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PRIMLE M\\ NIS7ER
CHECK AGAINST DELIVERY EMBARGOED AGAINST DELIVERY
OPENING ADDRESS BY THE PRIME MINISTER
HON. R. J. L. HAWKE, M. P.,
NATIONAL TAXATION SUIMIT -CANBERRA 1 JULY 1985
It is with sincere pleasure that I welcome you all to
the nation's capital to take part in this historic
National Taxation Summit Conference. And I do so not
only on behalf of the Australian Government, but on
behialf of the Australian people.
Your presence here, your participation in this
Conference, represents in itself a remarkable
demonst1ration of the strength and vigour of the
Australian democracy and the Australian democratic
process. The uitimate significance of this Conference goes beyond
the all-important question of reform of the Australian
tax system. For I1 believe that such a Conference on
such a fundamental question one that affects almost
every aspect of the life and we~ ll-being of the nation
and its people could be held only in a country
confident in itself, confident in the ' strength of its
democratic institutions, and profoundly confident in its
future.
Such a Conference for such a purpose could only be
called together, with expectations of a positive
contribution to tax reform, in a country characterised
by a deep, underlying, sense of mutual confidence.
It involves mutual confidence between Government and
people: a people with confidence in the Sincerity,
integrity and responsiveness of their elected Government
as the instrument for the fulfilment of their hopes and
aspirations, for themselves, their families and their
nation; and a Gove'rnment genuinely prepared to consult,
to listen, to share knowledge, information and
experience, confident in its own integrity of purpose
and above all, confident in the intelligence and
maturity of the people.
It is on that basis of mutual confidence that this
Summit has assembled. It is on that basis, of mutual
confidence, that I am sure we here, in our
representative capacities, will proceed over the comin'
week. And my confidence that this will happen reflects some of
my deepest convictions about the character and
capacities of the Australian people.
Since the presentation of the Draft White Paper on
Taxation Reform, an enormous range and diversity of
views, have emerged. But there has been one common
factor, notably on' the part of the groups and
organisations which have already held meetings to
discuss the issue or have made submissions to this
Summit. I mention, by way of example, the meetings of
business groups, the trade unions, welfare
organisations, Labor Party State Conferences and the
women's conference here in Canberra last weekend.
For all the inevitable divergence of views at this
stage, the common factor in all those deliberations has
been a recognition of the seriousness of the issue and
an earnestness of approach in the quest for significant
and lasting reform of the Australian taxation system.
And I am confident that that earnestness of approach
will characterise this Summit and continue throughout
this Summit.
I have stressed the role of this Summit as part of a
democratic process uniquely Australian.
And I mean that, in both a general and specific sense.
Specifically, this Summit as with the entire process
of tax reform derives its legitimacy from the will of
the Australian people, as expressed in the national
elections on 1 December 1984.
It is of fundamental importance that thi s fact should be
established from the outset of this Conference, because
it is of central relevance to-its purpose.
The Summit itself was undertaken as a crucial part of
the processv by which the Australian Labor Government
would fulfil the undertaking I gave to the people of
Australia in these terms:
A genuine reform of the Australian tax system to
promote growth and to ensure that the benefits of
that growth are fairly shared and bring lasting
relief on personal income taxes to the millions of
ordinary Australian taxpayers.
I invite you to remember that commitment in its
totality. There is a definite linkage between ensuring
continued growth fairly shared and tax reform.
But let me at once emphasise this point : we say as a
Government that genuine and lasting tax reform is
central to ourmandate from the people, and that this
Summit is an integral part of the process we undertook
to achieve that reform. Nevertheless we do not claim
for a moment that this Summit Conference has any prior
obligation to endorse the specific proposals we as a
Government, have put as the best way we believe we can
fulfil our mandate from the people and carry ont the
covenant we have made with the people.
At this Summit, I ceaffirm our. commitment to the
totality of their mandate. And that of course, means
reaffirming our commitment to the nine principles on
which we undertook to base both the process and the
program of tax reform.
In return, I'now seek from the participants in the
Summit, and from all Australians a commitment to
rational, calm discussion and genuine examination of
proposals. In particular, I ask that any components of
alternative packages be examined as part of the wholeand
not .1* iisolation.
We have asked you to come here to be a crucial part of a
continuing process in the long and difficult road to tax
reform. Indeed, this is a road which has led directly from the
original Summit the historic National Economic Summit
in April 1983.
The need for tax reform was recognised in the Summit
Communique as an essential part of the long-term task of
national recovery, reconciliation and reconstruction.
The Economic Planning Advisory Council . the ongoing
machinery established by the Summit set tax reform as
a major priority in the work of achieving sustained
non-inflationary growth.
