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Monday, 14 October 1985
Page: 1180

Senator MICHAEL BAUME(8.34) —The Income Tax Assessment Amendment Bill 1985 relates to superannuation deductions for self-employed people. This Bill reminds me of a situation which really developed as a result of the 1980 Budget. Prior to that Budget self-employed persons in Australia-and in the main, of course, they were hundreds of thousands of small business men and women-had no superannuation cover at all. As a result of the Government's initiatives at that time this was provided. I am reminded that in 1980 when the Fraser Government introduced that proposal Mr Howard was the Treasurer and the then Leader of the Opposition, Mr Hayden, said these words about the proposal:

How does the Government--

and of course, that was the Fraser Government-

justify this generous but regressive handout to the high income, self-employed professional in the heartland of the tax avoidance industry compared with the moderate income, self-employed skilled tradesman and farmer? It is a rort for high income earners. All your bankrollers will be making a fortune out of it.

Then he said:

It is a rort for high income earners, a rort for your people.

That was said, of course, by the Leader of the Opposition in those days, Mr Hayden, who is now the Minister for Foreign Affairs. The interesting thing is that this legislation-and I guess there is an irony involved in this-increases by 25 per cent what the Leader of the Opposition in those days described as a rort. It seems to me that this demonstrates how embarrassing it may be for members of the Australian Labor Party continually to use this kind of description, of rort, tax dodge and so on, to describe schemes which are quite properly available to people when in fact not only are they properly available but also history has resulted in a situation in which the Government, a Labor Government, is increasing those benefits.

Of all people I would think that the Minister for Finance (Senator Walsh) may well recognise the merit in members of the Labor Party having a degree of constraint in the language they use to describe this kind of activity when in fact they, having described this scheme as a rort, are now increasing the benefit by 25 per cent. I simply suggest that this is one of those dramatic examples of the use of the smear, the innuendo and the quick dismissal of positions maintained by members of the coalition parties on this side of the chamber whenever they discuss the matter of tax-the sorts of smears and innuendos that seem particularly to emanate from the present Minister for Finance-being totally inappropriate. This is one of the reasons I introduced my comments on this legislation by saying that this kind of thing was described by the Minister's Party as a rort and yet the merit of the porposition is such that it is now being increased by 25 per cent. In other words, it underlines the soundness of the point made by the Treasurer at that time in 1980-Mr Howard-that in fact this was a sensible and proper course to pursue.

This legislation also gives us the opportunity of discussing the general question of tax reform. I regret to say that the results that have emerged from the Taxation Summit and from the immense discussion in the community about attempts to reform the tax system have not been anything like the expectations that were created. There is no doubt that the Treasurer (Mr Keating) had immense support, particularly I might say from the Opposition, for his view that there should be a major reform of the tax system, particularly in the direction of indirect tax. There was no doubt about that and no suggestion to the contrary. The Opposition took the view that in fact there should be an extension of indirect tax, not only to the extent that there should be an increase in indirect tax; in fact at the last election the Opposition parties went to the people with the stated policy that there should be an increase in the proportion of tax raised by indirect tax and that there should be an offsetting reduction in personal income tax. There is nothing new, exciting or exceptional about that proposal. In fact, it remains the Opposition's policy.

The only concern that the Opposition has about this matter is that the Treasurer created an incredible level of expectation which he was incapable of fulfilling because, of course, he was violently opposed by people such as the Minister for Finance, who was the representative of one of the cliques, the groups or factions of the Labor Party which opposed the Treasurer's quite sensible attempts to move in the direction of implementing the policies of the Liberal Party of Australia.

