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Monday, 26 November 1973
Page: 3824

Mr FISHER (Mallee) - This Bill, I believe, is an unbelievable attack upon private enterprise. The many specific proposals in it, which are the result of Budget measures brought down by the Treasurer (Mr Crean) in August, will have detrimental and far reaching effects upon all sections of this nation. I believe that this Bill clearly emphasises the socialist philosophy of the Labor Government. It emphasises the Government's clear intention to transfer resources from the private sector into the public sector of the economy. I feel that it displays an ignorance of the important role that the private business sector has played in the community and must continue to play in the economic structure of this country. The measures proposed in this taxation legislation will raise approximately $360m. Pensioners will be taxed for the first time and it is clear that a large number of pensioners still under means test requirements will receive less income than they did before the latest pension increase. This legislation is also a severe blow to the small family and private company businesses as they have always been restricted because of a lack of availability of finance for expansion and development. Unlike the public company, which has ready access to the stock market, private business has been almost entirely dependent upon the accumulation of profits - a slow and often unreliable source - or the need to borrow from conventional finance sources such as banks or insurance companies. This type of borrowing has imposed huge limitations, particularly as capital repayments and interest costs have restricted working capital. At a time when productivity and increased supply is urgently needed in this country this clause of this taxation Bill will sap confidence and initiative and place the private company at a distinct disadvantage compared with the large Australian public company.

Many of my colleagues on this side of the chamber have spoken about the changes that are to be made in sections 75 and 76 of this Act - those sections which in the past have allowed primary producers to deduct in full expenditure incurred as capital expenditure and which have allowed primary producers and manufacturing industries to claim, in addition to depreciation, 20 per cent of the cost of new plant as a deduction, which is known as the investment allowance. These sections, which were introduced by the previous Government, have done much to encourage the establishment and updating of our primary and secondary industries. I believe that they have been largely responsible for the outstanding efficiency and productivity of our primary producers who, operating in a high cost economy, have been able to compete on favourable terms with exports to under developed low cost economy nations.

For the remainder of my. time this afternoon I wish to concentrate on clause 8 of the Bill which deals specifically with section 31a of the principal Act which relates to the trading stock of winemakers. Not only do the previous clauses which I have mentioned have a direct bearing upon the productivity and efficiency of wine producers and grape growers, but this Budget has dealt an extremely heavy blow to the Australian wine and brandy industry by phasing out section 31a. Section 31a has provided for the wine industry a consistent minimum basis of valuation, and it must be emphasised that this measure has acted only as a deferral of tax and not as a tax reduction. The deferral of tax liability on stocks is essential in an industry where producers' profits cannot actually be determined until wine is sold. Now, however, these stocks are to be brought up to the value of cost, replacement or market value in progressive stages over the next 5 years. Tax will then be levied on revaluation of stock and is in no way related to sales. In other words, tax will be levied even if wine is not sold.

I believe that the Government should immediately defer this proposal so that the total effects of this measure can become known through an inquiry. The reasons why this action should be taken can be seen by pointing out the unique features of this industry. The industry has a long working capital cycle as funds are committed in maturing stock. Stock turnover is lower than in most other industries. The average turnover in 1972-73 in the wine industry was 33 months. This time lapse is, of course, from the receipts of the grapes until the sale of the finished product. Section 31a has aided and abetted the wine industry and it is by the previous Government's policy on the brandy excise differential and the stock valuation provisions that incentives have been given to the industry. I am worried now that the wine industry will not be able to take all the grapes as and when offered. I am worried that the industry will not be able to absorb large tonnage fluctuations from vintage to vintage. I believe that section 31a has made a valuable contribution to the stability and prosperity of the grape growing industry.

These 3 factors have tended to keep stock levels higher than would have been the case in normal manufacturing industry and stocks of wine at wineries therefore have not been related only to sales forecasts. In other industries raw material often is readily available and can be easily stored. In the case of alcoholic beverages made from other than grapes raw materials can be obtained throughout the year on an immediate delivery basis. But wine growers have no alternative outlets and look to the wine industry only for the disposal of their raw materials over a very limited life of some 8 to 10 weeks. The major effect to the industry of repealing section 31a will be the dispossession of owners of private and family companies. There are approximately 180 such companies within the industry, which today has become one of Australia's very important industries. The wine growing industry is scattered throughout the length and breadth of Australia. Therefore this is by no means a parochial matter. Previous government policy has been to encourage capital investment by the industry. As a result the industry has kept abreast of the best international wine and brandy making techniques and has continued to upgrade its equipment. The industry has invested in a large amount of expensive equipment which is used only for the vintage for a small part of the year.

The effect of this measure will result in an unwillingness to accept all grapes offered. There will be a general lowering of wine stock levels which will flow through to grape growers and the co-operatives. Professor Grant in his report on the Australian wine industry says that the wine industry is unusual in that the burden on surpluses is passed back to the residual suppliers who are defined as the growers who supply proprietary companies and co-operatives with grapes and some small wine makers who supply them with bulk wine. Cooperative sales to other proprietary companies would be considerably reduced and consequently their intake of grapes also will be affected. It is important to recognise that grape growing and the wine industry are interdependent. I have mentioned that the industry must undoubtedly restrict grape intakes and reduce stocks both to conserve cash and to reduce stock holdings on which it will be taxed. Even if one assumes that total wine demand remains constant, this will result in some diversion of grapes to large organisations with the resources to finance such stocks. Similarly, stocks of immature wine could be directed to the financially strongest organisations at less than economic prices.

This taxation measure, like most others in this Bill, points out, I believe, the ignorance and complete lack of understanding by the Government of this major industry. It is vital to the future of Australian wine producers and the producers of grapes that the repeal of section 31a be deferred. The Labor Government would not be denied taxation for some months and it would give it time to inquire into the disastrous repercussions that this measure will have on the industry.

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