Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

The Tax Laws Amendment (2006 Measures No. 5) Bill 2006 contains a range of measures that Labor supports. First, it begins the process of implementing recommendations from the report of the Taskforce on Reducing the Regulatory Burdens of Business, Rethinking regulation. That report was prepared by the Productivity Commission headed by Gary Banks. It was a timely report; in fact, it was a well-overdue report. I am glad that the government ultimately did get around to commissioning a major report from sensible people who came up with a range of sensible recommendations.

The reason I am saying that I am glad they got around to it is that before the government came to office in 1996 the now Prime Minister had indicated that he would commission Charlie Bell from McDonald’s to oversee a task force into cutting red tape with the aim of cutting red tape by 50 per cent. That task force report was produced within a couple of years of the coalition coming to office but nothing came of it. Subsequently the government, upon the introduction of the GST, said that the very act of introducing a $24 billion new tax would simplify the Income Tax Act. The Prime Minister said then that the number of pages in the Income Tax Act would go down substantially and this, too, would ease the regulatory burden on small business. Well, that did not happen until very recently, when the government, rather than simplifying the Income Tax Act, simply removed a large number of pages from it. It can certainly do with a reduction in the number of pages: it started out at about 3,500 when the government first came to office and had blown out to 9,600. The exercise in reducing the number of pages, however, was limited to reducing those provisions that were redundant rather than simplifying the income tax system itself.

Nevertheless, ultimately—finally, thankfully—the government has begun implementing some of the recommendations of the Banks review. One of those, which is the subject of this legislation before us today, is an increase in the threshold for minor benefits exemption from fringe benefits tax from less than $100 to less than $300. That means that an item that an employer provides for an employee of a value of less than $300 will be exempt from fringe benefits tax. Of course, that will be welcomed by the small business community. It has significant, but not huge, revenue implications. It works out at about $43 million over four years for that plus other measures that are provided for in this legislation relating to fringe benefits tax. While the revenue losses are not great, the simplification that is achieved through them is worthwhile and certainly beneficial for the small business community.

A related provision in this legislation for simplifying fringe benefits tax is that if an employer offers in-house benefits like free meals or discount goods to employees or, for example, cut-price travel for airline employees then an aggregate of $1,000 per annum could be ignored for fringe benefits tax purposes. That $1,000 aggregate is a doubling of the current limit, which is $500. Again, that will be of some benefit to employees but, at least as important, will simplify the administration of the fringe benefits tax. Labor supports it.

There are some GST arrangements provided in this bill. The amendments make a car and pharmaceuticals GST free for those receiving a special rate disability pension under the Military Rehabilitation and Compensation Act 2004. That, too, is a worthy objective. There are further amendments relating to a part-year tax-free threshold for taxpayers who have ceased to be full-time students. So, overall, this legislation does simplify and, in some instances, ease the tax burden on people, and therefore Labor supports it.

I do have to comment that I speak on taxation law amendment bills very regularly, along with the shadow minister for small business and the member for Werriwa and others. The reason we do this is that the government is submitting them into this parliament with such frequency, which is confirmation that the government has not got the income tax system right. It continues to tinker with it and change it. I know that no tax system should remain invariant to change over time. Circumstances change and clarifications need to be provided, but the truth is that the income tax system in Australia is unnecessarily complex. As a consequence, the compliance burden is far too high.

There have been substantial proposals to reform the income tax system. I was fascinated to note that just last week the Treasurer commented on tax proposals which he asserted would have cost the revenue from $20 billion to $30 billion a year. He regarded those proposals, based on comments made by the Reserve Bank governor, as pretty wild and irresponsible. In fact, he said that any tax proposal which would cost the revenue $20 billion to $30 billion a year in the current economic environment would create a great deal of inflationary pressure by stimulating domestic demand, and that would force the hand of the Reserve Bank to yet again increase interest rates—to increase them a fourth time since the last election campaign, during which the Prime Minister promised to keep interest rates at record lows. In total there have been seven interest rate rises in succession, three since the last election, a fourth in prospect and who knows what the new year will bring?

