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House of Assembly - Fifty-First Parliament, Third Session (51-3)
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PAYROLL TAX BILL

Second Reading

Adjourned debate on second reading.

(Continued from 8 April 2009. Page 2327.)

Mr GRIFFITHS (Goyder) (11:03): It is a pleasure to have this opportunity to talk about this bill, which was introduced by the Hon. Mr Koutsantonis on behalf of the Treasurer on 8 April. I place on the record my appreciation for the briefing that was provided at very short notice by the office of the Treasurer which occurred on Monday of last week. As I would have expected, it was quite detailed in the areas on which we had some concerns and questions.

As I understand it, this bill is the result of an agreement that was reached between state and territory treasurers in March 2007 to progress towards the adoption of consistent arrangements announced by New South Wales and Victoria in February of that year regarding, amongst other things, the harmonisation of payroll tax.

There is no doubt that some level of consistency and consideration of taxation across the nation is important. We have changed considerably from the situation we had 50 to 75 years ago where activities occurred predominantly within a state to a situation now where, in many cases, businesses operate across all states. That is a good thing for the nation because it improves competitiveness and provides the ability to get jobs done and for expertise to be recruited, and for the best possible products to be developed as part of that.

So, there is no great philosophical point of difference between the Liberal Party and the Labor Party on this. In some way, it is predicated on the legislative amendments that were enacted as part of the Pay-roll Tax (Harmonisation Project) Amendment Act 2008, the bill for which was considered in this chamber last year and supported by the opposition.

The alignment between South Australia, New South Wales and Victoria will be a good one. Eight key points are referred to in this bill. The first relates to the timing of the lodgment, and I think that has been brought forward seven days from the 28th to the 21st of each month. The Treasurer nods in agreement. The others are motor vehicle allowances, accommodation allowances, fringe benefits, work performed outside of jurisdiction, employee share acquisition schemes, superannuation contributions for non-working directors and grouping provisions.

When I read the second reading explanation, I must admit that I thought that this was a progressive step forward in ensuring that the states actually work more cooperatively and there is an understanding for businesses that operate across state boundaries of what the circumstances (as they exist) will be for employees when they work outside their home jurisdiction. This is something that we should support, but this is also an opportunity to talk about some of the side issues that are associated with that, and payroll tax is a very important one.

The budget papers for this financial year identified that payroll tax revenues were to be in the range of $888 million or thereabouts. An adjustment may have been made as part of the Mid-Year Budget Review, but I have not got that figure in my head. However, I do note that payroll tax is certainly a very major component of the taxation policy of this state, and the income that it brings in is very important to the efforts to ensure that we can provide infrastructure and services for the state.

However, if we look back a few budget periods and go back, in particular, to the 2001-02 period, which was the last year in which the Liberal Party formed government and actually set a budget in place, we find that at that time payroll tax revenue was $601 million. There have been increases each year totalling, as it turns out, some 48 per cent. Even though I have only been in the chamber for three years, I have had the opportunity to review submissions that are proposed by business associations concerned about the level of payroll tax.

The Hon. K.O. Foley interjecting:

Mr GRIFFITHS: Yes, I understand that. I believe that the Motor Trade Association in its budget submission to the Treasurer is seeking an increase in the payroll tax threshold, which is intended to be $600,000 from 1 July, to $1 million. I recognise that there have been some adjustments made to the payroll tax threshold and that the rate has been lowered from 5.2 per cent to 5 per cent and, from 1 July, down to 4.95 per cent. The threshold has increased fractionally in that same time as adjustments have been made to the rate applicable to it.

However, I know from the submissions that I have read that business associations talk about the fact that the possibility of an increase in the threshold would actually allow more South Australians to be employed and that, in turn, the budget would provide benefits in other ways. That is part of the balancing act that the Treasurer faces, as have all treasurers before him, and all treasurers in the future will face the dilemma of ensuring that the taxation policy actually reflects the opportunities that need to be created within the state.

During the debate that occurred on the Pay-roll Tax (Harmonisation Project) Amendment Act 2008, the Treasurer flagged his intention for the South Australian government to adopt the harmonised payroll tax legislative model operating in New South Wales and Victoria from 2009. Now that this bill has been introduced with the opportunity to consider it within both chambers and have it implemented, I, as the lead speaker for the opposition, can confirm that the opposition will not be proposing any amendments, but there are some points that it does wish to discuss.

