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Monday, 6 December 1993
Page: 3840

Senator CHRIS EVANS —I direct my question to the Minister representing the Treasurer. I draw the minister's attention to the forthcoming decision of the High Court in what has become known as the duplicators' case. Could the minister advise the Senate what contingency arrangements might be put in place in conjunction with the states and territories should the High Court rule the current business franchise fees invalid?

Senator McMULLAN —It is true that there is speculation as to the implications for state and territory finances should the High Court decision invalidate these business franchise fees to which Senator Chris Evans refers, and of course we will all know tomorrow.

  Business franchise fees are an important element of the revenue base of all states and territories. They are worth, I understand, some $3 billion annually. Obviously, therefore, the Commonwealth has received representations from the states and territories and we have indicated that we are prepared to take immediate measures to provide interim safety net arrangements so that there is no disruption to their overall financial position.

  In the short term, this will involve safety net arrangements based on adjusting existing wholesale sales tax and excise rates. In the longer term, I understand that the states and territories would like a system closer to their current arrangements. The Commonwealth is prepared to consider such an arrangement, but a major consideration will be that any tax levied on behalf of the states and territories should be readily distinguishable from existing Commonwealth taxes.

  The Prime Minister has written to all premiers and chief ministers setting out the principles on which the Commonwealth will proceed in the development of these arrangements. We have emphasised, for example, that the rates of customs and excise and wholesale sales tax would be increased with the aim of raising an amount sufficient to ensure that each state and territory would receive at least what it would have collected from existing business franchise fees without requiring revenue raised in one state or territory to be returned to another, which I think people would accept is a necessary principle. This would mean, though, that most states and territories would receive increased revenue and would be required to return such additional amounts to taxpayers generally within their borders.

  Let me be quite clear, therefore, about what this means: not one red cent extra will be retained by the Commonwealth. So let us put down all the furphies about tax grab: none extra will be accepted by the Commonwealth. Neither will those states and territories—

Senator Campbell —Is that l-a-w law?

Senator McMULLAN —Why does not Senator Campbell wander off and ask his state government whether it thinks this is a good idea?

Senator Boswell —Are you sure ours will?

Senator McMULLAN —Senator Boswell is quite wrong because we will not do it unless all the states and territories ask us to.

Senator Ian Macdonald —What he is saying is that nobody believes you because you are a member of the Labor Party.

Senator McMULLAN —Fortunately, nobody listens to Senator Macdonald. Neither will those states and territories enjoy a windfall. They will not be allowed to pocket those funds. They will be required to return any such windfall to their citizens. It is a matter for them to determine the best way of achieving this outcome. If people do not like it, the democratic processes of those states will be the processes by which that will be addressed.

  But it has been very strange to see that both the current shadow Treasurer and the former shadow Treasurer have been at pains to find some sort of ulterior motive in this, when we will only proceed if all the states and territories indicate that they wish us to and we will act in accordance with their requests only. The shadow Treasurer has seen the announcements as a $1 billion tax grab when, in fact, the Commonwealth will require that the states and territories return any windfall to their citizens.

  The revenue will go to the states and territories. If people want to argue that it will not be returned, they need to go and talk to the governments of those states and territories and see if they share that view. I am advised that they do not; they accept that there is no alternative to this mechanism for proceeding and that it is the appropriate basis, because we have to have a uniform rate—the constitution requires that—and that the appropriate mechanism for returning the funds to the citizens is via the states.

Senator CHRIS EVANS —Mr President, I ask a supplementary question. I want to know whether the minister has seen Mr Reith's comments, reported in the Canberra Times, and whether the government is considering his suggested option as an option for the government to pursue.

Senator Hill —It is hardly a supplementary.

Senator McMULLAN —It is on exactly the same matter, and I welcome the question and the opportunity to respond. The former shadow Treasurer seems to be extremely confused. He finds it objectionable that the Commonwealth collect these taxes on behalf of the states and at their request when no-one thinks there is an alternative.

  He seems to be suffering from a very short-term memory lapse; in other words, he cannot remember what he said on the same page. At one point on the page he said that it would mean that the Commonwealth would collect more taxes and the states would lose taxes; then 200 words later, he advocated that there should be changes to the arrangements for income tax collected on behalf of the states by the Commonwealth—exactly the same issue within 200 words. Pardon me, the memory lapse is getting worse. The fevered leadership speculation, I am afraid, is going to his judgment. There may be some other explanation for his irrationality, but it seems to me that is an extraordinary error of judgment. (Time expired)