I thought I would have a look at this assertion by the Treasurer that people within the public domain are seeking tax changes that would cost from $20 billion to $30 billion. The closest I could come to it are the proposals by the parliamentary secretary for water, the member for Wentworth. Far be it for me to come into the parliament and spend a lot of time defending the member for Wentworth but, given that it would be unseemly if he had to do so himself in the parliament against these claims by the Treasurer, I thought I would check the Treasury costings on the proposals of the member for Wentworth. Indeed, the most expensive of those is quite expensive; it is quite costly. It works out at $14.55 billion in 2006-07. But the Treasurer said that people were making claims for proposals costing from $20 billion to $30 billion, so he is a fair way short.

The member for Wentworth did have something like 287 proposals, one of the most expensive being $14.55 billion. In defence of the member for Wentworth, he did in fact argue the case for base-broadening measures to help fund his tax proposals. I also looked at the proposals I had advanced, including a submission to the Treasurer in advance of the last budget, and mine cost $7.8 billion—a long, long way from $20 billion to $30 billion. Over the four-year forward estimates period it would cost $33.5 billion. That is still cheaper than the $35.8 billion that the government ultimately delivered. So the criticism of the Treasurer cannot have been directed at me. It could only have been directed at the member for Wentworth, and rather unfairly.

The Treasurer has been fast and loose with the truth not only on that occasion but on several other occasions, and some of them very recent. On 4 September, just last week, the Treasurer said in response to a question from the shadow Treasurer:

The Australian Labor Party never had the wit to actually balance the budget.

I have heard the Treasurer say this before. In fact the Treasurer said this in the parliament on 10 May 2000:

... we put the budget into surplus on a headline basis, which the Labor Party never did.

It astonishes me that the Treasurer of the country can make these sorts of claims. He is never picked up by the media in making them. They are absolutely false yet he feels that he can stand up in parliament, where there is supposed to be some effort to grapple with the truth—and perhaps even to tell the truth—and he knows that his statement that Labor never delivered budget surpluses is false. But he knows that he can continue to make it because, sadly, the members of the press gallery are quite happy for him to continue to make false claims in the parliament and not bring him into account.

I am bringing him into account. I used to be an adviser to Bob Hawke. If Bob Hawke ever came into the parliament and was put in a position of making a major statement that was factually incorrect, as advisers we would be horrified because we would be 100 per cent confident that Prime Minister Hawke would be brought to account by the media as having made a very bad mistake or for misleading the parliament. Of course those standards are now nonexistent.

The truth is Labor produced surpluses in 1987-88, 1988-89, 1989-90 and 1990-91. How do I know? I looked at Budget Paper No. 1: Budget Strategy and Outlook 2006-07. We just need to go to page 13-5 and we find that as a percentage of GDP such surpluses were recorded and, indeed, that in the middle two years of 1988-89 and 1989-90 the surpluses were 1.7 per cent of GDP. What is significant about that? They are bigger than any surplus that the Treasurer of this government has ever brought down. Indeed, at 1.7 per cent of GDP they are substantially bigger than the surplus that is projected for this year, 2006-07, of 1.1 per cent of GDP and in the out years of 1.0 per cent of GDP.

Here is the Treasurer, his own budget papers confirming that Labor produced four surpluses, including two that are bigger than any surplus that the Treasurer of this government has ever brought down, and the budget papers confirm it. Yet the Treasurer walks into this parliament with impunity and says that it never happened. His slipperiness and porkies are not limited to allegations about budget surpluses. The Treasurer has said on many occasions that Labor never delivered income tax cuts. I will just record a couple of them. The Treasurer said on Radio National on 10 May 2000:

Now let me make this clear, this is I think that first budget, well certainly in my memory, where there’s been income tax cuts ... Australians deserved it, they haven’t had an income tax cut for a decade ...

On radio 2AW on the same day he said:

This is the first time we have had a genuine income tax cut for well over a decade. A lot of people can’t even remember what it is like to have an income tax cut ...