The Labor Party has undertaken many areas of Liberal Party policy. I am reminded, for example, of the introduction of foreign banks into Australia and how, when the then Treasurer announced it in early 1983, the Labor Party took the view that this was a disgraceful and inappropriate method of improving the banking system in Australia. There were violent and offensive suggestions that the Treasurer at that stage was placating the foreign interests who had an undue influence, it was alleged, on the coalition parties. The reality was, of course, that applications were called in January 1983 for foreign banks to enter Australia. Those applications were due to be returned by May 1983. I remind the Government that it cancelled that call for applications because, in fact, it fitted with its policy not to pursue that course of action. Its platform, its hyperbole and the nonsense spoken in this and the other chamber about the entry of foreign banks was such that it opposed strongly any suggestion that foreign banks should come to Australia. It was alleged that the entry of foreign banks to Australia would increase the costs of borrowing and do all sorts of incredible things. It was alleged that if you were thin it would make you fat and that if you were fat it would give you cancer. The most unbelievable remarks were made about the consequences of foreign bank entry into Australia. Yet, having cancelled the previous Government's invitation to up to 10 foreign banks to come to Australia, the present Treasurer is now claiming the credit for having invited and admitted foreign banks into Australia. Apart from being hypocritical, this seems to me to underline the fact that there is great danger in an opposition being opportunistic and opposing matters introduced by a government simply for the sake of opposing them. That is why the present Opposition does not follow that course. It disappoints me, however, that the present Government followed that kind of course when in opposition. It accused the previous Government-I refer here to the superannuation arrangement-of responding simply to the demands of its bankrollers, of simply seeking to bring benefit to those people who were rich or somehow had the opportunity to earn profits. The then Opposition's attitude was so hostile to those people that it attacked the then Government for having introduced a superannuation scheme which allowed small business people, self-employed people, to participate in superannuation.

On this occasion I am simply outlining to the Government that some people on the Government benches always seek to find an offensive motive behind everything that is done by people on this side, or they always suggest that there must be something sinister behind the rewarding of enterprise or the acceptance that profit is not a dirty word. It seems to be that the Government's legislation embraces many of the attitudes that we embraced and that the people who attacked those propositions are now in an embarrassing and impossible moral situation. I include among those people the Minister for Finance, who seems to find it very difficult to discuss any issue in terms of the merit of the proposition involved but who insists on discussing all matters on the basis of personality and verbal abuse. It seems to me that the Senate is not an appropriate chamber for that kind of behaviour. It may be appropriate elsewhere. Our duty is to review legislation and to look at the merits of the issues. If Senator Walsh can find in his conscience that he has the capacity to discuss the issues I would be interested to hear his discussion of the issues. But if all he can find is the capacity to be insulting on a personal level I believe--

Senator Walsh —I'll draw attention to your scungy personal history.

Senator MICHAEL BAUME —That is an example of exactly what I was talking about. Senator Walsh finds it very difficult indeed to discuss any issue on its merits. He is only capable of pursuing personal abuse. I do not think that the tax issue should be discussed on that level. It seems to me that many serious issues are involved in the whole question of tax and I hope that the Senate would like to discuss them. So many of the present arrangements that the Government is introducing-this is not one of them-seem to discriminate against the private sector to the advantage of the public sector. I am very concerned indeed about the way in which the present Government is approaching the general question of taxation and superannuation. I have noticed, for example, that when this was discussed in the House of Representatives one member took the view that the only issue that should be raised was the question of the Raymor superannuation case. That did not seem to me to advance the general question of what is the appropriate, sensible and proper way to discuss the entitlements of small business people, people who do not belong to corporate superannuation funds, to prepare for their old age.

