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

It is a good place; the member for New England knows Eris well. Apart from being mad on rugby, joeys and all that stuff, he is a very substantial person in Armidale. The member for New England knows just how significant Eris is. My uncle Tom and most of my uncles are in their own businesses. It is very important to understand that Labor Party people do understand the pressures on people in small business. From my family experience, I certainly do. They let me know what pressures are on them or the impact of what the government is doing. It is also key that people in small business are marginal in the same sense as people who simply give their labour and work in factories, shops and so on. It is tough in small business, as it is tough on those who do not have resources other than to expend their labour.

However significant these measures in themselves may be for small business, we should look at the general things they want to do. Reduce compliance costs? Fine. Increase certainty? Fine. Increase the availability of the concessions? Fine. Increase the integrity of the tax laws? Fine. As I said before, you can actually do a great deal more for small business in this country if you change the GST laws. If you want to reduce compliance costs for taxpayers and reduce the compliance burden and significant on-costs for small business—if you want to make it easier for people to do their business and easier for them to report—you do not just look at the reporting mechanisms and say, ‘They have to report four times a year and we make things a bit easier for them by way of what they have to put in.’

If you wanted to make things easier, you would actually grab the GST by the throat—given that it exists in all its coalition glory as a result of this Prime Minister breaking his word and giving us that GST—and make it a retail sales tax. You would make it a tax that was not a 1960s paper-driven behemoth. You would make it a tax that was a 21st century retail sales tax where the only point in the cycle where the tax would be imposed would be at the final retail point. You would not have the inanity of a 1960s British and European model where every scrap of paper from the very start of the process to that very end—generating mountains of paperwork and work for people involved in every level of the chain of activity in business—had to be there for audit and reporting.

The current system is to cover the fact that you impose a tax at one level and pass it on to the next level. Having imposed it at the very first level, you can claim it back and get your inputs back. So there is a direct cost to business at every step of the GST chain. You say, ‘Business is fine, because although this tax has been imposed, they get their input cost back.’ That is given that the business is big enough and that its turnover is great enough.

The compliance costs of running this whole GST behemoth—the reporting and the paperwork that have to be done—are enormous. The big winners from the GST are Australia’s accountants; they have done extremely well. Anyone in small business who wanted to do their own books—unless they are accountants themselves—has had to give that work to someone else, because the load on them is enormous. The load on small business, which is being reduced by these measures, will be infinitesimal compared with the load on them now and on the community at large as a result of having this really dumb GST—a 1960s version, before fundamental computerisation, before mainframes could contain all the information needed to run and audit a system on the basis of real activity within an industry.

Whatever the industry—be it statistics or education—as with everything else, there is a simple thing called a bell curve. In a bell curve you get 10 per cent of activity up the top, the next 20 per cent of activity below that, 40 per cent of activity in the middle, which is the dominant range of activity, a further 20 per cent of activity below that and 10 per cent of activity down the bottom. You get that pattern of distribution; it is very simple. You do not need a million pieces of paperwork shuffled backwards and forward. You do not need the imposition of a GST 10 or 20 times during the process. You do not need the nightmare administrative load. You can audit businesses by saying, ‘Let’s look at the average activity, income and costs of a business. We can work that out, not just on an individual business basis but industry wide.’ The Tax Office certainly has the capacity to do that. Once you do that, and you set those standards, the auditing process becomes simple. Anyone who wants to rort the GST system will stick out easily. If you want to closely monitor people who are doing that, you will see that they are outside the norms of a particular industry, region or area—taking account of all the possible variables. What a dumb government we have to impose on the whole country, on every small business person, the enormous weight of an old and dumb GST, with all of its capacity to bury innovative activity.

This has not been taken up as Labor policy, and I am probably the one person in the joint who really believes in the utility of this, but I will continue to argue for it. In 1985, Paul Keating put up ‘Option C’, a central part of which, as recommended by Treasury, was a retail sales tax. Why? A retail sales tax was recommended because they did not think a full-blown GST could be brought in within a term. I have spoken to Ken Henry about this at length. I used to work with him. We have a dumb system in place. We could release Australian productivity if we dramatically changed our tax laws, got rid of the GST overburden and replaced it with a retail sales tax, which would be efficient, direct and effective. Small business and everybody else would benefit as a result.

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