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Thursday, 8 June 1989
Page: 3705


Senator STONE (Leader of the National Party of Australia)(8.01) —This evening we are debating cognately four Bills. One of those Bills which was to be debated this evening has now been deferred because of the tragic events in China. I share the Government's view that it is appropriate to defer that legislation for the time being. The four Bills before us are the Taxation Laws Amendment (Rates and Rebates) Bill 1989, the Taxation Laws Amendment Bill (No. 3) 1989, the Sales Tax (Exemptions and Classifications) Amendment Bill 1989 and the Income Tax (Arrangements with the States) Repeal Bill 1989. It is obvious that debating four Bills of this kind cognately in the space of 30 minutes does not leave much time to say a great deal about any of them. I propose to consider them in reverse order, so to speak in ascending order of importance. The Opposition does not oppose the Income Tax (Arrangements with the States) Repeal Bill 1989 but shall move an amendment to the motion that this Bill be now read a second time. In relation to that Bill I shall move:

At end of motion, add: ``, but the Senate notes that:

(a) the Treasurer is devoid of any policy on Federal/State financial relations;

(b) the Treasurer has been unable to achieve effective restraint in State expenditure;

(c) the Treasurer remains exposed to the effects of increases in State charges on the CPI; and

(d) the global borrowing limits are a fiction given the extent to which they can be circumvented''.

This Bill is nothing more than a political stunt. I put it to the Manager of Government Business (Senator Robert Ray) in particular that it is a waste of valuable parliamentary time when the Senate's legislative load is already so heavy. The Act, passed in 1978, has become moribund. That is not contested. But to be taking up parliamentary time to repeal it seems to me to be ludicrous. It was enacted in 1978 as a measure designed to provide the States with an opportunity to reduce taxation. It provided for up to 10 per cent of the tax revenue collected by the Commonwealth in each State to be allocated to that State explicitly in the form of grants. If a State did not desire the amount of revenue its residents could receive a tax rebate from that 10 per cent-which the State Government did not receive. In that way it was believed that a discipline would be imposed on State governments to encourage them to manage their financial affairs in a most efficient manner. This proposal was not taken up by the States at the time. The chances of tax reduction that it held out were destroyed by the vehement opposition to it by the then Premier of New South Wales, Mr Neville Wran.

It is regrettable that our Treasurer (Mr Keating) should spend time on playing political games in putting up this piece of legislation rather than getting about his assigned duties and, in particular, rather than formulating an effective Commonwealth-State financial relationship. I conclude my comments on that matter and simply pass on. The Opposition does not oppose the repeal of the legislation.

I now refer to the Sales Tax (Exemptions and Classifications) Amendment Bill 1989. The Opposition does not oppose this Bill, but again we will be moving an amendment to the motion that the Bill be read a second time. I now foreshadow that amendment:

At the end of motion, add: ``, but the Senate notes:

(a) that this Bill arose fundamentally because of the Government's blatant exercise of attempting to manipulate the Consumer Price Index by lowering the excise tax on beer while introducing a sales tax on normal strength beer;

(b) the Government's failure more generally to reform the ramshackle indirect tax system, which is littered with inconsistencies and anomalies; and

(c) that the Commonwealth Ombudsman has criticised the administration of sales tax, in particular on the grounds that it is unfair to expect taxpayers to operate a self-assessment system in an atmosphere of uncertainty and without an efficient advisory service or a regular and timely monitoring system''.

This Bill simply highlights the anomalies and inconsistencies of that ramshackle indirect tax system to which the second reading amendment I have just foreshadowed refers. The Treasurer has used the present wholesale sales tax system as a classic means of taxation by stealth. In the first nine months of this financial year sales tax revenue was up by over 24 per cent. That is well above the 14.4 per cent increase forecast in the Budget.

It is not an isolated development. Last financial year sales tax collections rose by 19 per cent; that followed rises of 10 per cent in 1986-87 and 15 per cent in 1985-86. In the six years of the life of this present Government, sales tax revenue has gone up by about 150 per cent-roughly three times the rate of inflation in that period. However, this particular Bill was not prompted by an endeavour to reduce the tax burden; it is simply a political stunt.

After attempting in the last Budget to fudge the consumer price index (CPI) figures in the short term by reducing excise tax on beer, the Government ran into another one of its manifold unintended consequences. Carlton and United Breweries Ltd claims to have leased beer bottles from the manufacturers of those bottles, Bottle Co. of Victoria Ltd, since 1903. Following the change in the application of sales tax to beer in the August Budget that company, quite legitimately-as has been admitted by the Government-sought to take advantage of a pre-existing exemption in the sales tax law which the Government in its haste had totally overlooked. In doing so the company was not seeking to increase its own profit. It was seeking to pass on the advantages of that exemption to consumers by selling its beer at a slightly lower price than that of its competitors. I do not think reducing prices is a serious crime.

