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Wednesday, 26 May 1993
Page: 1363

Senator HARRADINE (5.37 p.m.) —Would the Minister mind explaining further what he means? That is not as I understand the position that is before us. He is virtually saying that the expenditure of the employer will not be exempt from the fringe benefits tax unless the child care is undertaken in a designated child care centre. That is not the case. The extension is being made by this very Act. That is what the position was before, but is not now. It is being extended here to family day care, outside school hours care and vacation care.

Senator McMullan —But to priority of access in those places.

Senator HARRADINE —That is precisely what I am saying. It is a priority of access for family day care. Let us take the example of priority of access to family day care. It is priority of access to family day care provided that the day care is undertaken outside the employee's home. That is what the Minister is saying and that is why I am asking him to explain it. We are not talking about priority access to child-care centres, as people refer to them; we are talking about priority access to child care.

  What the Minister said is precisely right in respect of the previous legislation. It is not correct now because the Government—and I appreciate and support what it is doing—is extending it to family day care, outside school hours care and vacation care. All I am saying is that if and when the family day care guidelines are changed—as they must ultimately be changed to have regard to what I have been saying about the illogicality of having arrangements where a registered or approved day carer cannot go into the child's home and do the day caring there—the taxation Act as we are discussing now it will not enable the employer to claim an exemption from fringe benefits tax in respect of payment made for the care of the employee's children by a carer in that employee's home. I hope the Minister takes that seriously on board so that when next the taxation legislation is brought before us that anomaly is rectified.

  I want to raise one other point in respect of this measure, which is the deductibility of gifts under section 78. I do not think it has been referred to much—

Senator Watson —Yes, we did. We congratulated the Government on its new form. It's a big improvement in terms of drafting.

Senator HARRADINE —Let me take the opposite view, because I fear that the Opposition may not have seen what is behind all this. The Government is ultimately making these items not tax deductible items but government handouts. Once that happens, they are in the hands of the Government and charitable organisations will not be able to open their mouths in respect of government policy.

  The object of clause 8 of the Bill is to repeal section 78 of the Income Tax Assessment Act and substitute a `more readable version'. I do not believe that the provisions are any more readable. In fact, I feel that they are less so because they have no inherent logic. In terms of taxation theory, all gifts to charity ought to be deductible. Charities serve social and public purposes just as much as public spending programs do. If income is redistributed voluntarily within society, the demand on government programs is so much the less.

  I also note that section 78 is listed by the Treasurer (Mr Dawkins) as a tax expenditure or subsidy. That is nonsense. All section 78 does is allow deductibility to PAYE taxpayers for gifts to some selected charities. Taxpayers with income from property do not need section 78 to make tax effective gifts to charity. They can either gift property to charity, carrying the income with it, or pass the income from property through a trust to their favourite charity. Rather than being a tax expenditure, section 78 simply creates a level playing field between income from personal exertion and income from property with regard to its redistribution for charitable purposes.

  Because the gift provisions as redrafted are so complex, we ought to consider a simple amendment to save taxpayers the trouble of reading them. We ought to consider replacing the proposed section 78(4) with a general deduction for charitable gifts, as in the United States of America. Section 78 should provide a level playing field for all charities and all taxpayers and not be subject to the whims of a particular government of a particular day amending a particular Act such as this. All gifts to charity should be equally deductible for all taxpayers.

  From the point of maximising social welfare, a neutral tax system ought to recognise and respect all forms of non-government income redistribution. Voluntary redistribution of income to charitable causes is more efficient in many cases—and I would suggest most cases—than government taxed financed redistribution.

  I ask the Minister to explain to the Committee of the Whole why the Industry Commission has received a reference from the Treasurer to inquire into charitable organisations. Apart from wondering what the word industry has to do with charity, I would like to express my concern about the Industry Commission assuming, without proof, that tax allowances for charity are some sort of concession.

Senator Watson —Sometimes donations to such bodies as the Conservation Foundation finish up down some other hole.

Senator HARRADINE —Yes, that is another point. But the point that I am making is that I fear that what the Government is doing here is the beginning of a process where tax deductibilities to charities will no longer exist and where the amounts will be paid out by the Government as it chooses. I want to ask the Minister why the Government has chosen to send to the Industry Commission this reference to inquire into charitable organisations. What does it have to do with the Industry Commission?