The opposition is also aware that changes are occurring in other states at this time. Tasmania, I believe, has fully harmonised. Queensland has made the majority of the changes that are required. Western Australia is still considering its position—and I am not sure whether that is as a result of the change of government in the election last year or whether it has some greater concerns—while, as I understand it, the ACT is set to bring in those changes on 1 July 2009 and the Northern Territory is still considering some issues that it wants to pursue.

It is obvious to me that payroll tax and the quantum that it brings in—given that it represents probably some 25 per cent (maybe a little less) of the taxation revenue of the state—is a big determiner of the success of businesses within our state. It is challenging times out there, there is no doubt about that. Businesses are facing great difficulties in keeping their people employed. Expenditure is down across retail. The industrialised nations of the world are really feeling the pinch in many ways. Not only important are the decisions which have been made in the budget and as part of the Treasurer's and Premier's announcement on the extension and the commitment to capital works but also the need to ensure that the full picture is considered and includes taxation policy.

I know that, during Queensland's pre-election debates, announcements were made by both the LNP and the Labor Party about payroll tax and how they would treat that. I also believe the Liberal opposition in New South Wales made an announcement regarding its consideration, with a call for an immediate concession to apply for a one year period to ensure that its businesses have the greatest opportunity to weather the storm that faces us all. That is the attitude that needs to be taken within this state, too.

Businesses are struggling. I have been at forums in recent days at which a variety of people representing small to medium size enterprises have spoken about the fact that taxation is really making it very difficult. The widespread opinion amongst people is that payroll tax is a disincentive to employment. We know that, currently in South Australia, the latest figures show approximately 46,000 people unemployed. That in itself presents an enormous challenge for our state, but the projections that during 2010-11 unemployment will rise considerably above (I think) 5.6 per cent (as announced last month) potentially to the 9.5-9.6 per cent range will be a great challenge for all political parties to face in the lead-up to the next election.

Let us do some simple sums on this. We know that 5.6 per cent equates to 46,000 people (or thereabouts). If unemployment does reach 9.5 per cent—and I certainly hope that is not the case, but we know that, through an immense sense of loyalty, businesses have been keeping their staff on, but the difficult times will come for them—we face the real possibility of an increase of up to 30,000 people above that 46,000. It is important to look at the numbers behind that, too: 46,000 people—a terrible scenario, with people obviously wanting to work and to have a future for themselves.

Through a variety of global pressures which have been evident and which have been steamrolling across all nations—and very difficult for governments of any persuasion to manage—we are now faced with the scenario that, across the world, unemployment is going to increase. Payroll tax is a component of that. I do respect the fact that a payroll of 600,000 (which is where the threshold kicks in) equates to some $2,400 in payroll tax liability. It is interesting that, as part of the tax summit that the Liberal opposition held on 12 May last year, at one of the forums a chap was talking about payroll tax. It was a particular issue for him because he related it back to one very simple equation.

He remembers that to be responsible and liable for payroll tax within his industry probably 15 to 20 years ago you had to be employing about 20 people. Therefore, you have a business of a considerable size. Obviously you have had some history; you have some loyal customer bases; and you have some ability to weather storms that might arise within the industry in which you work. However, he told me that, as a result of wage increases at that time—and the fact that wage increases have occurred is also an important factor for our nation—the tax rates currently applicable for payroll tax meant that, within his industry, you only had to have about eight employees to be liable for payroll tax—a considerable difference between the 20 which was previously the case.

A firm with eight employees is not an overly large enterprise. The fact is that the South Australian economy is primarily based around small to medium size enterprises, a vast number of family businesses and a vast number of people who have employed people for lengthy periods and who show an immense loyalty to their employees and the employees, in return, show an immense loyalty, and suddenly you find that employing a relatively small number of people within a business starts to incur a payroll tax liability.

