 |
Locking in the GST Rate
George Williams
Law and Bills Digest Group
9 February 1999
The Policy
Under the heading 'Locking in the GST rate', The Howard Government's
Plan for a New Tax System(1) states:
The Government has taken careful note of concerns expressed that a future
Commonwealth government could increase the GST rate. These concerns relate
to overseas governments which have increased value-added tax (VAT) rates
after introduction. Principally this has been done to increase government
spending.
As GST revenue will be directed to the States, the Commonwealth Government
would not only have to agree to introduce legislation to increase the
GST rate, but the request for such a change would have to be unanimous
among State Premiers and Territory Chief Ministers. Legislation would
then need to be passed by both Houses of the Federal Parliament.
This statement of policy is reflected in A New Tax System (Goods
and Services Tax) Bill 1998. Clause 1-3 of that Bill states:
The Parliament acknowledges that the Commonwealth: ...
(b) will maintain the rate and base of the GST in accordance with the
Agreement on Principles for the Reform of Commonwealth-State Financial
Relations endorsed at the Special Premiers' Conference in Canberra on
13 November 1998.
This Research Note addresses whether it is possible to entrench the GST
rate of 10 per cent so that it cannot be altered except with the consent
of the States and Territories.
Entrenching Commonwealth Laws
A State Parliament can legislate to entrench an Act against abrogation
by a subsequent legislature by, for example, providing that the Act could
only be amended with the support of the people of the State voting at
a referendum. This has its origins in section 5 of the Colonial Laws
Validity Act 1865 (Imp). After granting to colonial legislatures
'full Power to make Laws respecting the Constitution, Powers, and Procedure
of such Legislature', section 5 states that such power may only be exercised
'provided that such Laws shall have been passed in such Manner and Form
as may from Time to Time be required'. The efficacy of manner and form
requirements now depends upon section 6 of the Australia Act 1986
(Cwlth).
On the other hand, neither section 5 of the Colonial Laws Validity Act
nor section 6 of the Australia Act applies to the Commonwealth, making
problematic any attempt of that Parliament to entrench an Act. A basic
facet of the doctrine of parliamentary sovereignty is, in the words of
A.V. Dicey, that the Federal Parliament has 'the right to make or unmake
any law whatever'.(2)
Nevertheless, there is limited scope for the Federal Parliament to limit
the law-making power of its successors. The law-making capacity of the
Parliament is defined and bounded by the Australian Constitution. Amendment
of the Constitution would be a legally effective means of requiring that
a Federal Parliament gain the consent of the States and Territories for
a change in the rate of a GST. Section 128 of the Constitution states
that a proposal to amend the Constitution must be passed by an absolute
majority of both Houses of the Federal Parliament, or by one House twice,
and then by a majority of the people and by a majority of the people in
a majority of the States (that is, in at least four of the six States).
Forty two proposals have been put to the Australian people under section
128. Only eight have been passed.(3)
One provision in the Constitution may already provide a basis by which
the Federal Parliament may bind its successors. Section 105A enables the
making of binding 'agreements with the States with respect to the public
debts of the States'. However, an agreement relating to the rate of a
GST does not concern, except indirectly, 'the public debts of the States'.
There may be means by which the Federal Parliament can entrench a law
even apart from the Constitution. Professor George Winterton has shown,(4)
despite contrary dicta by members of the High Court,(5) that the
Federal Parliament may be bound by manner and form provisions enacted
by a predecessor Parliament. Such a requirement might be in the form of
a notwithstanding clause;(6) for example, a requirement that, in order
to abrogate a right listed in a statutory Bill of Rights, a later statute
must expressly state an intention to breach this right.
A notwithstanding clause would not prevent the GST rate being changed
without the consent of the States and Territories. It would merely require
that in making such a change the Federal Parliament state its intention
to proceed notwithstanding that it has not gained the consent of those
bodies.
Other manner and form requirements could not be imposed. An Act could
not be entrenched by requiring for its amendment a special majority, say
two thirds, of either House of the Parliament. This is precluded by sections
23 and 40 of the Constitution, which provide, respectively, that questions
arising in the Senate and the House of Representatives are to be resolved
by a simple majority.
Similarly, the Parliament could not require a subsequent Parliament to
gain the consent of the States and Territories before enacting a change
in the rate of a GST. Section 1 of the Constitution defines the legislative
power of the Commonwealth, stating that it 'shall be vested in a Federal
Parliament, which shall consist of the Queen, a Senate, and a House of
Representatives'. This is inconsistent with any attempt to vest legislative
power or a right of veto in any other body or person, such as the States
or Territories. As Winterton states, it would not be possible for the
Parliament to 'substitute a new legislature for the present Parliament,
either by adding an additional element to the present legislative process
(such as the consent of the electors or another body) or by creating a
completely new body for the enactment of certain laws'.(7)
Such a provision may be found in the Flags Amendment Act 1998
(Cwlth), which was the subject of debate when introduced by the present
Government.(8) That Act states that the Australian flag can be changed
'if, and only if' the change is approved by a majority of the people voting
at a referendum. This provision is legally ineffective. It does not prevent
a future Federal Parliament from unilaterally changing the Australian
flag.
Conclusion
Constitutional change is the only means whereby the rate of a GST could
be 'locked in'. Otherwise, there is no legally enforcable means of requiring
a future Federal Parliament to gain the support of the States and Territories
to do so. The rate of a GST could be changed by an ordinary Act of the
Parliament.
However, this does not mean that a provision requiring the consent of
the States and Territories is of no value. A requirement for agreement,
even if it can be overridden by subsequent legislation, may create a political
convention. Hence, a government may not be prepared to change the Australian
flag without putting the issue to the Australian people. Similarly, in
a politically contentious area such as taxation, future governments may
not be prepared to breach convention, and may seek the agreement of the
States and Territories before initiating a change to the GST rate.
Endnotes
- AGPS, Canberra, August 1998, p. 85.
- A.V. Dicey, Introduction to the Study of the Law of the Constitution
10th ed, Macmillan, London, 1959, p. 40.
- For the results of each referendum, see A.R. Blackshield and G. Williams,
Australian Constitutional Law and Theory: Commentary and Materials,
2nd ed, Federation Press, Sydney, 1998, pp. 1183-1188.
- G. Winterton, 'Can the Commonwealth Parliament Enact Manner and Form
Legislation?' (1980) 11 Federal Law Review 167.
- South-Eastern Drainage Board (SA) v Savings Bank of South Australia
(1939) 62 CLR 603; Kartinyeri v Commonwealth v Commonwealth
(1998) 152 ALR 540 at 549 per Brennan CJ and McHugh J, at 560 per Gaudron
J.
- R v Drybones [1970] SCR 282.
- Winterton, op. cit., p. 192.
- See J. Norberry, 'Flags Amendment Bill 1996', Bills Digest No. 18,
1996-97, Department of the Parliamentary Library.
|
 |
