This speech is taken from Progress Magazine Issue No. 936, February 1988. It’s by Morris Williams, member for Doncaster and a past president of Prosper Australia (then known as Tax Reform Australia).
SPEECH FOR LAND TAX IN THE VICTORIAN PARLIAMENT
Mr. WILLIAMS (Doncaster)—The Bill distresses me. It could have roared like a lion, but it squeaks like a mouse. I am most disappointed in the Cain government which has within its ranks the talent and the reformist zeal, even in its party organisation, to lead the way to genuine tax reform, not the phoney, divisive and opportunistic posturing this country has had to endure both in this place and in the Federal capital.
The Cain government believes in social justice, and so do I. Social justice must come from both sides of the Budget; the revenue side as well as the expenditure side. All the high-sounding moralising on the subject of social justice is meaningless without an all-out attack on Victoria’s regressive tax system.
The Cain government made a tremendous start on the road to tax reform when it commissioned the committee of inquiry into revenue raising in Victoria which reported to Parliament in May 1983. Over the four years it has done precious little in following through with the findings and recommendations contained in the first-class report.
The committee of inquiry said it was essential for the government to substitute a single low-rate, broad-based expenditure tax for the multitude of narrow, high-rate taxes now inflicted on Victorians. It is now an article of faith by both the major political parties in Australia that there must be a shift away from direct taxation towards indirect taxation
Income tax laws are just not enforceable against persons are liable for provisional tax. As you would know, Mr. Acting Speaker, with your background, the only people who can be compelled to pay their tax honestly in this country are people like you and me and other wage and salary earners who have to pay pay-as-you-earn taxation.
Everybody else—the self-employed, the recipients of interest, rent, dividends and any other form of income other than wages and salaries—can submit to the taxation commissioner any income they like so long as they have good accountants and lawyers to assist them to defy the taxation commissioner.
I shall quote Mr. Brian Toohey, a former editor of the National Times, who claims to be aware of documents that indicate that one of Australia’s richest men, a person much advantaged by the decisions of the Hawke government, had paid no tax for years. Over the past year, the assets of the richest 200 people in this country have increased from $15,000 million to $25,000 million, an increase of 67 per cent.
Over the past five years under the Federal Labor government, the assets of the richest seven people in this country have soared by 840 per cent to $6800 million. Seven people in this country own approximately $1000 million each! Mr. Toohey said that the flourishing tax avoidance industry had been greatly facilitated by the Federal Treasurer’s decision to abolish the traditional role of the Reserve Bank of Australia to monitor financial outflows. The floodgate to foreign tax havens has been thrown wide open to 40,000 companies known to be sending money overseas, plus the 30,000 millionaires and 700,000 non-millonaires who are probably sending money overseas.
A good tax system should contain three principal criteria: firstly, the higher income groups should shoulder a higher tax burden than the lower income groups. Secondly, the system must be administratively simple and easily understood, as well as complied with by the public. Tax bases that are capable of manipulation should be avoided like the plague. Too often in this place and in Canberra, Parliaments have introduced taxes that have been manipulated by the smart people or those who have access to smart lawyers and accountants. Thirdly, the system must operate at minimum administrative and economic cost. The more complex the system, the greater will be the economic and administrative losses.
In my view, the wealthy could be stripped of their speculative and other ill-gotten gains. I say “ill-gotten gains” because up to one-third of the profits made on the stock exchange are made by people with inside information. Those gains and other moneys earned in the cash economy—in the markets and other places where goods are exchanged for cash—are ill-gotten gains.
It is said that between all of the various groups, up to 15 per cent of the gross domestic economy of this country is virtually tax free so far as taxable earnings are concerned. This reality cannot be escaped. Members of Parliament are foolish if they think laws can be imposed against those people to make them pay taxes.
In 1969, one in every eight Australian households was considered to be well-off. Those households controlled one- quarter of all incomes. Today one in every three households is considered well-off and they control about two-thirds of all incomes. One-third, the top bracket in our country, control two-thirds of all incomes. I include the underground income, about which I spoke a few minutes ago, in that bracket.