I want to complete my necessarily attenuated comments on this Bill by drawing to attention to the reference to the Commonwealth Ombudsman in the second reading amendment which I earlier foreshadowed. In recent statements the Ombudsman has listed a number of serious problems with the general administration of the sales tax system. In his report in the Administrative Review No. 50 of April of this year the Ombudsman noted:

The most significant problems are:

uncertainty about key provisions of the sales tax legislation giving rise to confusion both within and outside the Taxation Office, and to disputation;

disadvantage to taxpayers because the requirement to assess for themselves which goods are taxable and at what rate, leading to difficulty in the absence of an efficient inquiry system, in establishing correct liability for particular transactions;

absence of regular monitoring of sales tax returns by the Taxation Office so that taxpayers' errors are not detected in time to prevent significant arrears of sales tax, which continue to accrue until detection;

inconsistent advice and decisions from regional offices which may put some manufacturers at a significant competitive disadvantage; and

difficulties in obtaining refunds of overpaid sales tax.

The Ombudsman expressed the view that it is unfair to expect taxpayers to operate in a self-assessment system, in an atmosphere of uncertainty, and without an efficient advisory service or a regular and timely monitoring system. He said:

It is equally unjust, to penalise them for innocent errors resulting from these deficiencies.

It is true that those highly critical remarks were made as recently as only April 1989. I think, therefore, that it is fair to give the Commissioner of Taxation some time to respond to them, not merely in word but, I trust, in deed. Therefore, I say no more about it other than that the Opposition will certainly be monitoring that response.

I turn now to the Taxation Laws Amendment Bill (No. 3) 1989. The Opposition will not oppose the second reading of this Bill, but I foreshadow major amendments at the committee stage which are designed to address one aspect of the Bill which I can describe only as remarkable. Indeed, it has been the subject of some remark by the Senate Standing Committee for the Scrutiny of Bills. That Committee has drawn attention to the provisions of this Bill which would provide the Commissioner of Taxation, at his unfettered discretion, with the authority to provide information regarding taxpayers, whether individuals or corporations, to designated law enforcement agencies and also to the Comptroller-General of Customs. What is so remarkable-and, as I say, the Scrutiny of Bills Committee has drawn attention to this very point-is that this extraordinary provision appears in a Bill, the main purpose of which otherwise is to make a number of wholely technical amendments and to repeal a number of provisions that are no longer operative in tax law.

I will deal briefly with those unexceptionable, if you like, aspects of the Bill. What they are really about is clearing up a few of the unintended consequences of the Government's own ill-considered legislation. For example, the Bill moves to exempt from capital gains tax a taxpayer's residence when it consists of habitation in a retirement village and the like. The fact is that in the past the Government has claimed that such residences were exempt from capital gains tax. However, as the Treasurer now says, just to make sure or, more accurately, to fix up an oversight, the Government is putting forward this particular change.

I turn to the coalition's proposed committee stage amendments about which I propose to say something now because I regard the matter to which they relate as significant. As I said earlier, the amendments relate to the intention in this Bill to amend the taxation secrecy provisions in order to allow the Commissioner of Taxation to disclose, at his discretion, tax information to specified law enforcement agencies, namely, the Australian Federal Police, the State and Northern Territory police forces, the Director of Public Prosecutions, the National Crime Authority, State and Territory corporate affairs commissions and the Australian Customs Service. The coalition is not satisfied either with that framework of proposals or with the safeguards, such as they are, contained in the legislation against the misuse of such powers. We are simply not willing to place in the hands of the Taxation Commissioner further powers to relay confidential taxpayer information to other government bodies without much more powerful checks upon that process than the Bill now contains and, in particular, without changing, so to speak, the point of initiation away from the Commissioner and into the law enforcement agencies.

We are particularly concerned about these provisions in light of the Taxation Office's already apparent failure to comply effectively with the tax file number legislation requirements. I note that earlier this year tens of thousands of letters containing highly confidential tax file numbers were posted to dead people and to the old addresses of people who years ago had moved from their abodes. Even more recently, Opposition members and senators have been made aware of further gross breaches of secrecy provisions with people's tax file information being sent to the wrong people. For example, a case was raised only very recently by the honourable member for Warringah, the Hon. Michael MacKellar, in the House of Representatives.