On the question of the Government's approach to fringe benefits and tax in general, I am concerned-no doubt there will be other opportunities to discuss this-that the whole debate appears to have been diverted from the reality. The reality is that under the deal done with the Australian Council of Trade Unions the present Federal Government has, in fact, agreed to provide $2 billion in tax cuts in about September of next year. That $2 billion is not, in fact, a tax cut; it is simply a reduction in the rate of increase of taxation revenue. That $2 billion is a very important figure because it was quite wrongly and improperly suggested to the media by the present Government to be part of the tax package that was presented recently. It was suggested that the $800m in tax raising which was announced in that group of nasties called option A would be offset largely by the $2 billion of tax relief which would be given in September of next year. That is absolutely and totally phoney. Those newspapers that ran the story that a person would still end up $7 a head better off as a result of these tax changes were succoured, I believe, by a most effective Government public relations campaign. The reality is that the $2 billion in tax cuts will be totally offset by the 2 per cent discounting for indexation that will emerge in April next year as a result of the Goverment's belated decision to allow imports to be discounted against indexation. Of course, that will not occur until April next year.

The ACTU, the Government will remember, demanded of the Government that it not proceed with its Budget time promise fully to discount the impact of devaluation on wage rises. There was an absolute need for that to take place. The Treasury insisted on the need for it to take place; the Reserve Bank of Australia insisted on the need for that discounting to take place. In fact, the business community also said that a failure to do so would destroy confidence in the Government's management of the economy. There is no doubt that it was essential that the full discounting of the import rise-the cost of living factor consequential upon the increase in import prices that emerged from the devaluation-not be carried on in wages. It was simply that we were living beyond our means to such an extent that we had to have the biggest devaluation in Australia's history.

Having lived beyond our means in that way, the Government having recognised that, having said that one way to correct that would be to discount the impact of devaluation on subsequent wage cases and having argued its case at Budget time very well-I thought that the Treasurer, Mr Keating, put a very strong case for full discounting-a fortnight later the ACTU imposed its will on the Government and required the Government to change that situation. The ACTU required the Government to do that and the Government, naturally, acquiesced, as usual, in the ACTU's demand. The result is that in the current wage case presently before the Australian Conciliation and Arbitration Commission the Government is not seeking any kind of concession for the one per cent or so of the indexation element that emerges from import costs arising out of devaluation. Not only is it not seeking that, but it has agreed that the 2 per cent discount that will take place in April will be totally offset by a $2 billion cut in taxes. In other words, not only will real wages not be affected in any way by the fact that we were living about 20 per cent beyond our means, but the rest of the community will have to pay for that decision. The rest of the community is being asked to pay through the $2 billion in tax cuts. We found out a couple of weeks ago that $800m of that cost is to be met largely by the business community, by small business and by farmers who have to pay that sum to pay off the deal done between the Labor Party and the ACTU for next year's tax cut which offsets next year's indexation discount. The community is paying to protect the ACTU because the ACTU told the Government that that was what it wanted.

What concerns me immensely is that the Government's public relations campaign quite falsely presented the impression that the tax package involves tax increases on the one hand which are massively offset by tax cuts on the other without any suggestion of the reality of the April 2 per cent discounting for devaluation. We now know who will pay the bill for the deal the Government did with the ACTU. That deal is to be paid for by the rural sector through a range of offensive actions against it. The deal is to be paid for certainly by the hotel and restaurant industry, which is speaking very effectively for itself. It is to be paid for by the community as a whole, in effect as a result of these measures that have been introduced. I remind the Senate that these measures that we called option A were no more than the bribe that the Treasurer offered to the union movement in order to get option C accepted. Now we have lost option C. The Treasurer could not stand up to the pressure from the union movement. Option C, as honourable senators will remember, was a broadly based indirerct tax. Having said we would have to pay indirect tax-that we would not have real tax reform unless there were a broad based indirect tax-the Treasurer gave way because he was pressured by his own Prime Minister, who stabbed him in the back. It seems to me that we must now put up with the bribe which was option A without getting option C. Option C was the arrangement that really was to reduce our personal income tax. It was to bring some real benefit to income tax payers who, quite properly, were complaining that they were being pushed into tax brackets that were far too high. So we are left with the bribe without getting the benefit.

