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Tuesday, 5 November 1985
Page: 1551

Senator COOK(5.44) —From time to time we have debates in this chamber which seem to lack some substance. They are peculiar debates because the Opposition launches motions but Opposition members do not seem to have their hearts in them or, if they have their hearts in them, seem to lack the capacity to argue their own case. Today it is not peculiar, I suppose, that on the one day of the year on which Australia stops, Melbourne Cup day, they are launching such a debate. What this motion by Senator Messner has relied upon is empty assertion backed up by argument that is specious. In the end, it amounts to a claim by the Opposition that the capital gains tax envisaged by this Government is somehow negative. One of the most gross exaggerations made by the previous speaker, Senator Bjelke-Petersen, was that captial gains tax destroys jobs. But she failed to prove that assertion, and the assertion cannot be proved because it is untrue. In any case, it would depend utterly on a government imposing a capital gains tax that this Government is not going to impose.

The empty assertion approach has only pointed up the fact that this has been a limp debate launched by the Opposition-a debate in which, seemingly, Opposition members do not have their hearts. They do not even believe their own story, and the most outstanding feature is that it has lacked any substance at all. There has been empty talk of incentive as if incentive of itself would change the face of the Australian economy and as if a capital gains tax which will rise to $25m net gain to revenue over five years would be a massive disincentive to Australian industry. In terms of the economies of Australian industry, that is a ridiculous assertion and the Opposition knows it. The Opposition has also relied on the assertion that the tax is not necessary. If I ever saw an argument demolished, that was done this afternoon by the Minister for Finance, Senator Walsh, with his eyes closed.

The third strut of the Opposition's line of argument, if it can be in any way blessed by the term `argument', is that it is to generate and crank up a fear campaign forecasting horrendous rates of inflation and horrendous levels of unemployment. About the only thing the Opposition said would not happen if a capital gains tax was introduced was massive fratricide around the country. The fear campaign has simply been a disgusting exercise to make pretend to occur something that obviously and palpably will not.

Perhaps the real nerve in the Opposition's argument was touched when Senator Messner, in introducing a fairly limp, washed out and weak argument by the Opposition, said that he had discovered a poll in which 67 per cent of Australians were opposed to a capital gains tax. What Senator Messner failed to say was that Opposition senators were not opposed to the proposal that this Government was putting forward. They were opposed to the general concept that he and his Party have been hawking around the country in order to confuse people as to the precise procedures that this Government is intending to introduce. What he did not also say was that most Australians are not opposed to the tax package of which capital gains is a small part, because most Australians are advantaged considerably by the tax package. They know that and appreciate it. If one looks at the polls as to how the tax package as an overall proposition has been received, one sees the evidence with one's own eyes.

As Senator Maguire pointed out this afternoon, the evidence on which the Opposition would often wish to rely is how the stock market is performing. If that is the evidence one wishes to cite in this debate, I would point out that the stock market has given an outstanding vote of confidence to the tax package because the all ordinaries index went through the 1,000 mark for the first time in a record performance on the stock market. So even in the area on which Opposition senators often rely as being the key indicator, the tax package as a whole has been saluted by those who trade in stocks and shares.

The package is popular because most Australian wage and salary earners, over 6 1/2 million Australians-the majority of adults in this country-will benefit, and as typical workers will benefit next year by between $10 and $12 a week as they receive tax cuts, and they will benefit in 1987 by between $14 and $22 as they receive further tax cuts. It may irk the Opposition to know that we are redistributing the tax burden to those who have escaped the burden in the past. We are giving tax cuts to workers who deserve them in order to improve their purchasing power. It may also irk the Opposition to know that we are at last reaching for justice and equity in taxation. I can understand how that hurts the Opposition; nonetheless it is the reason why most Australians support the package and it is a reason with which Opposition senators may have to grapple in the future. Unless the Opposition comes to terms with the fundamental dissymmetry in the Australian tax system and addresses that in a comprehensive way, as we have done, there is no hope for the Opposition to be anything other than incredible, because it will not be credible to anyone.

This Government has bitten on the bullet of one of the toughest political questions that any government can face. It has recognised that over the decades of Liberal-National Party Government in this country the tax system has gone to rack and ruin. The burden has been shifted on to the shoulders of ordinary wage and salary earners who pay every cent of their tax through the pay as you earn system. At the same time, celebrated tax consultants and economists have remarked often enough for it to be more than obvious that for the rich and wealthy in this country tax has become a strictly voluntary contribution. Those remarks are well known.

We saw a massive tax avoidance industry grow under the former Government. We have seen too that billions of dollars have been lost to the public purse by avoidance, which means that ordinary taxpayers have had to shoulder an increasing burden to make up the difference. But it is not for these people-most Australians-that we hear any bleat of compassion or argument for justice or equity from the Opposition. The Opposition has argued on behalf of a small group of people who will be brought at last into the tax net-people who earn income not through wages and salaries but by investment, although income it is-and who will, therefore, be taxed according to the receipt of income. It is on behalf of that small group that this argument has been launched this afternoon-an argument which, as I have said, is without substance.

