Mr PEAco*ck(6.07)—The Bills we are debating tonight are the Sales Tax Assessment (No. 1) Amendment Bill 1988 and the Sales Tax (Exemptions and Classifications) Amendment Bill [No. 2] 1988. The coalition parties will not be opposing this legislation. These Bills follow decisions made in the Budget, but for those who listened only to the Budget Speech of the Treasurer (Mr Keating) the changes will be something of a mystery. Behind the Treasurer's rhetorical claims of a magnificent fiscal achievement lies the reality.
Of course, we all heard that the beer excise was reduced. However, the Treasurer neglected to mention that sales tax will now be levied at a rate of 20 per cent on all goods used to wrap or secure products for marketing, delivery and household use; that is, everything from cardboard boxes to plastic wrap to masking tape. Containers for marketing biscuits, snack goods and ice-creams are now to be taxed at 10 per cent; muesli bars and similar health food bars are hit; while for those who prefer thick shakes and ice-cream mixes there will be a new 10 per cent sales tax. All prepackaged coffee, chocolate and malt-flavoured milk drinks with less than 95 per cent milk content will now be taxed at the rate of 20 per cent.
I am reading out all these items because no Government Minister is prepared to say this to the public. Instead, the increases are buried away in the Budget Papers. The Government has tried to keep the increases quite, just as it has quietly increased sales taxes year after year. They increased by 19 per cent last financial year; by 10 per cent the year before that; and by 15 per cent the year before that. Those figures represent significant real growth above the inflation rate. Bluntly put, they represent taxation by stealth. If one does not drink much beer or indulge oneself extravagantly with the use of cosmetics, one will lose from this Budget.
The Treasurer has certainly proved himself adept in one key area of economic policy-the raising of taxes. He is the biggest taxing Treasurer since the Second World War. Living standards have been hit, and hit hard, by this Government. As the Leader of the Opposition (Mr Howard) and I have said many a time before, Labor has savaged Australian living standards. A family on average weekly earnings, with a dependent spouse and two children, would need a minimum tax cut in July 1989 of $56 per week to restore household income to its March 1983 level.
Under Labor's mismanagement, inflation last financial year was 7.1 per cent, nearly double the average for our major trading partners. Youth unemployment remains at around 19 per cent. Over 2.6 million people now live below the poverty line, and of that number 20 per cent are children. Sixty thousand people now live on the verge of homelessness and 40,000 sleep in the open or in refuges. According to the Australian Bureau of Statistics, the share of gross income held by the top 10 per cent of the population has increased while the average income of middle income groups has fallen in real terms, particularly for young workers and older groups.
Tragically, the Minister for Finance (Senator Walsh) highlighted the Government's penchant for statistical misrepresentation in a speech made last week. In trying to attack our claim that living standards have fallen, the Senator used an aggregate statistic-real household disposable income per capita-in an attempt to argue that the living standard had risen. He neglected to mention that the increases in this aggregate measure have been largely due to growth in capital-sourced incomes, including those earned by Labor's rich mates. The honourable senator's paranoia about the standard of living seems to have clouded his judgment. One simply cannot bring the incomes of the very rich into a statistic that one is using to display the living standards of lower to middle income Australians. The Hawke Ministry seems to be as supersensitive about the question of living standards as its lame duck Prime Minister is about the leadership question.
While the Budget surplus is $5.5 billion, it has been overwhelmingly achieved by increases in taxation. Over and above the sales tax changes we are debating today, an extra $5.7 billion in income tax is being collected from individuals. That is a 13.6 per cent increase and it is even higher than the 10 per cent growth of the previous year. We have one more year of tax bracket creep. The Treasurer claims that bracket creep is offset this year by revenue cuts. If so, where are the offsets for the total of $7 billion in bracket creep estimated to have been collected by the Government since 1985-86? That has not been offset. However, the problem with the taxation system does not simply stem from the level of taxation. The administration of taxation is also a major concern. In the area of sales tax the Opposition has given a commitment to reform and rationalise the existing ramshackle indirect tax system. There is a whole range of inequities and anomalies, and just plain bad, inefficient administration that has to be remedied. Having said that, I note that the Sales Tax (Exemptions and Classifications) Amendment Bill [No. 2] will exempt from tax plain soy milk currently taxable at the 20 per cent rate, and will reduce from 20 per cent to 10 per cent the sales tax on flavoured soy milk. It has been a hard campaign by various members of the Opposition such as the honourable member for Bruce (Mr Aldred), and various community groups, to have these changes introduced. I commend the Government for finally doing so.