Mr. Maclellan—The rich are getting richer.
Mr. WILLIAMS—I agree with the honourable member for Berwick, the rich are getting richer. Unfortunately, he and I are getting richer all the time and we cannot help it! The middle class, which I hope I represent in this House, have been squeezed from being three out of every four households in 1969 to not much more than one in every three households today. Their share of income has declined from nearly three-quarters to less than one-third of all incomes.
The poor, the so beloved of the social justice idealists of the government, have risen from one household in every five to one household in every three. In 1969, the poor received 5 per cent of all income, today with welfare handouts the share of the poor has risen to 10 per cent of all incomes.
The Bill before the House could have done so much providing a lead to the rest of Australia in signposting the way ahead for true revenue and expenditure justice in government Budgets, but the Bill is trivial, band-aid medicine that exacerbates rather than cures injustice and inequity in our society.
After fourteen years in this Parliament, I must protest that it is the first time that I cannot speak for 30 minutes on each of three separate Bills. I have always delighted in condemninga stamp duty Bill and a payroll tax Bill and applauding a land tax Bill. The Parliamentary procedure followed in this Bill is wrong and is contrary to the constitutional arrangements agreed upon between the Commonwealth and the States at the time of Federation.
I hope the Treasurer will not weep if someone challenges his enactments in the court. It will serve the Treasurer right for introducing proposed legislation that cannot withstand any attack in the courts. No Labor government should tolerate the highly regressive tax structure that is currently blighting the social and economic fabric of this country. Low and middle-income earners are being forced to provide the bulk of government revenues while the mega-rich are coining wealth to the tune of hundreds of millions of dollars a year and paying precious little into consolidated revenue because their speculative gains and overseas incomes are outside the reach of our antiquated tax laws.
Land is virtually the only asset that cannot be relocated to escape the Victorian tax net, yet the Treasurer is boasting that this measure will reduce land tax payable by the 70,0OO landholders whose valuations are under $350,000. Some will be in the same category as the honourable member for Berwick and I, where we, presumably, own properties worth close to $350,000!
According to the 1986 tax commissioner’s report, compared with approximately 2 million properties in this State, only 82,198 taxpayers paid an average of $2020 on land assessed as worth $12,763 million in December 1985. If 1 know anything about soaring land values over the past two years, today that land is probably worth approximately $15,000million. One hears that those people cannot pay tax; 60 per cent of all land tax is paid by 855 large companies. Do not tell me those companies cannot pay land tax!
Mr. Coleman—Do they have shareholders?
Mr. WILLIAMS—They do have shareholders, including me!
The ACTING SPEAKER (Mr. Stirling)—Order! The honourable member for Doncaster will address the Chair and ignore interjections.
Mr. WILLIAMS—Mr. Acting Speaker, a further 4146 landholders owned property worth between $300,000 and $1 million yet they contributed only 20 per cent of land tax. The fortunate beneficiaries of the Treasurer’s largesse, that is, those holding land worth less than $350,000 contributed less than 20 per cent of all land taxes.
The bulk of Victorian households—up to 2 million —pay no land tax. Of course, many people say that this is good but I believe taxes are an unpleasant necessity and if one does not pay them in one way one will pay them in another. It is far better to pay land tax then to pay a lot of other regressive taxes which have high administrative costs.
Any self-respecting Labor government confronted with massive tax avoidance by business entities of all sizes, ranging from the large corporations to the small-time car wreckers and to traders out at the Footscray Market who deal only in cash, should do something about. It would be better for those companies and people to pay a broadly-based tax on the sites occupied by their businesses.
Uniform valuation systems feeding up-to-date information into a land data computer bank on land tax would make land tax one of the least costly taxes to be collected. If land tax is costly to collect at present it is due to inefficiency and for no other reason. If there is a greater tax base collection of up to 2 million taxpayers, to which I referred earlier, that could considerably reduce the cost of collection, and it would be simple to administer.