The Opposition wishes to establish a mechanism which will provide a check on the ability of the Commissioner of Taxation to provide information solely at his discretion to various law enforcement agencies. Effectively, what we shall be proposing at the committee stage are procedures very similar to the procedure which exists for information requests by the National Crime Authority. I repeat: We propose to place the initiative for such a request not in the hands of the Commissioner but in the hands of the law enforcement agencies. Where an authorised law enforcement agency officer considers that the Taxation Commissioner may have information that is relevant to the particular inquiry or may have acquired information which is relevant to establishing whether a serious offence has been committed or is being committed, the officer, we propose, may apply to a judge of the Federal Court of Australia for access to that information. That application would be required to be in writing and would need to set out particulars of the information requested. In turn, the Federal Court judge may-I repeat, may-order the Commissioner to disclose the requested information to the law enforcement agency and make further orders prohibiting that agency from communicating that information to unauthorised persons.

I repeat: This is not the Government's proposal; these are the amendments which the Opposition shall, in due course, move in the committee stage to that proposal. We will provide for the Taxation Commissioner to be given the opportunity to bring to the notice of the judge any matter that the Commissioner considers should have been regarded in considering the application. The judge would need to be satisfied that that information was relevant to the investigation. We propose similar conditions to those which we are proposing in the case of the law enforcement agencies to apply to the Comptroller-General of Customs in terms of a request for information which he and his officers may also make in like case.

Finally, we propose that the Privacy Commissioner should monitor the provision of any such requested information and shall report to the Minister if the Privacy Commissioner thinks that the provision of that information is an invasion of privacy. I will have a good deal more to say about those matters when we come to the committee stage.

I conclude my remarks on that legislation by saying that I regard it as astonishing that the Government should bring forward a proposal of that kind tucked away in an otherwise nugatory and inoffensive technical, unassuming Bill, particularly so in light of recent events and the hullabaloo last year in relation to the tax file number and subsequently this year in relation to the administration of that legislation, even as finally enacted.

I come now to the final Bill before the Senate in the series of Bills being debated cognately this evening, that is, the Taxation Laws Amendment (Rates and Rebates) Bill 1989. The Opposition will not oppose this Bill, but I foreshadow the following amendment to the motion that the Bill be read a second time:

At the end of motion, add: ``, but the Senate notes that:

(a) even after the July 1989 tax cuts, the Hawke/Keating Government will remain the highest taxing Government in the post-war history of Australia;

(b) the long overdue tax cuts will substantially be eaten up by the consequences of the Government's high inflation and high interest rate policies; and

(c) it is vital that economic measures be implemented to lower inflation and interest rates if Australia is to see a sustainable reduction in the tax burden and in the enormous net foreign debt of $103 billion''.

This Bill, of course, delivers the personal income tax reductions and other changes which were announced in the 12 April economic statement by the Treasurer. However, the fact is that, as noted in that foreshadowed second reading amendment, even after the tax cuts are delivered on 1 July, this Government will still remain the highest taxing government in our postwar history. The truth is that the tax cuts to be granted at that time will return only part of the taxes that have been ripped off Australian taxpayers over recent years through the insidious processes of bracket creep. According to the very professional economic consultancy firm, Access Economics Pty Ltd, by the end of next year this Government will have plundered around $10 billion from taxpayers through bracket creep since 1985-86-basically, since the tax summit. The tax cuts being given at the beginning of next month are worth only around half of that amount.


Senator Walters —What about the sales tax increase?


Senator STONE —As my colleague Senator Walters reminds the Senate, this says nothing as to the plundering through the sales tax mechanism to which I referred before Senator Walters came into the chamber. The new tax scales announced by the Government offer very little incentive to work harder for anybody earning over the second highest tax threshold of $20,600, which is, of course, about 20 per cent below average weekly earnings. The top rate of tax, 48.25 per cent-that is, 47 per cent plus the 1 1/4 per cent Medicare levy-cuts in at an income of still only $35,000, which is now considerably less than one and a half times average weekly earnings. Thirty years ago, the top rate-which admittedly was then somewhat higher, in the area of 66 per cent-did not become effective until one earned 18 times the average weekly earnings. As bracket creep continues to take its toll, almost two-thirds of Australian taxpayers will be facing the top two marginal tax rates within two years.

The simple fact is that the Government cannot give sustainable tax cuts without cutting inflation, including wage and salary inflation. The Government cannot cut that inflation because it has abrogated economic leadership for the past two years almost, since the last election, in favour of cheap electoral stunts. One indication of this is the Treasurer's economic statement of 12 April last. It contained barely two sentences-one each-on Australia's two major problems of high foreign debt and high inflation. We all know what has happened since that statement was brought down not quite two months ago. We had figures only a short time ago showing that our foreign debt has increased even further from the figures which the Treasurer was no doubt basing his remarks on at that time, and at the end of March we had net foreign debts of $103 billion.