The Sales Tax Assessment (No. 1) Amendment Bill will amend the sale value provisions of the Sales Tax Assessment Act (No. 1), so that where a manufacturer sells goods only by retail or retails goods only through an agent the sale value for tax purposes is based on the manufacturer's own costs and profit. The proposed changes are aimed to simplify and rationalise one part of the sales tax system. They are designed to stop some manufacturers gaining an undue advantage from the sales tax laws. On face value there is nothing objectionable about these changes. Let us hope, however, that the Government gets them right. We should all remember the fiasco of the Attorney-General (Mr Lionel Bowen) the week before last when he brought in 280 amendments to his corporations legislation only four months after the original Bills were introduced.
Some of the most damaging problems with the indirect tax system remain, however, in its administration. The people who suffer are the 800,000 or so small businesses around the country and, of course, the 16 million consumers. Let us look at some specific examples. The recent House of Representatives Standing Committee on Industry, Science and Technology conducted an inquiry into the problems of small business. The submissions from various industry bodies were very similar on the question of sales tax. The Australian Chamber of Commerce noted that the major complaint was where, and I quote:
. . . businesses are required to pay sales tax before funds are actually collected from debtors. Sales tax must be paid on the twenty-first day of the following month. However, payments from debtors usually occur some thirty to ninety days after goods or services are delivered.
This sales tax provision forces many small businesses, especially those with a small overdraft, to fund short falls by taking out bank loans. This diversion of funds reduces business investment and increases the operating costs.
The same grievance was registered by the Council of Small Business Organisations of Australia-COSBOA as it is called-by ASBA, the Australian Small Business Association, the Australian Chamber of Manufactures, and others. The Australian Chamber of Manufactures went on to list other problems such as the complex administration, the high compliance costs, the simple problem of businesses being inadequately informed of Australian Taxation Office rulings, and the very slow appeal procedures for disputing Tax Office rulings. As it says, the only way in which the problems associated with sales tax can be dealt with is through a comprehensive review. But, of course, reviews of the taxation system by this Government always seem to fall short of expectations. Every review of tax it has conducted has included some tinkering with the existing system; almost inevitably some new tax; and, therefore, also inevitably, a higher taxation burden on the Australian people. The latest evidence of absolute disorder in the Government ranks is over the question of tax cuts for next year-`the biggest tax cut in the history of this country' in the words of one of Labor's de facto Cabinet members, Bill Kelty.
The supposed linchpin of the Government's economic policy-the wage-tax trade-off-appears to be a shambles. The Treasurer, who does not want wage rises and still says everything is up for negotiation, is squared off against the Prime Minister (Mr Hawke), who says there will obviously be wage rises and tax cuts. Of course, the Minister for Industrial Relations (Mr Peter Morris) says, `No matter what the Treasurer says, the tax cuts are inevitable on 1 July next year'.
The Prime Minister called in all his economic Ministers the other day to clear up this confusion. The Prime Minister seems to be having a little problem. He wants to talk about taxes and they want to talk about his resignation. It is a pity for him that the Governor-General's vacancy has already been filled. The fact is, as Paul Kelly reported in the Australian newspaper yesterday, and I quote:
Nobody knows where the Hawke economic team is going from here. But the good old days are over. The super-optimists who think everybody can kiss and make up are in a condition of super-delusion.
The fragility of our balance of payments position certainly has implications for next year's tax cut. The Treasurer was reported as saying in Berlin only two weeks ago that next year's tax cut would go ahead, even if Australia's trade performance suffered as a result of slower world growth. In addition, in this House on 25 August he said that the tax cut would be funded from the Budget surplus. In short, the Treasurer is intent on providing next July's tax cut without cutting government spending. That would mean an increase in private sector demand with no offsetting decline in public sector demand. The effect on our already precarious balance of payments would be untenable.
This tired, confused Government simply cannot get the broader questions of tax policy right, nor can it adequately address the specific questions of sales tax reform. I therefore foreshadow the Opposition's second reading amendment.
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