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Friday, 29 November 1985
Page: 2577


Senator MESSNER(10.44) —The Sales Tax Laws Amendment Bill (No. 2) 1985 and associated Bills are the first Bills in a series of legislation relating to the Keating tax package. As we all know, the Keating tax package was brought down on 19 September, earlier this year, and these Bills represent a significant part of that total package. As has been made quite clear by the Opposition, we will be opposing various parts of the total Keating package and taking positions as and when we see the legislation in respect of other parts of the package. We will not be opposing these Bills, which represent a rationalisation and reclassification of many types of goods that are subject to sales tax and a reorganisation of the rate structure for sales taxes that apply to various goods.

That does not mean, however, that the Liberal Party of Australia and the National Party of Australia do not have very significant views about some of the matters incorporated in the legislation. I make the point that many of the anomalies that were supposed to have been cleared up as a result of the introduction of these measures appear to have been regenerated by them. Let me give some examples. This Government is determined to treat products such as ice cream as a fad and not a food and so tax it as though it were some kind of hobby rather than as a major food item, which I am sure most Australian people would consider it to be. There are also the questions which were resolved yesterday by the Treasurer (Mr Keating) in relation to sales tax on solar hot water systems and goods such as atlases. Consequently, by virtue of the announcements yesterday-I see that before us we now have amendments proposed to the Bills-those matters have been clarified.

However, many anomalies remain in the legislation. For instance, it seems to me to be illogical and unfair that products used principally by men, such as safety razors, razor blades and electric shavers-although I must say that I do not use them-shaving brushes and shaving creams and pre-shave and after-shave lotions, bear a 20 per cent rate of tax. However, comparable equipment and lotions for skin and personal care which are used by women attract a rate of 30 per cent sales tax. It is quite unusual that this Government, which is so equalitarian in its approach to matters sexist, should penalise women in this way in regard to toiletries whereas men who choose to shave-I cannot understand why they want to spend their money on shaving equipment when, obviously, nature can take care of the problem-are penalised by a 20 per cent rate of sales tax. That situation seems to be rather anomalous. The Government, in its haste to get in place some legislation in order to save Mr Keating's face-literally-obviously has not considered all the effects of its rationalisation process.

Perhaps one of the silliest and most absurd anomalies that result from this legislation is that dog shampoo attracts a tax at a rate of only 20 per cent, but human shampoo has to bear a tax at a rate of 30 per cent. It is rather strange that this Government has seen fit to introduce such anti-human legislation. It takes the prevention of cruelty to animals to a ridiculous extreme.


Senator Peter Baume —If humans used animal shampoo, what would happen then?


Senator MESSNER —I guess we will see that happening. Do you not think, Madam Acting Deputy President, that many people will use dog shampoo in future? We cannot predict what the outcome of that might be for future generations. No doubt it will be a matter for Senator Georges and his Senate Select Committee on Animal Welfare to investigate in due course, as no doubt there will be a run on dog shampoo and a shortage of it in the future. Consequently, dogs will be left out in the cold literally, Heaven knows what might happen with a growth in the number of smelly dogs around the place. No doubt many complaints will be made to Senator Georges's committee as a result.


Senator Aulich —Canine dandruff could be a problem.


Senator MESSNER —Canine dandruff will become a serious problem, no doubt, and there will be a rush on vaccum cleaners to help fix that problem. Some of the serious aspects of this legislation are of great importance. We must acknowledge that a measure such as that which has been taken against ice cream-although some people might say the ice cream industry is a small time industry-will have very significant effects on dairy farmers. We know that the dairy industry in Australia is not in the greatest state of health at present. I find it absolutely outrageous that the Government should seek to impose a sales tax, albeit at a rate of only 10 per cent, on legitimate and well recognised food items such as ice cream which stem from the dairy industry. Jobs will be lost in the dairy industry, which means jobs lost in regional towns and country areas where dairying is such an important part of community activity. That is certainly true of parts of my State of South Australia, particularly the south-eastern part around Mount Gambier which, of course, is very heavily reliant upon the dairying industry. From the estimates that have been provided to me by the industry, I believe that the ramifications of the new tax are likely to lead to a drop of 5 per cent in ice cream sales. This proposal will not only have a critical effect on dairying-I notice that some of my Queensland colleagues are present in the Senate-but also it will obviously have an effect on the sugar industry, which is going through a difficult period in the State of Queensland.

