PAUL Keating wasn't happy. It was July 1985 and Prime Minister Bob Hawke had just rolled over on his treasurer's plan for a broad-based consumption tax.
Almost 20 years later, the 10 per cent GST introduced by Liberal Prime Minister John Howard in 2000 is now hailed as one of the landmark taxation reforms in Australia's history.
But 15 years before, Labor didn't have the will to fight the political battle for a 12.5 per cent levy to help fill the gaps in commonwealth revenue left by a widespread culture of tax avoidance and minimisation.
Cabinet papers for 1984 and 1985, released on Tuesday by the National Archives of Australia, record how the Labor government of Hawke and Keating embarked on an ambitious program of tax reform, with the consumption tax at its heart.
Then, almost everyone agreed the tax system needed reworking.
The 1980s was an era of rampant tax rorting when well-heeled individuals resorted to a variety of schemes to minimise their payments, aided by a High Court that generally took a lenient approach when evaluating the legality of some questionable minimisation schemes.
The worst excesses were revealed by the Royal Commission headed by Frank Costigan, QC, which exposed so-called "bottom of the harbour" tax schemes.
For most regular taxpayers and small business operators, the tax system was oppressive.
In a submission to cabinet in July 1984, Keating observed out-of-date tax scales meant an increasing number of taxpayers on relatively modest incomes were paying the top marginal rate of 60 per cent.
Even those on average weekly earnings paid a rate of 46 per cent. (By comparison, the top marginal rate today is 45 per cent, and only applies to income over $180,000.)
Cabinet agreed to cut one of the rates, and the plan was announced when Keating handed down the budget in August 1984.
But there was more was to come.
Before the year was out, Australia was in election mode and during the campaign, Hawke announced a re-elected Labor government would hold a national tax summit to seek consensus on reform.
Archives historical consultant Dr Jim Stokes said the move defused taxation as a contentious election issue.
But it left Hawke and Keating with the formidable challenge of trying to build consensus in an electorate viciously opposed to change.
So the government commissioned a white paper on the issue, which was considered by cabinet on May 12, 1985. It was released a month later, ahead of the tax summit was held in Canberra in the first week of July 1985.
The white paper observed tax avoidance was a problem and the loopholes remained, taxation income denied the Commonwealth would at least double within three years.
It proposed a range of measures to broaden the tax base - many current taxes, including fringe benefits tax and capital gains tax, date from this time.
Also proposed was a national identification system known as the Australia Card, which was intended to reduce tax evasion and fraud of the social security system but was eventually dropped.
This was a time when there was nothing to stop someone opening bank accounts in multiple names to collect social security benefits under each identity.
But the showpiece of the white paper was a 12.5 per cent consumption tax, offset by tax cuts for those on lower incomes.
After the summit, Hawke and Keating reported back to cabinet.
The pair backed a range of measures - the Australia Card, reduced marginal tax rates and the consumption tax.
Just over a month later in August, cabinet dropped the consumption tax, leaving John Howard to finish the job 15 years later.
So what prompted the sudden retreat?
Then-Labor government minister Susan Ryan said Keating vigorously led the charge for a consumption tax - known as Option C.
But the tax summit had uncovered plenty of opposition from unions, business and the welfare sector.
"It didn't happen because in Hawke's judgment we couldn't get the major stakeholders to agree," Ms Ryan told reporters at the launch of the cabinet paper.
"With those three big institutional outfits not supporting it, Hawke's view was we shouldn't proceed with it. You would have to say that treasurer Keating was not happy with that outcome."
But Keating did manage to end tax deductions for entertainment expenses - the practice of claiming lavish meals as a business expense - outraging the restaurant industry which feared profit and job losses.
Keating responded the deduction cost the Commonwealth $300 million, which meant taxpayers were footing a bill of up to $28,500 to maintain each job.
He argued the change wouldn't deter businesses from entertaining, and the cost would be met from business after-tax dollars rather than the public purse.
Then there was the vexed issue of means testing pensioner assets.
Labor already had a bruising political encounter and faced widespread protests when it first tried to assess the assets of pensioners against their pension entitlements in the 1983 budget.
Hawke persisted, declaring pension spending should be directed on the basis of need.
In June 1985, cabinet had endorsed a new assets test that excluded the family home and only applied to around 15 per cent of pensioners.
Over the years, that policy has been progressively tightened so most pensions are now assessed against all their assets.
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