I know that some rebates are applicable to traineeships and apprenticeships—and they are a progressive thing because they encourage people to get into those fields—but the fact is that for eight people and some $600,000 they are up for a liability of $2,400. If they get to the $800,000 barrier, on the figures that were produced for the last budget—if they have an $800,000 payroll liability—all of a sudden their liability on the taxation component is $12,400. In effect, that becomes half of a younger person's job, and that is the great challenge for us. On the last figures produced, I think youth unemployment was in the range of 25 to 26 per cent. I understand that it identifies only people between the ages of 15 and 19, but that is a key age group that we need to ensure is in the South Australian workplace.

The Economic Development Board submitted a report to the parliament—certainly to the government—in June last year which identified some of the labour force challenges our state will face over the next 10 to 15 years. From memory, within the baby boomer generation—of which many in this chamber are part—some 206,000 people are currently employed within South Australia, and they would be likely to retire within the next 10 to 12 years. Managing the transition from that loss of skill and experience and ensuring that we have an opportunity for our young people to come through—and I declare an interest because I have a 19 year old and a 17 year old; the 19 year old is working and, hopefully, the 17 year old will enter the workforce next year—will be a great challenge for our young people. If we lose these young people we might not get them back.

Good campaigns are being run to entice people back to South Australia. We need to ensure that those who have a connection and affiliation to our state are attracted back here. A lot of those people have wonderful levels of expertise. At a forum last night I was talking to a couple whose youngest child graduated from university in 1990. Their child has architectural qualifications and applied to just about every firm based in South Australia for an opportunity to start work and could not get any chances at all. They went overseas, applied for jobs in Singapore and had four job offers within a week. That person is now working in Melbourne—they have come back to the nation, at least.

Where is the certainty in order to give jobs to those young people? Payroll tax becomes part of the issue. I know it is hard to draw the connection, but it is an issue which is worthy of greater debate within the chamber. Martin Hamilton-Smith was elected Leader of the Opposition in April 2007 and in a major speech in June that year proposed a tax summit. We thought it was important to give South Australians a voice. A summit was held on 12 May last year and was successful. I think about 45 submissions were received and about 90 people attended within the parliamentary confines. They were involved in not only a major discussion that took place in this chamber but also discussions in break-out groups that occurred in other rooms. I hope that some of the ideas that came from the summit stimulate some attitudinal change about what our needs might be.

One point has not been lost on me. Certainly, this supports state by state competitiveness, and there is no doubt about that. The Liberal Party supports the intent of the bill, but it highlights an issue that was raised in the public sphere not long ago. The Northern Expressway is an immense project which will derive enormous benefit for the northern areas, opening up opportunities for business growth. It is a $564 million project, or thereabouts, of which the federal government is providing 80 per cent, but a concern which was seriously expressed to members of the opposition and which got some traction in the media is that we need to look at the opportunities the project created for South Australian companies. The Civil Contractors Federation expressed some concern that large tracts of that project had been given to interstate companies. I understand that decisions are often based on price competitiveness, but that is where the tax competitiveness of our state compared with that of other states creates an issue.

The Commonwealth Grants Commission has just released some interesting figures that look at nine key areas of tax policy across all states. In six of those areas, South Australia has the highest taxing effort for all areas. I think that, if we use 100 as being the average for all states, South Australia's overall tax effort is something like 111 per cent.

However, in this instance, if we look at the Northern Expressway project and the amount of work that interstate companies have been engaged to undertake and, indeed, the amount of machinery and vehicles with interstate registration that are working on that project, we have to consider whether it is the tax policies that have made it very hard for South Australian companies that have history, expertise, experience, the skilled employees and the capacity to undertake this work. Does the pricing regime, because they operate within a state where there are higher WorkCover levies, exceptionally high land tax rates and high payroll cost rates, make it difficult for our companies to operate within the state? That is something that none of us wants to even consider but, unfortunately, for some of these people it is becoming an increasing reality.

That is where harmonisation is important, because it puts some balance back into the argument. It is a key to understanding the fact that states retain the capacity to determine (as they should) individual thresholds, exemptions and tax rates. I suppose that is where our call has been at all times for taxation policies to be reviewed regularly to determine whether they are, indeed, the most appropriate.

The Treasurer has much work to do; there is no doubt about that, and the concerns that have been expressed around the world have made his job even harder. We will not know the true position with respect to the difficulties we will face in the 2009-10 financial year until 4 June. These are important issues that need to be addressed by all.