The public, the media and the financial Press of Australia have congratulated this Government for approaching reform in taxation directly, honestly, openly; for the way in which it has supplied information for public debate and consulted widely with the various interest groups in the community; and for the way in which it has moved, after consideration of the response by the community, to what is an ideal tax package. Of course, in any tax package of the Government in response to community interest there will be winners and losers. But the package as a whole stands on the basis that it is a package best worked out to meet the overall needs of equity, fairness, efficiency and the stamping out of tax avoidance that are necessary features of tax reform in this country.

This afternoon we have had a debate in which the Opposition has plucked at one aspect of an overall symmetrical package aimed at addressing all the dissymmetries in taxation. The Opposition has plucked at that one feature as if it were a major aspect and it maintains, therefore, that the tax package itself cannot pass. Of course, that is a situation in which an opposition, which has not declared its own tax proposals publicly, can and does languish. That is the advantage of an opposition without the responsibility of government and without the responsibility of framing a Budget. It can sit back and carp, criticise and nitpick; in fact, it can border on being dishonest. Until there is a comprehensive package of proposals from the Opposition on tax reform in this country it cannot be judged. Not that that worries this Government. We are proud of being judged on the record of reform that we have introduced in this country in all areas of the economy. It irks members of the Opposition to know that many of the people on whom they rely for opinions and leadership in the private sector economy praise this Government for its achievements.

I turn now to some of the aspects of the debate that has been raised by the Opposition. One of the interesting phrases in the letter sent to the President to start this debate was `because of the destructive effects on incentive'. At first blush, when I saw the words `because of the destructive effects on incentive' I thought that the Opposition might be taking a positive view. It is possible to take a positive view that it is destructive of incentive if widespread tax avoidance and evasion is not curbed. But the Opposition is not taking that view; it is taking a view that defends widespread evasion and avoidance; it has argued to protect it.

There is another aspect of incentive. What about the disincentive to those 6 1/2 million Australian wage and salary earners who pay every cent of their tax to know that there is a small, select band of people who evade their tax payments simply because they can? Any system of taxation which exists on the foundations of fairness and equity is complied with. Any system that is palpably unfair is not complied with. That is a fundamental precept of taxation law. It is a major disincentive for those who honestly pay their tax dollar to know that a select group is being protected from having to pay tax. This disincentive aspect for honest taxpayers ought to be addressed. The Opposition just cannot have it both ways. It cannot plead incentive for the select and impose a major disincentive for the majority, which is what the incentive concept in this urgency motion proposes to do.

I asked Senator Messner, in his substantive address, to quantify what he saw as being the incentive loss due to the imposition of a capital gains tax. He paused and then went on with his address simply because the incentive loss that he asserts in his motion is not a figure that he can quantify. He has no way of knowing what it is. If we refer to the economies of other Organisation for Economic Co-operation and Development countries with similar economies and with which we compare ourselves, we see that there is no loss of incentive, for example, in West Germany or in Japan. We could hardly say that the Canadians lacked incentive. It could not be argued necessarily that business in the United States of America had a massive disincentive because of the imposition of a capital gains tax. We might be able to argue that about Britain but I doubt whether those on the Opposition benches could argue that this was the result of a capital gains tax because they favour the sort of dry or arid government that Maggie Thatcher runs in that country. We could not argue in relation to France either that a capital gains tax is a massive disincentive to reinvestment in industry. If we go to the record--

Opposition senators interjecting-

Senator COOK —The interjections begin to flow as soon as I start to introduce facts in this chamber. Opposition senators get restive and uptight and start to fight back because they know that in the international community to which Australia aspires and of which it feels a part there are integral capital gains taxes. The notable thing in comparing the tax regimes of all those countries is that until now Australia has not had a capital gains tax. Under this Government we are going to join the international community to ensure that the basic precepts of fairness, efficiency and both horizontal and vertical equity in taxation are introduced.

In the few minutes left to me I wish to deal with the capital gains tax. In all fairness to Senator Jessop, he pointed out in quoting from a document from the Treasurer (Mr Keating) that a capital gains tax addresses those two central issues of horizontal and vertical equity: One should be fairly treated at all stages according to one's income level, or one should be fairly treated across the board according to what type of income one enjoys. It is this Government's intention to construct a tax system that is fair. A capital gains tax is an integral part of that system. Capital gains are income. As long as they go untaxed and other income is taxed the situation is unfair. If Senator Bjelke-Petersen reads the Treasurer's statement she will see that many of the qualms she has expressed are not valid. The capital gains tax is indexed. It taxes only real capital gains. It exempts the family home and it also makes other exemptions consistent with the owner use of property. In that sense it is a very soft capital gains tax, one that ought to be in the tax regime of Australia-and it will be under this Government.

Motion (by Senator Sheil) agreed to:

That the question be now put.

Question put:

That the motion (Senator Messner's) be agreed to.