Let us have a slight look at what the consequences of this will be. Here is the Government, by a series of actions under option A, pushing the business community and workers into a situation where the cash economy will become bigger and bigger. Because they cannot do some of the many things which have become customary in the past, they will now be obliged, if they want to benefit people, to make things more and more for cash. I will remind the Senate that while a business lunch is now no longer deductible, a bribe still is. A bribe is deductible if it is necessary for the earning of income. This Government is quite happy to see bribes being deductible against income, but not a genuine business expense involved, for example, in a lunch. In order to placate the ACTU the Government is quite happy to destroy the consequences of the very intelligent and well-worked-out motor vehicle scheme introduced by the Leader of the Government in the Senate last year.

When one looks at the consequences of the Government's failure to introduce a broadly based tax and then its determination to proceed with the bribe nonetheless, one sees that many ordinary Australians will be forced into a situation where they are tax cheats. I have spoken to people who are normal, proper, reasonable, decent Australians. They are not rich; they are not the large people who seem to be always the butt of criticisms by the Minister for Finance, Senator Walsh. They are decent hardworking Australians who say: `For heaven's sake, this has gone too far. The Government has gone right off'. They say: `Very well, we will simply go into barter systems'. A restaurant owner, for example, will have the local butcher to dinner and have, say, a $100 dinner with his wife or associates. That $100 will be cut out when the restaurant owner then goes to the butcher and buys his meat.

I think that any tax system which pushes ordinary decent Australians into becoming tax cheats is a lousy system. I am most concerned indeed about the way the Government has gone about pushing people into that kind of situation. It seems to me that there are better ways for the Government if it is genuine, to look at the sorts of problems that have emerged in this area. If the business lunch has become too great a rort, why not put a ceiling on it? Why wipe it out altogether? I remind the Government that there are genuine business lunches and genuine seminars. The inadequate dividing line, which is obviously unable to be drawn by the Government, judging by the inadequate responses from the Government Ministers in this place to questions on this score, clearly creates an atmosphere of uncertainty in the law. One of the vital things about tax law is that we must have certainty before it if we are going to have a good tax law.

I regret to say that I do not believe that the Government knows what it is doing. It was appalling to hear, for example, the Leader of the Government in this place admit here last week that there had been no adequate study of the consequences on the motor industry, for example, of the Government's decisions in relation to motor transport and the extent to which it could be tax deductible. The Government had not done, if the Minister was right, any kind of adequate study on the consequences for motor vehicle sales or for employment in the motor industry of its changed arrangements. Yet the Government, of all people, ought to know how sensitive that industry is to any impacts external-in particular tax-on that industry.

There is no doubt that Senator Button, having spent a great deal of time coming up with what I believe to be a first rate motor vehicle industry plan, is now seeing that plan sabotaged by his own Treasurer. I do not know to what extent the motor industry will be able to overcome this situation. I do not know how many people will be sacked. There was a suggestion by one of the automotive associations that there will be massive sackings and an enormous fall in motor vehicle registrations next year. I do not know how accurate that is, but neither does the Government, and that is the appalling situation. The Government has no idea of the consequences of its actions. It is almost criminally irresponsible. Its only intention, its only concern, was to raise money without giving a damn for the industry, the employment and the consequences on the Australian economy of what it was setting out to do.

There have been announcements in the papers in recent days too about the impact on the entertainment industry. It seems to me that rather than throwing out the baby with the bath water all this Government had to do was to set a series of reasonable limits. But, of course, that would have suggested that it had a concern for the industries involved, and it did not. Its total concern was the raising of revenue. I would like to conclude by making this point. I do hope that the Government, in discussing tax measures, will in fact find itself capable of discussing them in terms of the merit of the measures themselves rather than questions of personality and rather than saying that anyone who supports private enterprise is in fact supporting tax cheats. The reality is that there is a very difficult dividing line between the proper deduction and those people who are misusing those deductions. I hope that the Government approaches this with a fair recognition of the reality that there are genuine and proper deductions in the business community.