As part of the briefing, I asked some questions about the level of support from other areas. We certainly had contact with Business SA about its thoughts on this matter, and I am grateful that confirmation has been received in the last few days that Business SA supports the harmonisation that is intended to occur. We think that it is an important step forward to make this happen, but we again enforce the fact that, even though adjustments have been made to thresholds and, indeed, the tax rates, this bill does not look at that issue. So, I think we need to look at what some other opportunities might be.

I am grateful for the briefing that was provided. Certainly, it identified any issues of concern that I had, and my questions were answered very well. The second reading speech states:

Consequently it is not envisaged that there will be any significant revenue implications as a result of adopting the harmonised legislative model.

Given that payroll tax is a very significant income area for the state government, I asked the obvious question: 'What do you believe it was going to be? Was it $1 million?' and they said, 'No, significantly less than that.' The Treasurer might take the opportunity to qualify what the actual—

The Hon. K.O. Foley interjecting:

Mr GRIFFITHS: The Treasurer—

The Hon. K.O. Foley: It's rats and mice; less than a million.

Mr GRIFFITHS: Certainly, the Treasurer has just confirmed that it is less than $1 million. I think the indication to me when we spoke was more in the range of $250,000, or $200,000 or thereabouts. The Treasurer might wish to choose to put that on the public record when he responds to some of the comments made by the opposition.

Again, I confirm that the opposition supports the intent of the bill. It understands that collaboration between the states in many areas is a good thing.

Certainly, it does take some time to make these things a reality. Given that the agreement was reached two years ago, some effort must go into ensuring that everyone accepts things such as this. It takes a while to draft the legislation and put it before the chamber, but let us hope that, with the debate and the input that will come from other members, we have steady passage of the bill.

Mr VENNING (Schubert) (11:25): I rise to support the shadow minister, the member for Goyder, and I congratulate him on his good work. Even though we are supporting the government on this bill, it does raise several issues that members on this side of the house want to put on the record. The bill will repeal the Pay-roll Tax Act 1971 and replace it with a new act, which will bring into line South Australia's payroll tax provisions and its regime as much as possible with equivalent payroll tax legislation in New South Wales and Victoria from 1 July 2009.

In March 2007 an agreement was made by all state and territory treasurers to progress the adoption of consistent arrangements announced by New South Wales and Victoria in February 2007, including the harmonisation of payroll tax provisions. The changes brought about by this bill will bring uniformity with our system and with the payroll tax regimes of New South Wales, Victoria and Tasmania. At this time Tasmania has fully harmonised, Queensland has made the majority of changes, Western Australia is still considering its position (apparently the recent change of government has slowed the process), the ACT is set for 1 July 2009 and the Northern Territory is considering some changes.

Payroll tax rates, thresholds and exemptions were not part of this agreement between the states, and all remain under the control of each jurisdiction. In some ways this is unfortunate as South Australia has the lowest threshold of payroll tax in Australia.

The Hon. K.O. Foley: Not true!

Mr VENNING: The Treasurer says, 'Not true!' Certainly, I will be interested to see what he—

The Hon. K.O. Foley: Victoria has a lower one than us.

Mr VENNING: I will be interested to hear what the Treasurer has to say in his follow-up to the second reading on this bill. Similar to—

The Hon. K.O. Foley interjecting:

Mr VENNING: My information is that we have the lowest threshold of payroll tax in Australia. Anyway, if it is not true we must be the second, which is still not a great recommendation. It is similar to our uncompetitive land tax regime, which is by far the highest in Australia; and, in order to be competitive with our interstate counterparts, the state Rann Labor government needs to overhaul our system. Will this mean some relief for business with a reduction in payroll tax? I heard the Treasurer's comment a minute ago that this could be around $1 million, give or take a few. I presume that will be on the positive side of the balance sheet for business here in South Australia.

We do not want to add any further imposts whatsoever to business at the moment because of the terrible situation we are going through as a result of the economic downturn. However, as I said earlier, this bill does not deal with rates, thresholds and exemptions, but harmonising payroll tax for business with other states. Why not? One could ask that question. I know that the states are fiercely independent of each other and that they do want the right to have their own rates, but, why not?