In our preparation for this Summit, we have sought to
discharge our obligations in the same way as we did at
the Economic Summit the obligation to provide the
information on which informed judgements can be made,
the obligation to Indicate how we believe the
community's objectives can best be achieved, and then
in the actual working of the Summit the obligation to
listen, to enter into a genuine dialogue, a genuine and
meaningful exchange of information, views and ideas.
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Equally, I stress at all times that this Conference and
the outcome we hope from it, is in no way intended to be
a substitute for the decisions and policies which must
be the ultimate responsibility of the elected Government
alone.
But we have ' always believed that effective policy cannot
be made in a vacuum. Wle do not believe that in so
complex a matter as tax reform we are the fount of all
wisdom; or the repository of all available knowledge,
especially as to how specific proposals may impact upon
the daily lives of particular individuals, groups or
interests, on whose behalf you yourselves are c elegated
to speak.
The very purpose of this Summit is to expose us all, not
least those of us with direct responsibility for
government decision-making, to part11icular viewpoints as
well as the wider realities.
Nevertheless, if we are best to serve, individually and
collectively; both. those we represent and the community
as a whole, it will require, from each of us, some
capacity for the broader view and some tempering of
narrower short-term sectional interests, with a sense of
a wider, long-term, national interest.
I have put the Government's commitment to achieving
significant tax reform in the context of the clear
man~ date we sought and received from the people of
Australia at the last elections.
But in truth it would be a trivialisation of so
important and far-reaching a matter as tax reform if it
were to be viewed solely through the focus of the last
election or for-that matter, the next election.
Issues do not emerge at an election from a vacuum. They
reflect reality; or at the very least, public
perceptions of reality.
Tax reform is central to our commitment to the people
because it is central to the economic and social
objectives of a Government committed to growth, equity
and efficiency.
But just as important, it is a problem perceived by the
overwhelming majority of the Australian people and
correctly perceived by them as impinging heavily and
directly on their legiti'mate hopes for a better life in
a fairer and more " efficient society.
It is not a problem that can be responsibly or
rationally approached by reference to election
timetables, past or future.
The overriding consideration and the starting-off
point for meaningful, relevant, rational debate, here
this week and throughout the community in the weeks and
months to come must be a realisation of the dimensions
of the problem and a recognition of the consequences of
doing nothing..
In particular, we all must have a clear understanding of
the consequences of failure to achieve significant tax
reforia for the millions of ordinary Australian taxpayers
the middle and lower income earners who are bearing
the brunt of the massively increased reliance on
personal income tax under the existing system.
Today 39 percent of full-time earners in the workforce
are paying income tax at the 46 cents marginal rate.
Without significant reform, that number will be far in
excess of 50 percent within 3 years. There would be 3
million out of the five and a half million full-time
earners paying the 46 cents marginal rate. That is, we
are approaching the situation where for more than half
the workforcb, every extra dollar in the pay packet will
be eroded by almost half.
Thirty years ago, the upper income earners those above
the present-day equivalent of $ 35,000 paid more tha~ n
half the personal income tax collected in Australia.
Now, those in the upper income range account for only
percent. And what has happened, of course, is not only that
average earners are being pushed into the higher
marginal tax brackets, but as PAYE taxpayers, they are
bearing the burden of the tax avoidance devices,
available mainly to tLhe wealthier sections of the
community. It is true tChat tax avoidance and evasion on the massive
scale which was allowed to take root and flourish from
the mid-1970' s transformed the personal tax system from
a genuinely progressive system to a flagrantly
regressive one, as it is exploited by some of the
wealthiest and the most privilfeged sections of the
community. For its part, the Government will continue its attack on
tax avoidance and evasion which has become the most
regressive aspect of our tax sy'stem.
The Draft White Paper foreshadows further measures to
extend that fight.
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But it would deny all known experience to imagine that
changes in laws and regulations, however desirable in
themselves, can provide a lasting solution to the
problems of avoidance and evasion.
The Draft White Paper points to one of the most serious
aspects of this problem. It is not just the problem of
a huge revenue loss.
The Draft White Paper shows how, as a direct and almost
inevitable result of the operation of the present
system, tax avoidance is becoming endemic and threatens
to become entrenched almost as part of a way oi. life for
a significant part of our great nation.
And that is something even more serious than the loss of
revenue involved, because it goes to a loss in our
national character, a loss to the quality and standards
of our national life.
It will be seen, therefore, that in preparing for this
Summit, and in our overall approach to the task of tax
reform, we have had at the forefront of our concerns the
need to restore equity, efficiency and integrity to the
Australian taxation system.
It is becoming a system increasingly deficient in each
of those fundamental qualities.