All in all, it seems that the Government has rushed in in trying to organise its so-called rationalisation of sales tax. It has just created more and more anomalies and difficulties in the administration of sales tax. It also has not thought through the employment consequences and the effects upon the economy of some of the measures that it is proposing in this legislation. For that reason, we are a little surprised that the Government has not seen fit to listen to our representations on such important matters and to consider amendments along with those which were announced yesterday with respect to school atlases and solar hot water systems.

I think it is also important to realise that there have been rather significant changes to the sales tax law in respect of such important consumer durables as stoves, refrigerators and white goods of that kind. That means that higher taxes will be imposed on those goods. This, of course, flies in the face of apparent Government concern for young people being able to obtain houses. We know that the Government is killing home ownership in this country through its fierce interest rate policies which deliberately keep interest rates high in order to make sure that the dollar does not fall any further on the world markets. As a result people have found that interest rates on a basic home loan have risen from a level of only 11 per cent about a year ago to at least 13 1/2 per cent. That is not the average cost of a home loan to a home buyer at present, because there is a drought in money available for housing. Banks and financial institutions are rationing the amount of money that people can borrow at the 13 1/2 per cent rate, so people are being forced to borrow topping-up loans, such as personal loans or overdrafts, or they have to go to the loan sharks, and they are forced to pay 19 or 20 per cent on the topping-up money that might be required. That means that the average interest rate that people are paying for new home mortgages at the moment is more of the order of 15 or 16 per cent than it is 13 1/2 per cent.

The Government claims it is doing well for Australians by keeping a 13 1/2 per cent ceiling on interest rates for home loans at the moment. It is a farcical situation. We know full well that, come 8 or 9 December, immediately following the South Australian election, the Government will lift the ceiling on home loans and interest rates will rise. That will occur as a direct result of the political mischief that this Labor Government is perpetrating at the moment as it tries desperately to keep the Bannon Labor Government in power in South Australia. We know how desperate things are, because today the Bannon Government has placed advertisements in Adelaide newspapers and in other media outlets emphasising what it says is the false nature of the assertions of the Opposition in relation to interest rate policy. Those claims made by the Bannon Labor Government are false. It will be seen in due course by the people of South Australia and of the rest of Australia that the interest rate policy of the Hawke Labor Government is biting and will continue to bite more and more deeply into the flesh of the Australian community in the months ahead.

The point that has to be remembered is that not only are people paying a great deal more for their home mortgages as a result of the Hawke Government's deliberate interest rate policies, but also they will be forced to pay higher taxes on the white goods that they purchase to put in their homes. This will be a direct result of this piece of legislation that is before us today. We find it extraordinary that this Government should seek to penalise young home owners and buyers in the way that it does. By taxing the necessities-the various white goods that are needed to furnish a house-the Government is making sure that young home owners will have less money to put into their houses. We find it extraordinary that the Government has not thought through more carefully its whole approach in this area and that it has not got together a more comprehensive package.

We have to recognise too that part of the Keating tax package is aimed at attacking those who are renting homes. The tax package will introduce a capital gains tax. It will also abolish negative gearing for the purposes of tax allowances. That will mean that a shortage of rental housing will develop in this country, as there already is in the suburbs of Sydney. Rents in Sydney particularly, and in other parts of Australia, are rising fiercely at the moment. It is not unusual for housing rents to go up at the rate of $10 every couple of months or so. As a result of the Keating tax package, the capital gains tax and the negative gearing arrangements, low income earners will be hurt. These proposals come on top of the sales tax impositions that I have just mentioned on white goods such as stoves, refrigerators and items of that kind which are the subject of this legislation. This Government is really in a frightful mess in working out its policies to help Australian home owners. I certainly think that this tax package in its entirety will have an absolutely devastating effect on future home ownership in this country, and the sales tax Bills before us today are but one part of it.

The broad thrust of the Government's direction with regard to sales tax is one which generally finds favour with the Liberal and National parties. We are in favour of a gradual and predictable extension of indirect taxes, with a commensurate reduction of direct taxes-taxes on income. It has been a matter of record for some years that that is the policy to which the Liberal and National parties subscribe. We believe that there should be more emphasis on indirect taxes in order to provide more incentives for people to earn more income.