I believe that this bill could have gone a lot further if we had said, 'Well, okay; we will fully harmonise the lot.' If we have the same rates, thresholds and exemptions, companies cannot cherry pick between states. I have several large employers in my electorate, including companies such as Fosters and Orlando Wyndham. There is a great list of them, so I will not pick on those two. These companies can cherry pick between states. They are able to move employment—or at least the bookwork—to the state with the least impact and in this way rob our state of revenue.

It causes movement of jobs, so I cannot understand why state governments, particularly as they were all of one political flavour (they had been, but not now; Western Australia has seen the light), could not fix the rates to be the same right across Australia. I cannot understand why they are not doing it.

The Hon. K.O. Foley interjecting:

Mr VENNING: Well, we did not have the crisis we have now, Treasurer, right at this very moment. You do not need to be Einstein to see what is happening, and on the very day that we hear that Holden is discontinuing the Pontiac and the Americans are not importing it.

The Hon. K.O. Foley interjecting:

Mr VENNING: Well it just adds to the impost these companies are facing. You can imagine the payroll tax that General Motors pays here in South Australia. It would be huge, and what I suggest certainly would be a help and a move in the right direction, if nothing else.

The system really is suffering some sort of shock when big companies such as General Motors America and now General Motors Holden are discontinuing the Pontiac, which is fully built here in Adelaide. It does send shockwaves, and it is an issue which I do not believe should be politicised in any way, and I am not doing that. I just raise it here today to highlight that it is a difficult climate in which to operate, and the atmosphere of uncertainty right now must be causing the directors of these companies no end of headaches.

Here we are discussing payroll tax, but I believe that any relief we can give these companies we should give them. I question the bottom line again, and I will be interested to hear what the Treasurer has to say in a moment about the $1 million. Is it a future impost, or is it going to be a handback or a relief to them? Business needs to be helped.

My last comment is this: in a debate like this we ought to be discussing whether payroll tax is a just tax and whether it achieves anything. I believe that it is a tax with all the disincentives it puts on employment, and that it should not be there at all. I cannot believe that any modern government puts a tax on employment today; it goes against any reality. I would love to hear the Treasurer saying in connection with this bill, 'We will do this but, hopefully, within the next 10 years (say, by 2014 or 2018) we would like to phase out payroll tax altogether, because we ought to.' I would support anyone who says it ought to be banned; but, in the short term, it ought to be phased out. That ought to be part of the political process, and I hope that both parties can stick it in their election manifest during the coming campaign. Certainly it would be great to have in the June budget of this government in a few weeks' time some indication from the Treasurer of payroll tax relief. After all, the abolition of this tax, of all taxes, would assist industry in this state—as would a reduction in land tax.

With those few words, I indicate that I support my shadow minister and commend him for his work on this issue. We support this bill, but with some caution. We would be interested to hear what the Treasurer has to say about whether this is a negative or a positive for business, and also what he believes is the future of payroll tax in this state.

Mr PENGILLY (Finniss) (11:33): I also rise to indicate support for the bill, as indeed does the Liberal Party, but it is worth picking up on just a few points, many of which have been made this morning by the members for Schubert and Goyder. The reality is that this tax is killing business in South Australia. It is a disincentive to employ people.

It is making it difficult for contracting firms to get work in South Australia, and one example I give of this is the earthmoving works for the desalination plant south of Adelaide where a New South Wales firm, Abigroup, has the contract to undertake the vast majority, if not all, of the earthworks. They have put in place large earthmoving machinery which was brought from interstate, yet contractors here in South Australia have the same equipment sitting in their yards. They simply cannot compete because, when they put in a tender, they are stuck with the payroll and land tax implications in South Australia. I hear it regularly (and I am sure other members on my side as well as those on the government side of the house are getting it as well) that they are just being taxed out of existence in South Australia, and there is very little incentive to do anything at the moment. It is a matter concern. I hope the Treasurer will remedy some of this situation in the forthcoming state budget. We keep talking doom and gloom about where the world is, but the world will keep going and so will business in South Australia—it has to, we have far too much to lose.