Land tax is easily understood and it is virtually incapable of manipulation or evasion. Economically it is a neutral tax. Land tax is one of the few taxes that cannot be passed on in a free market economy—by free market economy I mean one that is not manipulated by monopolies and restrictive trade practices and other activities whereby the cost of land is absorbed by the producers and not passed on to consumers.
The State government must implement the land tax recommendations set out in the May 1983 report of its committee of inquiry into revenue raising. The main recommendations in that report that I want to be implemented are: firstly, that a central valuation authority be established to supply all valuations of land to ensure the better use of scarce valuation resources, to ensure uniformity, and to avoid manipulation of the system by municipal valuers—as I suspect now occurs.
It is virtually impossible to get a true and fair valuation of capital improved value because one must physically inspect each house inside and out and also carry out other valuations which would keep one occupied for weeks.
Secondly, land transfer procedures should be revised in order to speedily identify information to be processed by the land data computer and to eliminate the abuses and anomalies inherent in the current indexing. It is regrettable that we are still plagued by antiquated methods of assessing property values.
Thirdly, a special land tax should be introduced on windfall gains arising from planning decisions.
Mr. Wilkes—That would be a betterment tax.
Mr. WILLIAMS—I am seeking to inform honourable members that land tax is being provided for in the Bill and ifwe are to get tax and social justice in this country we must reform the tax system. I was endeavouring to tell honourable members that one property developer who started in a small way 30 years ago now has Westfield Shopping town at Doncaster and Highpoint West and other places. The shares of that company are 100 times their earning value; they are the most pricey shares in Australia.
That is good business and indirectly I probably have shares in the Westfield corporation but, if we are to keep a just and proper society, companies which develop properties should be taxed on their windfall gains and particularly on the benefits they receive from planning decisions.
This year, land tax collections are not expected to exceed $200 million but a mere 1 cent in the dollar of site value on $60,000 million worth of land would triple land tax revenue from $200 million to $600 million and the people who pay land tax would be able to claim a deduction for income purposes for most of that; particularly, those who run businesses would gain legitimate tax deductions.
Some people ask, “Why should we have to pay $600 million in land tax?” They will be able to receive more than $600 million by way of eliminating a wide range of stamp duties and miscellaneous taxes that now oppress small business and middle and lower income earners.
Taxes for each Victorian family are way above the level of land tax that would be payable under my proposals. Stamp duties are an administrative nightmare and, unfortunately, the Bill will make that even worse for the accountants, lawyers, real estate agents, and others in the dutiable transactions field.
Stamp duties are a regressive form of taxation because the lower income earners, particularly young homeowners and car buyers, pay out a higher proportion of income in dutiable transactions than do higher income earners and the undervaluation of motor vehicle and chattels are a headache for the taxation staff. The Bill is endeavouring to do something about that situation.
Unfortunately, the cost of detection is so huge that many people are able to get away with tax avoidance under this Bill without risk of detection. In my opinion it would be far better to wipe out stamp duties altogether, to collect property taxes through land taxes, and to collect motor vehicle taxes through a joint Commonwealth-State fuel consumption tax.
On the subject of payroll tax, I state that I absolutely abhor the tax. It is a tax against the worker and a tax against labour. It adds to prices and it lowers the ability of local manufacturers to compete at home and abroad.
Another aspect I find reprehensible is that Commonwealth instrumentalities such as Telecom, Australia Post, the Australian Broadcasting Corporation and similar statutory authorities do not pay payroll tax. Something must be done about this iniquitous situation at the next Premiers’ Conference.
We must do all we can to lift the tax burden on the lower and middle income earners and ensure that those who are able to make profits and enjoy huge rewards from our society —and I do not begrudge them their big rewards because I believe in the free enterprise competitive system—pay a reasonable level of taxes on the income that they earn. We must abolish the present regressive inequitable tax system that is so unfair to the middle and lower income groups in this country.