We have to recognise that this proposal before us today has defects in that it contains anomalies that I have mentioned. Also, it is not strictly neutral, although Mr Keating promised us that we would have a neutral rationalisation of the sales tax system as part of this tax package. Indeed, the net effect of all the changes that will occur with the introduction of his legislation is that the Government will raise an extra $110m from Australian taxpayers as a result of Mr Keating's apparent concern for justice for taxpayers. It seems a somewhat absurd notion that a government can rationalise a tax system but still raise an extra $110m-which will hit the pockets of the taxpayers of Australia even more.

The various details of the changes are significant. I applaud the Government's approach in simplifying the classification procedure and in introducing a three-rate structure. Whether or not it has got the goods in the right categories is a matter for debate, as has been clear from some of my earlier remarks. The basic problem really is that the idea of broadening the tax base in the way contemplated by this legislation introduces all kinds of difficulties in respect of particular industries, and it is that which we have most quarrel with.

As I say, the approach of the Liberal Party and the National Party to the extension of indirect taxes is one of gradualism and predictability. That means that the industries which will be affected by change in respect of sales tax-whether through reclassification, different rate structures or the bringing to tax of various goods that were not previously subject to tax-ought to be given the opportunity to adjust and take account of those effects. We have only to observe the effects on the wine industry of the sales tax changes last year. I am sure that you, Mr Acting Deputy President, coming from the great State of South Australia, would know full well that the sales tax increases on wine that occurred as a result of the Hawke Government breaking its promises last year have resulted in a fall in the sale of wine, which has affected very greatly the produce and the prosperity of the Barossa Valley and the irrigation areas of my own State of South Australia. That introduced a concept and a lack of confidence as far as the future is concerned for the wine industry in South Australia. That is something to be considered as a direct example of the problems that can occur through arbitrary measures, such as taxes, being imposed on particular industries without their having been given appropriate time for consideration as to change and restructuring. I believe that the elements of the legislation before us at the moment contain the same lack of consideration on the part of the Hawke Government for matters of that kind. No doubt we will see emerging as the months go by more and more problems in industries such as the ice cream and dairying industries, which I have already mentioned.

I turn to the amendments that have been proposed in respect of this legislation. We note that, as a result of the deal between the Australian Democrats and the Government yesterday, one or two minor matters have now been taken care of by virtue of a Government amendment. It provides that tax will not be imposed upon atlases used exclusively for educational purposes and upon solar hot water heaters. Those are points which, in any kind of isolated consideration, are legitimate and worthwhile points to make, and we will not be opposing that Government amendment.

The amendment that is being proposed by the Australian Democrats is of a different kind altogether. It seeks to extend an exemption for sales tax on goods that are available as special aids for the handicapped and the disabled. That is a general policy line which I think all of us would like to support. However, the problem with the Democrats' amendment is that it is such a loose amendment. In fact, it seems to give carte blanche to any kind of aid, without its necessarily being defined as being specifically helpful to the handicapped or to the disabled. Indeed, it does not require a specific authorisation from medical practitioners who are expert in that particular field, but instead seems to require a rather loose arrangement for approval by any medical practitioner who may prescribe any kind of aid or appliance. That seems to be somewhat loose but, more particularly, it does not seem to be aimed at assisting particular groups. Indeed, these goods may be shown, when they are subject to proper medical examination, not to be helpful to those groups at all. Consequently, we think that the Democrats have overstepped the mark in terms of what they are trying to achieve by this amendment, and we will not be supporting it on those grounds.

I should mention that the removal of the sales tax on aids for the disabled and the handicapped has been part of Liberal-National Party policy. Indeed, it is something we would pursue in government in order to ensure that as much as possible is given to the disabled in that regard. Because no appropriate mechanism is recommended by which people can gain access to what are legitimate aids for the disabled, the amendment cannot be supported by the Opposition.

As I pointed out at the outset, the Opposition will not be opposing the sales tax legislation but we do realise that there are very significant problems with it. Indeed, we wonder whether the Government has thought through the consequences of its actions, in much the same way as it seems that it has not thought through the consequences of its proposals in respect of other parts of the Keating tax package.