It is a sensible move to harmonise the pay-roll tax provisions across the states. We have looked at that and, as the member for Goyder indicated, we will support it. The reduction of red tape alone that will occur by naming a dedicated group employer with the commissioner's approval to make payroll tax lodgments on behalf of specified members of the group is a step in the right direction. It is all a step in the right direction, but at the end of the day the issue is one of how inhibited businesses will be in South Australia by all these taxes, particularly payroll tax.

In my electorate I have very few large businesses, so there is a limit to the amount of pay-roll tax paid across my electorate. There are serious numbers of small businesses; for example, there are 600 small businesses in Victor Harbor alone. There are 3,500 ABNs in Victor Harbor, which is most interesting, but there are hundreds of businesses across the electorate of Finniss, many of which are small farm businesses and small tourism related businesses or restaurants, and the list goes on. There are few businesses of any size, the exceptions being the SeaLink Group, which operates the ferry between the mainland and Kangaroo Island, and a couple of businesses down in the Fleurieu would be paying serious amounts of payroll tax.

However, at the end of the day in these difficult times we should be asking the government to give all assistance necessary to business to give it the opportunity to employ without being encumbered by this multitude of taxes that are restricting employment and making life more difficult. With those few words, I support the bill, as does this side of the house, but I make the point that, as long as we are going down the road of reducing red tape and a few other things, we need to reduce taxes to go with it. That is a priority.

The Hon. R.B. SUCH (Fisher) (11:38): Everyone agrees that we would be better off without payroll tax, but unless you have a substitute that will not happen, certainly not in the short term. What needs to happen at federal and state level and involving the local government sector is a complete fundamental review of taxation in this country. I am pleased to say that the Rudd government has moved along that path of reform. Recently, I made a submission to the federal government on the need to reform totally the taxation system in this country. It is unnecessarily complex. I commend the government for introducing this bill as it will simplify matters and reduce administrative costs. It is a step in the right direction.

The fundamental issue that has to be addressed is looking at taxation overall in this country. We have some people who do not seem to be paying their fair share of tax. There are too many loopholes in the taxation system at the moment. I believe in reward for effort and I have no problem with people getting a decent reward for the effort they put in, but one would have to ask how it is possible that some people can end up with luxury boats costing tens of millions of dollars if they have been paying their fair share of tax.

I remember one MP in here, who was quite wealthy, who said to me once that only idiots pay tax. I do not agree with that. I do not mind paying tax—and I pay a fair amount—because I believe we have an obligation to support society and the people in it who are less fortunate and to maintain essential services. So the people who continually sound off and say that taxation is evil are, I think, deliberately missing the point and are interested only in their own selfish ends.

So, yes, we have taxation, and it will be with us forever, but let us have a system here in Australia that enables us, for example, to get rid of payroll tax. You would have to offset that with some other revenue source, and there are all sorts of options. I am not arguing for any one in particular, but one possibility would be a small increase in the GST. Of course, the problem with the GST is that it puts an unfair burden on low income earners, but there are plenty of options that could be considered if we had a fairer, more equitable income tax system and closed off a lot of the loopholes where people abuse things like trusts. There is a place for trusts if they are used properly, but at the moment you can drive a truck through a lot of the legal aspects of things like trusts. If people paid their fair share of tax, you would be able to get rid of payroll tax.

Getting back to this bill, I believe it is a step in the right direction and I urge the Treasurer, when speaking to his federal counterpart, to encourage the federal government to give leadership, and continue to give leadership, in the area of taxation reform across this country involving the federal, state and local government arenas.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (11:41): I will not say a lot on this, but I would like to quickly pick up on a theme that my colleague raised. When did you come in, Bob? Was it 1989?

The Hon. R.B. Such: I think it was 1889!

The Hon. K.O. FOLEY: Bob came in a term before me, but I have always appreciated his comments and his passion for the job. He raised a very good point about tax minimisation. As we know, the Liberal Party per se is the party of tax minimisers; it is the party that has many members who spend a lot of their time working out ways to minimise their tax. I think of the great merchant banker who now leads the federal Liberal Party, Malcolm Turnbull; I bet he has employed a lot of lawyers and tax accountants over decades to ensure that he has minimised his tax bill.

I find it extremely amusing, when I hear about tax cuts being proffered as a solution to every economic ill, that many members of the Liberal Party (and I do recall the member to whom the member for Fisher refers) actively look at ways in which they can avoid paying tax. It is all lawful, of course; nonetheless, they look at minimising their tax.

