Date 20th August 1998
Ladies and Gentlemen of the Press
On the release of the Howard Government's tax reform last week, I announced the fairest approach was to allow time for proper and considered evaluation.
I did not agree with the dishonest political posturing of simply and immediately attacking the package after only minimal evaluation.
In particular, I was appalled to see Labor had produced their anti-GST advertisements even before the release of the Liberal/National package.
This was a disgraceful exercise by Labor who have previously considered a GST themselves and would no doubt attempt to implement a similar policy if they could get away with it.
Liberal, Labor and National are all either locked into the antiquated and unfair system we have or are party to changes not addressing the public need.
The view of Pauline Hanson's One Nation is quite different on most issues and tax reform is no exception.
When we examined the Howard/Costello tax plan we began with open minds and with the interests of ordinary Australians as our only consideration in making judgement.
There has been much said about the Howard/Costello package and comments made by others. In our view the following points in particular must be emphasised.
Inequity of Tax
One of the fundamental problems for Australian taxpayers is the inequity in who contributes.
This is particularly evident in the case of multinationals and major corporations, most of whom do not pay their fair share of tax.
This obvious and glaring lack of fairness has not been addressed in the Government's GST tax package. For 1998/99, total tax revenue is estimated at $138 billion; Australians will pay the bulk of that, and foreign owned companies and multinationals will contribute little or nothing.
This was revealed and confirmed by a statement from Mr Jim Killaly, Assistant Commissioner of the Taxation Office on 28 October 1996: "The figures show most multinationals pay little or no tax."
One of the points of concern relating to this package, not raised by commentators, is the always available option for governments to increase income tax rates, change thresholds, introduce excises and possibly change the date tax is payable.
A major flaw is the Government's reliance on paying the promised tax cuts using the present budget surplus and future budget surpluses.
This is presumptuous and dangerous given the seemingly unpredictable nature of our economy, in particular given the as yet largely unfelt effects of the Asian meltdown.
This unreliable expectation of future budget surpluses puts in jeopardy essential community services and the Social Security safety net.
Compensation for Low Income Australians
Low-income families, pensioners and the unemployed will be relying on compensation to offset GST increases in service costs and the general cost of living.
Little mention has been made of the increase in the cost of services to, for example, employ a plumber or other tradesmen, have a motor vehicle repaired or attend to the many other repairs or services required in every day life.
All these will cost at least 10% more.
The compensation for pensioners and low income earners can be easily eroded by inflation, or simply withdrawn by this or future governments.
This possibility, after adoption of the Liberals' package, simply leaves these Australians vulnerable and in the hands of politicians who have time and time again proven themselves unable to be trusted.
Cost of Goods and Services
The true price increases of goods and services and therefore the actual change in cost of living will only be known after the GST is introduced.
The inflationary effect of the GST, and the subsequent effect on low-income earners can not be defined.
The use of CPI to determine increases in pensions does not recognise the inequity of using a price index which includes, for example, an increase of 8% on staple items, 1% on other items, and even decreases for some items.
The net result may be a CPI increase of 3%, but those people with the staples as a major component of their expenditure, such as pensioners, will actually pay 8% more for food and other necessities while their pension will only rise by 3%.
The 30% increase in the rebate or assistance of approximately $600 for private health cover is welcome, but its likely effectiveness is questionable.
At present, contributors whose annual income is less than $70 000 are entitled to a rebate of $450 per annum, yet membership of private health funds has been dwindling and is now down to only 30% of the population whereas 10 years ago it was 47%.
The new rebate of $600 per annum is without a means test, but are we to believe less than 45 cents a day extra will reverse the terrible fall in private health care membership.
The "one off" $2000 payment to self-funded retirees is in part an attempt to offset the abolition of the superannuation fund managers' exemption from paying 15% tax on earnings on superannuants' funds once pension payments are started.
The loss of this exemption means that superannuants' capital will be eroded and the amount or duration of a pension will be reduced.
On top of this, the increase in costs to superannuation fund managers through the 10% GST on services including investment advice, external administration and insurance will reduce returns to self-funded retirees.