Again, on radio 2SM on the same day he said:

I think there are a lot of people in Australia would say, a lot of young income earners, suppose you’ve only been in the workforce for 10 years, you’ve never had an income, they wouldn’t know, they have no personal experience of an income tax cut.

That is what he said. What is the truth? Labor cut personal income tax seven times in 13 years. It cut personal income tax in November 1984, December 1986, July 1987, July 1989, January 1990, January 1991 and November 1993. Three of those were in the decade to which the Treasurer was referring. Labor gave seven tax cuts in 13 years, handing back all of bracket creep and more, and yet the Treasurer says that no tax cuts were delivered in living memory and none in the 1990s—yet three of those were, in fact, delivered in the 1990s. I could go on, but the Treasurer never gets called to account for this.

While we are on the subject of tax cuts, the Treasurer says, ‘We have delivered the greatest tax cuts that Australia has ever seen.’ Let me make some remarks about the Treasurer’s taxing record. The fact is that when the Treasurer introduced the GST he pulled a gigantic fiddle because he moved to classify the GST as a state tax. When the GST was introduced, it was a $24 billion tax but it replaced the wholesale sales tax, which was regarded as a Commonwealth tax. So, overnight, the Treasurer replaced a $14 billion wholesale sales tax with a $24 billion GST and, hey presto, the budget papers showed a big reduction in tax. Terrific if you can get away with it. He counted the wholesale sales tax as a Commonwealth tax, declared that the GST was a state tax and then, despite increasing indirect taxes by $10 billion, he claimed that the $24 billion tax never existed in the first place. In so doing, he defied rulings from the Australian Bureau of Statistics and the Auditor-General, who came to the obvious conclusion that the GST is a Commonwealth tax. The revenue from the GST has grown to $39 billion.

But it gets worse. In the budget papers the Treasurer counts as a saving the scrapping of untied grants to the states, made possible by the allocation of all GST revenue to the states. So he chooses the best of all worlds—he makes the GST disappear from his budget, he makes the wholesale sales tax that the GST replaced appear in all budgets before the GST was born, and he chalks up as a budget saving the scrapping of untied grants to the states made possible by this orphan tax—the GST.

If we want objectively to assess the Treasurer’s record in tax and in overall budgets, we would either add back the GST or take away the savings from abolishing untied grants to the states. If we add back the GST we get these results: Commonwealth taxation revenue as a share of GDP in 2006-07 is 25 per cent. What is significant about 25 per cent? It is much larger than Commonwealth taxation revenue as a share of GDP when the government came into office, when it was 22.3 per cent; it is much larger than when Prime Minister Bob Hawke left office in 1991, when it was 22.7 per cent; and it is much larger than when Gough Whitlam was in power, when it was 20.2 per cent of GDP. It proves conclusively that this government is the highest taxing government in Australia’s history.

The truth is that under these fiddles in the so-called Charter of Budget Honesty the Treasurer could increase non-GST tax revenue by a massive $23 billion a year by the end of this decade and still claim never to have increased tax revenue as a share of GDP compared with what it was at the time of the change of government in 1996. He can keep increasing taxes and claim that he is reducing them as a share of GDP because he has been able to get away with this GST fiddle.

On top of these sorts of fiddles the government has been willing and able to open up more and more holes in the income tax base. When the government came to office there were 170 so-called tax expenditures. These are special concessions or special tax breaks. In the last year that had increased to 270 special tax breaks—an increase of 100 in less than 10 years. It took all of federation to get up to 170 of these tax expenditures and only 10 years for this government to increase them by another 100. As a consequence, marginal tax rates are unnecessarily high under this government. This government holds the record as a political party for the highest top marginal tax rate, which peaked, I think, at 62.5 per cent. Who was the Treasurer? John Howard. It took a Labor government to move to cut marginal tax rates. Labor is the party of tax reform; the coalition is wrecking the income tax base and imposing unnecessarily harsh marginal income tax rates on ordinary Australians.

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