The interesting thing about the Liberal Party now is that it is all over the shop on policy positions. It wants to build a football stadium worth billions; it wants to build stormwater projects worth $400 million; and it wants to do all sorts of beautiful and wonderful things that will cost money.

Mr Griffiths interjecting:

The Hon. K.O. FOLEY: Well, where is the $400 million coming from?

Mr Griffiths: Where is the $1.1 billion coming from for the desal plant?

The Hon. K.O. FOLEY: From water pricing.

Mr Griffiths interjecting:

The Hon. K.O. FOLEY: So, you are going to increase water prices. The shadow minister for finance has just indicated that the Liberal Party will pay for its $400 million stormwater improvement program through an increase in water pricing. I will ensure that we come back into the parliament today and tell members opposite how much more South Australians will now be paying for their water to pay for the Liberal Party's stormwater project.

Again, that just shows that the Liberal Party is all over the shop on policy. The shadow finance minister, one of the most senior economic members opposite at the forefront of policy formation for his party, has just announced that the $400 million stormwater project will be funded from an increase in water pricing. I read the paper yesterday and apparently Martin Hamilton-Smith was planning to ask the Labor Party to pay for it out of Canberra.

Mr Griffiths: You've got water price increases for the next three years.

The Hon. K.O. FOLEY: For the next five, to pay for the desal. So you are going to increase it further to pay for your stormwater projects. The shadow finance minister has said that the $400 million stormwater project will be funded from price increases in water. Members opposite make policy on the run.

When it comes to tax cuts, the Liberal Party has had its tax summit here, but what has come out of it? Zip. It is very good at highlighting problems and at highlighting issues, but it is never able to put on the table a constructive solution. It is a bit like its call leading right up to the last state election that we should cut land tax. The land tax mantra was, 'Cut it, cut it, cut it. It is shameful what you are doing with land tax.'

What was the Liberal Party's policy on land tax at the last election? 'We'll give a $70 million tax cut on land tax, but we don't know which rate to cut or how we would implement this tax cut. We'll work that out after the election.' That was how pathetic its policymaking was in the lead-up to the last election, and I see no improvement in its policy formulation at present, except for one frightening fact: the Liberal Party policy put forward by its leader (Mr Bankrupt, as I now quite appropriately name him), and every policy option that is coming out of the Liberal Party, is about bankrupting the state financially.

We have just listened to the shadow finance minister quite rightly put on the table the extraordinary financial devastation which has been wrought worldwide, which is now crashing onto our shores and from which this state is not immune. Mr Bankrupt, as the Leader of the Opposition, is still out there every day saying, 'We'll build a stadium for $1.5 billion. We'll do stormwater for $400 million,' which we now know will be paid for through water pricing. We have the Leader of the Opposition saying that we should relocate the Keswick railway site for however many hundreds of millions of dollars that would cost. The next thing is that we will hear him say that he wants a concert hall and that he wants this, that or whatever.

Every time the Liberal leader, Mr Bankrupt, pronounces a spending policy it will, without a shadow of a doubt, bankrupt this state financially. I will hammer this point right up to election day: a Liberal government is about big spending and bankrupting the state financially and it is not one with any economic or financial credibility at all.

On payroll tax, the shadow minister and other speakers talk about cutting payroll tax, saying that it is the great disincentive to employing people. That is simply not true. As the leader said—that was a Freudian slip; perhaps one day, Steve, but you will need to tighten up on policy formation. The current shadow finance minister, the would-be leader, says that payroll tax receipts have increased enormously—yeah, duh! That was because we have had a rapid increase in employment: the more people employed, the more payroll tax receipts. That is how it has increased, not because we have increased the rate.

In fact, since coming to government, we have significantly decreased the rate. We now have a more competitive payroll tax regime than our nearest competitor, Victoria, and we have a more competitive payroll tax system than the state of New South Wales—that is not bad. We have a lower rate than WA, where I think the rate is 5.75; ours is 4.95. Yes, it has a higher threshold, with fewer companies paying it, but those that are pay nearly a percentage point more than they do here. I have always said that, where possible, government should look at reducing taxes to ease the tax burden.

