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Tuesday, 26 November 1985
Page: 2223


Senator COATES —I ask the Minister representing the Treasurer a question. I refer him to the comments of the Leader of the Opposition, claiming that the justification for his opposing some parts of the tax package but supporting the personal income tax cuts was that the latter were part of the 1986 and 1987 Budgets. Can the Minister inform the Senate whether any aspects of the tax package are any more or less part of the Budget than any other parts? Is there any way in which Mr Howard can possibly justify his hypocrisy on this matter?


Senator WALSH —I am aware of an extraordinary statement from the Leader of the Opposition, along the lines that Senator Coates outlined. On the PM program on 15 November the Leader of the Opposition said that the Opposition would support the tax cuts but would not support the other tax reform measures, on the quite spurious grounds that the tax cuts-that is, the personal rate scale cuts-already forecast for 1986 and 1987 were part of the Budget but the rest of the package was not. That is an alternative way of saying that the Opposition will approve the rates proposed by the Government but it will not approve the tax base. The Opposition is saying that the tax base can be fretted away and eroded away as much as it has been, with most of the erosion taking place during the period in which Mr Howard was Treasurer, but it will still support tax cuts. Without a tax base the rate scale becomes irrelevant. The rate has no relevance whatsoever if there is no base left. It is towards that point that the country was rapidly advancing during the period that Mr Howard was Treasurer. I can assume only that that extraordinary statement came out of the mouth of the Leader of the Opposition because of the confusion which prevails about this question in the Opposition ranks in general. The first fortuitously public statement on this matter which the Opposition made was made on 19 September, the same day as the Treasurer's statement was made in the House, when Senator Messner wrote in that famous tax committee minute: `We cannot be seen to be supporting the goodies in the package while opposing all the baddies', which is now precisely the policy which is being advocated by Mr Howard. The Leader of the National Party of Australia on the other hand said in the House of Representatives last week:

The Government should be withdrawing the whole of its tax package and considering whether there cannot be a fundamental and significant reduction of government expenditure.

Mr Sinclair and his colleagues had seven years in government during the 1970s and early 1980s in which to address that question should they choose to do so, but they did not do it then and there is no reason to believe that they would do it now. That confusion in the Opposition no doubt sponsored the statement which the Leader of the Opposition made on PM. Finally, the clear and inescapable implication of the policy being advocated by Mr Howard is that the tax cuts-that is the new rate scale-could not be implemented if the tax base is fretted and eroded away in the way that Mr Howard proposes to allow it to be. Since it will not be completely eroded away, the general policy effect which Mr Howard is advocating will be to shift the burden of raising revenue, the burden of taxation, more and more on to the shoulders of honest wage and salary earners operating under the pay as you earn system. It is instructive to note that during the five years in which Mr Howard was Treasurer that is precisely what happened. In his first Budget in 1978-79 PAYE net tax receipts amounted to just under 45 per cent of total tax receipts, but by 1981 and 1982-his final two Budgets-they had risen to 46.2 per cent. If we look at net PAYE tax receipts as a proportion of total revenue, we will see that the increase was even greater. It was 40.8 per cent in Mr Howard's first Budget. By the time his fourth Budget was produced it had risen to 42.9 per cent. So by more than 2 per cent in those four years he transferred the burden for raising government revenue on to the shoulders of the honest PAYE taxpayers, and he proposes to continue that process if he gets the opportunity to do so.