EMBARGO: 5 PM
PRIME MINISTER'S WEEKLY BROADCAST MR FRASER'S DOUBLE TAX PLAN T
SUNDAY 5 OCTOBER 1975
I doubt if there has ever been a more muddled and
dangerous set of policies put forward by the Opposition than
Mr Fraser's latest brainchild on State and Federal taxes.
I say " Mr Fraser's brainchild", though it's well known that
the scheme was dreamt up by Senator Carrick, a Liberal Party
Senator from New South Wales, and seems to have been adopted
by the Opposition with very little thought. It's all been
dressed up as a policy on federalism which is a nice vague
term but in reality it's a policy on taxation. And this is
the extraordinary thing: while Mr Fraser is always talking
about the burden on the taxpayer, he's now telling us that if
a Liberal Government came to power, it would allow the States
to impose income tax on every Australian in addition to the
normal income tax that all of us pay now.
In other words, it's a policy for double taxation.
W Mr Fraser wants to overturn the whole uniform tax system which
has served Australia well under Governments of every political
colour since early in World War 11. On top of our normal income
tax, we would all be paying income tax levied at the whim of.
Mr Lewis, Mr Hamer, Mr Bjelke-Petersen and the rest.
You would imagine that any party introducing a
policy as extraordinary as this would at least show some
enthusiasm for it themselves. In fact, the Opposition and
the Premiers are well ahd truly split over the Fraser plan.
The New South Wales Premier Mr Lewis, has said that no one
really knows what the scheme is all about. Sir Gordon Chalk,
the Liberal Treasuzer of Queensland, has expressed his
reservations. Mr Kevin Cairns, a Queensland Federal Liberal
member, is quite rightly worried that the scheme would
disadvantage the sma~ ller States. As Mr Cairns said, and
I quote his words: * All Australians with a sense of equity
would ask who pays and who gets the benefits?" Mr Gorton,
a former Liberal Prime Minister, points out that every taxpayer
would receive a demand varying in each State for tax " over
and above what they would pay in Federal taxation."
Senator Steele Hall a former Liberal Premier of South Australia
has denounced the scheme, and so has Mr Dunstan, the most
experienced and successful Premier in Australia.
So all told it's not surprising that the Liberals
are soft-pedalling on their latest plan. For when we look at
it closely we can see how hopeless and defective it is. The
idea seems to be to give the States a guaranteed share of income
tax revenue, and if that isn't enough, they could raise extra
revenue themselves. But what revenue would there be for the
States to share in, in the first place? Only a month ago,
in his Budget speech, Mr Fraser promised tax indexation. The
effect of tax indexation would be to reduce the revenues going
to the Federal Govern-ment. There would be a smaller share for
the States, whose own taxes would have to be steep indeed.
Mr Fraser's policies a month ago are completely contradicted by
his latest scheme.
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We can see what would happen by looking at the
situation in Canada, where the Federal Government and the
Governments in the different provinces all raise their own
income tax. I happen to admire a lot of things about Canada,
but their tax system has undoubtedly penalised the poorer parts
of the country. The poorest provinces all pay the highest
provincial taxes; people in the richest provinces pay the
smallest provincial taxes. That was exactly what happened
in Australia when the States raised income taxes before
the war, and it's the very reason why the old system was
abandoned in favour of uniform taxation.
My Government has no intention of allowing the
smaller and less populous States like Tasmania and Western
Australia to come off badly compared with the bigger and richer
States. Under this Government's policies all States get a
fair deal; all Australian pay the same taxes. There are
no second-class citizens under a Labor Government. It's quite
clear that the Fraser plan has been devised as a sop to the
Liberal Governments of New South Wales and Victoria. Because
of the Lewis Government's incompetence and its refusal to
co-operate with Australian Government policies, it wants to
grab more money at the expense of other Australians to swell
its own coffers. Mr Fraser has never specified how much Commonwealth
tax would be given to the States as a right, and he has
flatly refused to say what the share for local government
would be. We are asked to take the whole thing on trust.
You can imagine what a regular battle we would have: instead
of arguing each year what their actual share of revenue
would be as the States do now they would be arguing what
the percentage share focr everyone of them would be. The small
States would be arguaing with the bigger ones and they would
all be arguing wit:-Canberra.
The people who would be best off under this system
are the residents of Canberra, who would pay no State taxes
at all. They'd be first-class citizens. The other lucky
people would be those in wealthy suburbs where local councils
have adequate revenues. They'd at least be second-class
citizens. All other Australians, those in small States,
in remote country towns, in run-down suburbs of the big cities,
would get third-class treatment. That's the reality of the
Fraser plan inequality and more inequality. The proposals
don't guarantee an appropriate share of funds for States
where local governm-ts find it hard to raise revenues and
meet their expenses.
At present this problem is met by the Grants
Commission, which can build up the revenues of the needy States
and ensure that extra-Funds go direct to local government
areas that are falling behind. The Grants Commission, under
reforms introduced my Government, has done an excellent
job in helping loca-2 councils. When the Liberals were last
in office, less than halfL of one per cent of local government
money camne direct from the Federal Government. Now the
Australian Governmnt see that more than six per cent comes
to local government through the Grants Commission. The Fraser
alternative to this system incredible as it sounds is to set
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up seven grants commissions the one we have now and one
for each State. Imagine it seven grants commissions
and this from a party that complains about bureaucratic
waste! The six new State bodies would have the job of
handing out a little extra money to the local councils on
top of their basic grants, but there would be no way of
seeing that the money they handed out was adequate in the
first place, or that the States who need most money would
get it. The Opposition doesn't tell us what the basic
grants for local councils would be based on, how they would
be arrived at, or by whom. It's all incredibly vague.
No wonder Mr Lewis is baffled by it all.
The only thing that's clear from the Fraser plan
is that every Australian would be at the mercy of a host
of tax-grabbing authorities. There'd be State income
taxes and council rates as well as the usual income tax.
S And where would that leave my Government's proposals for
tax reform for big tax savings for the family man and
a fair system of rebates for everyone? The tax reforms in
our latest Budget are essential to the battle for wage
indexation. Unions will only accept wage indexation if
S they know they will be saving in the tax on their take-home
pay. Introduce three levels of tax and these savings and
reforms will disappear. Indexation will collapse, and the
battle against inflation will be vastly more difficult.
Sound, uniform, national economic management in Australia
would be almost impossible. It's not surprising that
many Liberals themselves are confused and dismayed by
Mr Fraser's double tax system. I'm quite certain that the
Australian people won't have a bar of it.