We also have an incredibly insatiable appetite and demand from the community for more and improved services, but you cannot have improved services without the money to pay for them. In a perfect world, perhaps we would not have payroll tax, although I am not certain that that is actually necessarily good public policy. If you did not have payroll tax, what tax would you have? Would you have a 15 per cent GST? We do not support that; do you? Would you have death duties? We do not support that; do you? Would you have increased land and property taxes? We do not support that; do you?

Ultimately, you cannot abolish or greatly reduce payroll tax to the extent the conservatives opposite say that we should without putting in new taxes to replace it or, if you do not have new taxes to replace it, slashing, burning and cancelling widespread government programs. Of course, the opposition never, ever spells out that part of the equation; it simply says that we should do this, this and this. It really is very disingenuous and very poor, sloppy policy preparation, policy development and policy pronouncements.

You can stand up and complain about anything in the world you like, but when you are in government you have to come up with solutions and alternatives, and the opposition has not given me any alternative today as to what it would do differently on tax to what this government does. What I do know is that it is this Labor government that has reduced payroll tax on employers, not the former Liberal government.

What I do not hear coming out of the opposition's so-called tax summit where it had a whole lot of good ideas—I get good ideas about tax cuts every day from business. Business loves to talk about tax cuts, why wouldn't it? That is its advocacy role to do that. But we have not seen or heard of one bit of policy coming out of the opposition's great tax summit. Where is your tax policy? Silence.

Mr Venning: Why would we put it out now?

The Hon. K.O. FOLEY: 'Why would we put it out now?' says the whip, the member for Schubert.

Mr Venning: We will put it out during the election period.

The Hon. K.O. FOLEY: Oh, you will not release your tax policy until the election period. You will keep it hidden from people, will you?

Mr Venning: We will put it out when it is right for us.

The Hon. K.O. FOLEY: Right. So, we now know that the Liberal Party will not release its tax policy until the election period proper because it wants to hide it from people. You can work out your tax policy now; it is not difficult. You will have the state budget in a few weeks' time. You will have the forward estimates. You can release your tax policy then. But of course the opposition will not. It will try to do what it did last time, it will talk tax cuts, it will talk tax reform, it will not promise a zack and it will hoodwink South Australians.

Mr Venning: What did you do last state election?

The Hon. K.O. FOLEY: Got re-elected with a record majority.

Mr Venning: You did exactly the same thing. You are a hypocrite.

The SPEAKER: Order!

The Hon. K.O. FOLEY: That is unparliamentary, the word 'hypocrite', sir.

The SPEAKER: The member for Schubert will withdraw.

Mr VENNING: I withdraw.

The Hon. K.O. FOLEY: Thank you. I am very offended by that reference.

Mr Venning: You are a whited synagogue.

The SPEAKER: Order!

The Hon. K.O. FOLEY: I am a what?

Mr Venning: A whited synagogue.

The Hon. K.O. FOLEY: A whited synagogue. What does that mean, sir?

Mr Venning interjecting:

The Hon. K.O. FOLEY: What is a 'whited synagogue'? Is that blasphemy to the Jewish community?

Mr Venning: You check the Hansard, it is all there.

The Hon. K.O. FOLEY: Like me, Ivan, don't try to use Latin, French or any other language that you do not understand. I have enough trouble with English.

Ms Fox: It is English.

The Hon. K.O. FOLEY: Was that English, was it? Now, where was I in my blistering attack on the opposition? Can someone remind me?

Ms Fox: You were saying that it just was not on and they would not let us know what their policy was, they were hiding it.

The Hon. K.O. FOLEY: That is right; extremely well put by the member for Brighton. I cannot do any better than that but to conclude by saying this, that I welcome the opposition's support. We always look at taxation reduction where we can but, equally, we have to be mindful that we are in arguably the worst financial crisis the world has seen since the Great Depression.

It is affecting the state in a drastic way. We have already lost billions of dollars of revenue. We need to continue to provide surpluses. The budget will be severely in deficit. Our credit rating is at serious risk. This is an incredibly difficult time and one in which making tax cuts becomes all the more problematic and very difficult.

Bill read a second time and taken through its remaining stages.

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