States and GST Funds
What provision will there be for individual States to increase their revenue if GST allocation to them is inadequate?
The Federal Government has shifted the political liability of increasing the GST to the States. The whole matter of GST funding to the States has to be agreed by Premiers and Chief Ministers, after the election - there is no guarantee of this agreement.
The States may not agree to the proposal as they will be aware all the States wanting to increase the GST at the same time is unlikely.
In addition, the States will recognise they, not the federal government, will appear to be the instigators of tax increases.
Also, as individual States wish to increase their revenue to meet fiscal needs, they will need to increase indirect taxes.
Under the agreement they retain payroll tax, and despite undertaking to abolish nine other taxes, there is nothing to stop them from increasing payroll tax, already a terrible tax on employment, or introducing new taxes.
States will also become fully responsible for funding local government. While local government will welcome rates, water and sewerage charges being GST free, there are many concerns about the impact on local government and local communities from other elements of the Liberals' tax package.
Despite the GST exclusions mentioned, local communities still face a GST bill of millions a year on Council services.
Federal financial assistance grants to local government have been effectively frozen at an historically low level per capita and will continue to decline as a share of total tax revenue.
Worse still, the federal government is walking away from its responsibilities to local communities by passing the entire grants system to the States - all without sufficient long term guarantee they will be maintained.
It must be pointed out there is no commitment to consultation with local government on detailed implementation of the package.
Home prices will increase, making owning a home even further out of reach for average Australians.
According to the Government, the cost of new homes will go up less than 5% and they have offered a $7000 tax rebate to first time homebuyers. However according to the Housing Industry Association the cost increase will average $16000 and more than $20000 in Sydney - double and triple the amount offered to compensate only a few.
Along with this, Master Builders Australia are working on an increase of +8%. They also point out this increase is likely to raise the price of existing properties by a similar percentage. There is also the added cost of repairs and additions. 30% of Australian family groups live in rented accommodation.
What will compensate this group's losses and protect their living standards?
Rents must surely rise.
Zero rating of items will cause compliance costs for business, particularly small business and community organisations. Zero rated areas that will be affected include health, childcare, local government rates, garbage, water, sewerage, development and building applications as well as any other service offered by local government.
The exemption of education includes private schooling but only to the extent it covers accommodation costs for boarders and the cost of tuition.
It does not cover the considerable cost of books, special materials, computers and a range of other goods and services which will impact both private and public schools as well as their students and teachers.
30% Corporate Tax Rate
Despite Prime Minister Howard saying he will develop a separate Business-Tax-Reform package after consultation with business, the fact is different industry sectors will have different requirements and consensus will be almost impossible.
Anyway, this is only talk at this stage, and talk is cheap.
So will this be one of Mr Howard's core promises or just a lesser promise that is not really a promise at all? - they cannot be trusted.
Tourism will be adversely affected by increases in the cost of transport, dining out, hotels, motels, resorts, entertainment, tours, all forms of recreation and many other services including attendance at sporting events as GST makes its mark on travelling Australians and international guests.
While overseas visitors, many of whom are used to paying a form of GST, will avoid the new GST by pre-booking, the impact on Australians travelling within their own country provides yet another disincentive for Australians to holiday in their own country.
One Nation Tax Policy
Pauline Hanson's One Nation believes the only way to resolve the inequities, complexities, disincentives and punishing nature of our taxation system is to start again.
There is no point tinkering with a tax system that poses a major obstacle to Australia's growth and development and a disincentive to employment and the pursuit of income through wages.
Australia's inefficient taxation system has contributed to an ever declining living standard for pensioners, PAYE taxpayers, self-funded retirees and small business owners - in essence, the majority of Australians.
Most of us cannot generally understand our tax laws, and many accountants struggle to keep up to date with changes.
One Nation is putting together a totally new approach to taxation.
Our initiative will offer a completely fresh start, will ensure all Australians are taxed fairly, will ensure multinationals pay their real share of tax, will provide incentive for growth in our economy and improve employment prospects, while also being relatively easy to understand.
Our approach to tax reform will be detailed and delivered during the course of the Federal campaign.