such as confectionery. It seems to me to be utterly destructive of what this Government claims to be on about-providing homes for young people who are seeking them-to be driving up the cost of important parts of people's homes such as consumer durables, refrigerators, stoves and other white goods, while at the same time claiming that it is doing something in the interests of tax equity. It is plainly a nonsense, and, clearly, it again demonstrates the illogicality of the Government's position.

I return to the question of goodwill and capital gains tax, because it really comes down to this point about enterprise, which we in the Liberal Party want to make so clear to the Australian people. The fact is that if anybody starts up a small business today-be it a delicatessen operator, or a carpenter and joiner who gets his bag of tools and starts to build up a business, or whoever it might be-and works at that business for 20 or 30 years and accumulates a value in it called goodwill, which is the effort which he has put in over that period, and he sells that business and realises a profit which will then, in turn, become the basis of his superannuation for his retirement, that profit will be taxed at the full marginal rate of income tax. Consequently, as much as half of that amount will be paid to the Commonwealth. Twenty years of effort will go down the drain in tax to the Australian Taxation Office, administered by this Labor Government. That is what is so destructive about the Labor Government's package and why it is so bad. It destroys incentive and, what is more, destroys the opportunity for people to build up their businesses as they want to and consequently to build their lives for themselves. We believe that that is wrong. It is entirely contrary to the principles upon which this great nation has been built; that is, solid effort from individuals striving to do their own thing. These are the basic objections which we in the Liberal Party have to the Labor Government's tax package. It is destructive of not only enterprise but also employment and is likely to lead to very severe job losses over time.

Senator Maguire —Humbug!

Senator MESSNER —Senator Maguire says that that is rubbish. He knows that it is not rubbish. He knows that it is going to happen because he can see it happening already in the car industry in South Australia. He will know tomorrow that it is going to happen in the cosmetics industry and the restaurant industry as a result of his Government's efforts. I hope he is proud when he goes back to South Australia and starts to attend meetings of unemployed car industry workers. I look forward to debating the issues with him.