The Draft White Paper addresses itself comprehensively
to these deficiencies and puts forward the Government's
proposals to combat them.
Of those proposals, the Government's preferred course is
expressed in Approach C.
It contains, we believe, the elements required to
achieve significant tax reform and the most effective
way of achieving a fairer, simpler tax system which
contributes to sustained economic growth.
Again, I emphasise the need to examine the proposal as a
whole to see itas a package.
The proposals for broadening the income tax base and for
introducing a broad-based consumption tax can not be
isolated from the substantial " reductions in personal
taxation they make possible. Neither of these
interdependent proposals can be separated from the
compensation provi * sions'which are an equally integral
part of the total package.
No section of the Draft White Paper was accorded a
higher priority or-greater attention to detail than that
dealing with compensation for the disadvantaged and for
low income earners.
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As a Government:, we are convinced that this section of
our community would not only be adequately compensated
but woulLa be significantly advantaged by the changes
proposed in Approach C.
Since the release of the White Paper, the Australian
community has made it clear that it, too, shares the
Government's concern about compensation and insists that
the Government be very certain that any change in the
taxation system does not disadvantage that section of
the community least able to protect itself.
Accordingly, I now give this und ertaking : under
Approach C, the Government would establish an
independent monitoring authority to gauge carefully the
effect of tax reform. Its function would be to ensure
that, should there be any unforeseen effects to the
detriment of those in the lower income areas, they would
be drawn quickly to our attention, to be rectified at
once.
We believe that all the necessary protections have been
included in the proposal. But we recognise that all
Australians require an assurance that the least
privileged among us will not suffer as a result of the
changes. And I give that assurance unreservedly.
Further, we understand the concerns of Australians and
particularly Australian housewives about price rises
which could not be justified by any changes in the tax
system.
We have faith that the great bulk of the Australian
business community would play the game fdirly and not
seek to exploit changes for unfair or unrecessary gain.
We would be actively seeking the co-operation of
business and the States to ensure that this would not
occur. There are two final points I sh ould wish to make of
great relevance to the conduct of this Summit. The
White Paper makes it clear that our proposals for tax
reform are revenue-neutral, although the vast majority
of taxpayers would be better off. I cannot stress too
strongly that tax reform is not about increasing taxescertainly
not tax reform'proposed by this Government.
On the contrary, iC is precisely because the present
system has allowed Governments over the years to
increase the tax burden by stealth, that reform has
become so urgent.
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And second, we recognise as a Government that the
overall level of taxation is a reflection of the overall
level of Government expenditure. We have demonstrated
as a Government our commitment to expenditure restraint
including through our trilogy commitment and in the May
Statement. We will continue to exercise that restraint
as central to the achievement of our economic objectives
for this nation, consistent with our broader obligations
as a Government.
In indicating the Government's preferred course, I again
emphasise that we do not come to this Summit with a
closed mind on any aspect of the Draft White Paper. And
I would hope that that will be the reciprocal attitude
of all the participants at this Summit.
Clearly, given the size and complexity of the problem,
it would be unrealistic to expect complete agreement at
this Summit about the best means of achieving tax
reform.
But it wouldt be a tragedy for Australia if there were no
tax reform at all because each political group and every
interest group, each from its own entrenched position,
was insisting on its version of the best package.
We can riot underestimate the magnitude of the task.
We all know that the main reason why tax reform has so
lcng been ignored, is that it is hard.
But the threatened breakdown in the Australian tax
system can be prevented only if we have the courage and
confidence to act now.
It is certainly in that spirit that the Australian
Government approaches this great task.
It is a test for us all certainly for the Government,
for all of us here at this historic Summit, and for the
people of Australia themselves.
In a very real sense, it involves a test of the
Australian character itself. -it will be a test of our
maturity. It will be a test of our intelligence, it
will be a test of our commonsense. It will be a test of
our capacity for enlightened self-interest. It will be
a test of the sincerity of our claims as a nation to be
a people who believe in' the fair go and the fair sharing
of both opportunities and obligations.
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And it is precisely because of my confidence, my
deepest-held belief in the reality of those qualities in
the Australian people, that we have embarked upon this
course, knowing all the pitfalls and pressures and
difficulties; and why I am absolutely confident of an
ultimate outcome which will be of enduring service and
benefit to all the people of Australia.
My friends, we know there is one thing upon which we and
the overwhelming majority of our fellow Australians
agree the existing tax system is distintegrating to
the point where it has ceased to be either fair or
efficient.
Ours is the responsibility to approach with resolution
the task of examining the ways towards the creation of a
new system which will meet the legitimate aspirations of
our people.
Let us now set about that task.