Michael Hatton (Blaxland, Australian Labor Party) Share this | Hansard source

I am happy to support the amendment put forward by the member for Hunter on the Tax Laws Amendment (2006 Measures No. 5) Bill 2006. By putting his amendment forward, he has put Labor’s position with regard to the unfortunate people who have suffered at the hands of the James Hardie corporation over decades—people who have ended up with mesothelioma or asbestos poisoning, who have had their very health and lives destroyed. And it has impacted dramatically on their families.

This government has mucked around with the resolution of this process. It is not been forceful or put its foot down in relation to it. It has not put as much pressure on the company as it should have—a company that has sought through just about every means imaginable to run away from its responsibilities. The government, in a hands-off approach, has said that it can only rely upon the good graces of this company to come forward and give adequate compensation to people. Labor has argued that we in fact need to do more. The amendment refers to:

(1)

failure to provide certainty to the former employees of James Hardie and their families by providing tax exempt status to the James Hardie Asbestos Victims Compensation Fund ...

The government has argued that it should not create a special case and that it puts more pressure and onus on the company by not providing a tax exempt status. Given what has happened so far in relation to this, the opposition is of the mind—as the shadow minister has put it in his amendment—that we in fact should consider this, and the government should have done so. On one of the other great major unresolved taxation issues, the amendment refers to:

(2)

creation of great uncertainty in the Australian business community by its failure to bring forward its review of loss recoupment rules.

The shadow minister dealt with both of these areas quite extensively. I indicate my support for the action that he has taken.

This is a typical taxation bill and a combination of three very disparate measures under three schedules. The first relates to particularly minor changes in the fringe benefits tax area. The second relates to the treatment of veterans, extending the provision to them of pharmaceuticals and access to cars. The third relates to the availability to students of the tax-free threshold. I commend in particular the changes made in schedule 2. I will go to the specific provisions. The schedule proposes GST concessions in relation to the Military Rehabilitation and Compensation Scheme established under the relevant act. The amendments provide that the supplies of drugs, medicines and other pharmaceutical items are GST free if supplied as pharmaceutical benefits under that act and that the GST-free motor vehicle concession for veterans will be extended to include a new category of severely injured veterans under the Military Rehabilitation and Compensation Scheme. Previously, you had to be a totally and permanently incapacitated veteran to gain that concession; here they have somewhat lessened the extent of injuries necessary to qualify.

I think this is an entirely appropriate response to people who have suffered in the past and continue to suffer for their country from injuries sustained from fighting on our behalf. Just in this last year, we have had a special operations group in Afghanistan. They have fought for a full 12 months and 12 of those soldiers have been injured—one very severely in the jaw and another in the abdomen. Those injuries would not qualify for assistance under the existing provisions. A range of other measures are available to them, but taking practical measures to relieve the distress of and the financial burden on those veterans by creating a class under which they can be assisted is important because it recognises the particular needs they have and that they have done things that others have not.

I am not sure about schedule 3. I do not know why this was done and what drives it. I have looked at the Bills Digest; I have not been able to look at the explanatory memorandum to this, but there is a notation in relation to it. According to the Bills Digest it changes the application of the Income Tax Rates Act 1986:

... to extend the full tax-free threshold of $6,000 to taxpayers who cease to be engaged in full-time education for the first time from the year 2006-07; at present these taxpayers are only entitled to a proportion of the tax-free threshold of $6,000.

When the minister is summing up debate on the second reading, I would like to know exactly what the reasons are for this. I can see that, at present, a series of calculations have to be done—if a person ceases to be a student at some time during the tax year, they may have to do a calculation of one, two, four, six or seven months out of the 12 and only get a pro rata treatment. That is what the situation has been historically. If you are in the workforce for five months out of 12, then you should receive five-twelfths of the full tax concession of $6,000. I do not think it is beyond the wit or the imagination of all those students or the people who give them tax advice to actually work that out.

I do not see the compelling reason for changing this other than to make a simple change to the manner in which the act is operating for the benefit of students. Why is it being done? The argument is for less complexity and that it is less burdensome for those students, but is that it? Someone came up with the notion that what has been done historically should be turned upside down? The point here is not a question of appropriate generosity in schedule 2; the point goes to the question: why was this done? Is it just within the scope of this bill generally that there is a drive towards less complexity?

This brings me to the first schedule, which I might devote some time to. Schedule 1 is about fringe benefits tax. What is achieved here? The purpose of the schedule is to, firstly, increase to the minor benefits exemption threshold from $100 to $300; secondly, increase the reduction of taxable value that applies to eligible in-house fringe benefits and airline fringe benefits from $500 to $1,000; and, thirdly, increase the reportable fringe benefits amount threshold from $1,000 to $2,000. The schedule also changes the definition of remote areas. There is a specific provision that applies here—and this one is a doozy. Maybe this is for Tasmania, if you actually go by ship from Tasmania to the mainland. This provision says: ‘We recognise that it is more inconvenient and more difficult to travel by water than it is to travel by land. Hence, if you undertake a journey that is completely by water, we will allow you to claim double the amount. If it is partly by land and partly by water, that amount by water will be doubled.’