The Prime Minister has mounted some sort of personal campaign in the media designed to con Australians into the view that somehow that does not matter because, as he says, 61 per cent of these debts are liabilities of private corporations and they are not, therefore, the Government's responsibility. That, of course, is hogwash. Of course they are the Government's responsibility, because it is the policies of the Government which have produced the deficits month by month on the external balance of payments on the current account of this country, which can only be paid for, only be financed on the capital account, either through borrowings or through selling off bits of Australia. Of course, the Government has been presiding over policies which have resulted in both of those things being done at a very fast clip. Not only have we now totted up $103 billion of foreign debt, but at 30 June last, which is the latest date for which we have figures in this area, we also had totted up net foreign other liabilities, in the sense of ownership of land, companies, corporate equities and assets other than debt instruments, of $30 billion. At that time our total net foreign liability position in this country was $121.2 billion.


Senator Maguire —Who is `we'?


Senator STONE —Under the policies of this Government, the Government which Senator Maguire is happy to speak up for.


Senator Maguire —You mean John Elliott and Rupert Murdoch, do you?


Senator STONE —It is no good either the Prime Minister or Senator Maguire, in his lame brained fashion, going on about people such as Mr John Elliott, Mr Alan Bond or other people like that borrowing overseas-all the scapegoats which this Government would love to lay the responsibility on for the results of its policies. The fact is that if it had not been for the policies of this Government, we would not have the deficits which have had to be borrowed. If Mr Elliott, Mr Bond or somebody else had not borrowed them, governments would have had to borrow them. Somebody would have had to borrow them, as Senator Maguire well knows. It is totally disingenuous, to use a parliamentary expression, for the Prime Minister or Senator Maguire to attempt to persuade the people of this country that it is not the Government's fault.

I turn to the matter of high inflation. As we all remember very clearly, the Treasurer, in last August's Budget, told us that by this time inflation would have dropped to no more than 4.5 per cent. He even went so far as to forecast beyond that: that in the financial year on which we are about to embark, it would drop further to between 3 per cent and 4 per cent. What have we got? Even on the new fudged figures we have got a consumer price index running at 6.9 per cent in the 12 months to the March quarter, and almost certainly rising even further in the current quarter. So we will finish the year with an inflation rate of probably over 7 per cent compared to the Treasurer's 4 1/2 per cent. The Commonwealth Treasury, working for this Government, as is its duty, in figures prepared for the recent Premiers Conference and Loan Council meetings in Canberra a few weeks ago, in putting forward information to indicate to the States the amounts of the financial assistance grants which would be likely to be paid to them next financial year, made the point-it had to, because it had to provide these forecasts for that purpose-that in the 12 months to the March quarter of next year inflation would run at 6.9 per cent. So the Government's own agencies are currently forecasting that inflation will continue to run at its present extravagant levels. Because of these two major problems of high foreign debt and high inflation, the Government simply cannot give tax cuts that are sustainable.

The tax cuts which will be given, or which the Government is purporting will be given in a few weeks time, on 1 July, will be eaten up, as our second reading amendment says, by the consequences of the Government's high inflation and high interest rate policies. In the last 12 months alone housing loan mortgage rates have risen by 3 1/2 percentage points, which in itself goes a very long way to eating up the consequences of a tax cut which is broadly estimated to be $20 a week after tax for the average weekly wage earner. In addition, the inflation rate is bowling along merrily at 7 1/2 per cent, and the wage and salary package which has been negotiated between the Government and the Australian Council of Trade Unions will increase wages and salaries, according to the Government's estimates, by 6 1/2 per cent, although most independent commentators expect the increase to run at 7 1/2 to 8 per cent. Judging by the recent rate of wage drift I would say that even that may turn out to be an underestimate. This will speed up even further the process of bracket creep to which I have referred. The Bill which purports to represent the final fruits, which is meant to bring home the bacon, as the Treasurer promised his Party and ministerial colleagues at the time of the Budget last year, will bring home the usual litany of fraud, deceit and failure of which the Government can now be totally convicted. I move:

At end of motion, add ``, but the Senate notes that:

(a) even after the July 1989 tax cuts, the Hawke/Keating Government will remain the highest taxing Government in the post-war history of Australia;

(b) the long overdue tax cuts will substantially be eaten up by the consequences of the Government's high inflation and high interest rate policies; and

(c) it is vital that economic measures be implemented to lower inflation and interest rates if Australia is to see a sustainable reduction in the tax burden and in the enormous net foreign debt of $103 billion''.