I would like to know the genesis of this and how many people it actually applies to. I do not know whether this is an amendment centred on Tasmania or not. I cannot think of many other applications, unless people are coming in from Lord Howe Island in the electorate of Sydney. That is one small aspect of that. These measures are not very great or significant. One could guess that they were just developed in the normal course of the Taxation Office doing its job. They are very small eggs to have been laid. If you looked at the genesis of this, on 12 October 2005 you might have expected that the eggs laid by the government goose with regard to this would be not only golden but goose sized. Instead of that what we have here are extremely small eggs—quail eggs or smaller. This is the scope of what the Treasurer and the Prime Minister announced on 12 October 2005. They released the task force report Rethinking regulation, which looked at reducing regulatory burden on business. They said it will:

• identify specific areas of Commonwealth Government regulation which are unnecessarily burdensome, complex, redundant or duplicate regulations in other jurisdictions;
• indicate those areas in which regulation should be removed or significantly reduced as a matter of priority;
• examine non-regulatory options (including business self-regulation) for achieving desired outcomes and how best to reduce duplication and increase harmonisation within existing regulatory frameworks; and
• provide practical options for alleviating the Commonwealth’s ‘red tape’ burden on business, including family-run and other small businesses.

As part of this, we have these changes on the fringe benefits tax: a hell of a lot promised; an enormously small amount delivered in these changes.

There were a couple of goes at how much was done and what came out of this, given that the government, when it came into government in 1996, from memory, promised to slash red tape by half. This is a government that has specialised in creating more complex legislation, particularly in the tax area, over the last 10 years. Here it is responding to pressure from a very wide ranging and deep task force, and what has it come up with? There were several parts to what was recommended. The Treasurer chose only the first couple of parts, and they are minor in their effect. All up in these three schedules, we have got about $13 million—there is $2 million for the student part, about $1 million for schedule 2 and about $10 million for the rest.

What is the reaction out in the community? If you have a look at the Australian Financial Review, on 29 August 2006 Mark Fenton-Jones, in an article entitled ‘Tinkering falls short of much-needed tax revamp’ says:

The latest changes to the way GST and fringe benefits tax are calculated by small businesses are welcome measures to reduce the compliance burden. But it is only tinkering on the margin, as the whole tax system needs to be revamped with small business in mind.

He went on to summarise the comments made by Pitcher Partners manager Gary Matthews on the FBT changes:

He says the government needs to take a more fundamental approach and evaluate the whole FBT legislation, which is about 20 years old, to see if changes in business practices during the past two decades should be reflected in broader changes to the legislation.

That basically gets to the core of it. Businesses would of course want to take their regulatory burden and place that on the employee. They like to mirror what the government is doing. What the government is trying to do through legislative workplace changes is take the on-cost of business and put that onto individual employees. If both achieve that then the employee would take the weight of just about everything that can be put on them.

But by reducing compliance costs, reducing burdens and so on, by putting so much into this effort and coming out with so little, you would have to ask fundamental questions. Why did this government choose to bring in a GST whose fundamental structure and approach was generated in 1962? Why did it choose a paper-driven GST, appropriate to the fifties, sixties and seventies, in a computerised age? The one fundamental change that could change things for small, medium and large businesses in this country is to change the GST regime from the old paper based system—although they use computers to operate it, it is paper based at every iterative step of the process of everybody having GST imposed on them, so they have to claim it and they have to take it back, put it in and put it out, in a mass of records—to a simpler proposal and a simpler way of going about things.

They could transfer this into a retail sales tax. If you want to take a burden off small, medium and large business in Australia, take an intensive GST and turn it into a retail sales tax. That was proposed by Treasury in 1985. When option (c) was put up, Treasury recommended that because it thought the full-blown GST would be too difficult to implement in a short time frame. I have had discussions since with certain Treasury officials who might have known something about what happened then and later, and they are reluctant to undertake this approach. There can be no impediment to this with regard to the question of what the effect might be on the black economy. In Australia and in Europe, it is absolutely evident that the GST regime we have got—the burdensome British and European 1960s regime—is still riddled with a black economy that has run rampant through various parts of Europe and has run rampant, despite the imposition of the controls that are there, in the GST.

If you wanted to make some of the changes that this task force was suggesting, which none of Australia’s businesses are doing, you need to look at it deeply and fundamentally and ask: is the very design of this tax correct? Is its implementation right? Shouldn’t the government be looking at dramatic simplification by having one point at which this tax is put on? Simplify it for everyone else except at the endpoint.

I want to make another couple of points. Originally this GST was to raise $24 billion. We know there is $32 billion-plus now, and rising. It replaced a wholesale sales tax that the government said was shambolic and all the rest of it. The wholesale sales tax had the benefit of being put on at one single point in the process. It was much simpler, much less complex, despite the fact that it had differential rates of application. And it was certainly far less costly to the community than this process is.

Just in passing, because we have had a very wide debate, there is something that is entirely pertinent in this regard. I join with the member for Rankin here with regard to the fact that this is the highest taxing government in Australia’s history. It is also the one that has put a whole series of burdens on people while arguing that those burdens really are not great. They have been significant burdens.

However, this is also a government with a Treasurer responsible for taxation matters in this country who is willing to completely distort the truth of the matter. He is currently swanning around the world, being in South Africa at the moment, but just last week, at the dispatch box, he told a complete and utter untruth. He said, ‘Why has the Labor Party never had the wit to be able to run a budget surplus?’ I interjected at the time, which was not parliamentary. However, my interjection at that time was quite simple. The first four surpluses in the history of the Commonwealth of Australia were under the Australian Labor Party. Guess who the Treasurer was. The member for Blaxland, Paul Keating. One, two, three and four. No-one had ever done it. Had John Howard, the member for Bennelong, in his years as Treasurer ever had a surplus budget? The answer is no.

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