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Inquiry into The GST and a New Tax System
CONTENTS

ADDITIONAL STATEMENT

SENATOR DEE MARGETTS
THE GREENS (WA)

and

SENATOR BOB BROWN
THE AUSTRALIAN GREENS

1. Environment

1.1 Agreement With the Chair's Report

The Greens (WA) and the Australian Greens agree with the account of the evidence presented in the majority report. The Greens (WA) and the Australian Greens share the environmental concerns raised by the majority report in relation to:

1. Departmental participation, including:
• the inadequacy of Environment Australia's written and oral submission to the Committee; and

• the extraordinary lack of consultation between Treasury and Environment Australia in relation to the development of the ANTS package.

2. Inconsistency of the ANTS package with international obligations and recommendations including:

• the International Framework Convention on Climate Change and the Kyoto Protocol; and

• the International Energy Agency's recommendations to increase fuel prices.

3. Inconsistency of the ANTS package with international trends in ecological tax reform, including:

• carbon taxes;
• tax incentives for low polluting and energy efficient technologies; and

• increased prices for energy and fuel.

4. Inconsistency of the ANTS package with other Government initiatives including:

• direct funding for the development of gas infrastructure; and

• Living Cities Program.

5. Severe environmental and related impacts including:

• Increase in air pollution;
• Increase in greenhouse gases;
• Increase in the energy and resource intensity of the Australian economy;
• Increase in congestion and noise; and

• Increase in impacts associated with unsustainable mining, forestry and agricultural practices.

6. Severe health impacts (and related social costs) associated with increases in air pollution and increased use of road transport, including:

• lung cancer;
• other respiratory diseases such as asthma coughing, bronchitis and phlegm; and

• premature deaths.

7. Prospective and current disincentives to take up gaseous fuels (Liquid Petroleum Gas and Compressed Natural Gas) by:

• governments for public transport and fleets;
• individual motorists in private vehicles; and

• businesses for use in transport fleets.

8. Further disincentives to take up renewable energy use such as:

• solar power; and

• wind power.

9. Destruction of the recycled oil by the reduction in diesel excise with implications for the volume of waste oil to be disposed of.

10. Missed opportunities to move towards the use of gaseous fuels, renewable energies and recycling techniques for oil that:

• are sustainable and environmentally friendly;
• assist in reaching international emission reduction commitments
• reduce Australia's dependence on rapidly declining imported fuels
• assist our balance of payments

• will be the sunrise industries of the new millennium and potentially provide significant export opportunities and jobs for Australia,

11. Disincentives to use public transport due to:

• increase in prices; and

• decreases in the price (capital and fuel costs) of private vehicles.

12. Incentives to shift from rail to road transport due to the `unlevel playing field' which is:

• at least 3 times less fuel efficient; and

• increases congestion and noise.

1.2 Who Wins from the Reduction in Fuel Excise

In addition to the evidence presented in the majority report, the Greens (WA) and the Australian Greens believe that it is important to outline exactly who “wins” from the reduction in fuel excises in the ANTS package.

Essentially, the reduction in excise provides a windfall benefit for the mining industry, the export woodchip industry. The mining industry stands to gain at least an additional $800 million a year from the extended diesel fuel rebate, on top of the $1088 million value of the rebate in 2001/2.

This comprises:

• $75 million from the abolition of the 2.4 c/l excise that the mining industry currently pays for off-road diesel use;
• a minimum of $735 million from the 18 c/l reduction in the price of diesel used in heavy transport; [1]
• additional amounts (not estimated) for the GST rebates on diesel and petrol used in small vehicles

The government estimates that mining industry costs will fall by 4.4%. This includes the lower price for fuel as well as reductions in sales tax on equipment. Apart from the direct effect on greenhouse gas emissions from reduced fuel prices, these subsidies will flow through to the price of coal used in electricity generation. They will also make it relatively cheaper to operate in remote locations.

Table. Expanded rebates of fuel excise – now called `credits' -- available to business generally, and to the mining industry, under the government's GST plan

Export woodchipping is like mining in more ways than one. The native-forest based woodchip industry also benefits handsomely from the government's package:

• vehicles and equipment used in logging native forest GST-free if the woodchips are exported;
• woodchips GST-free, when exported;
• diesel cost for transporting logs and chips reduced by 25c/l; and
• diesel fuel rebate continues for off-road machinery.

Ecotaxes

Recommendation 1

That there be a inquiry to examine ecological tax reform elements that could replace or stand parallel to elements of the government's current ANTS package such as:

• carbon taxes; and
• tax incentives for fuel efficient and low pollution vehicles and technologies.

Excise

Recommendation 2

The proposed reduction in all fuel excises is abandoned in acknowledgment of the extensive short and long term health, environmental and economic costs directly associated with the reduction.

Recommendation 3

The Government calculate the whole range of economic, environmental and social costs associated with fuel use (such as road costs, pollution, congestion, noise, health impacts) and incorporate them into the level of fuel excise.

Recommendation 4

The Government explores other, less destructive policy options to assist rural and regional communities.

Industry Impacts

Recommendation 5

The explicit acknowledgment of:

a) enormous negative impacts on sunrise industries including:

• the alternative fuel industries such as LPG and CNG;
• the renewable energy industries such as solar and wind; and
• the recycled oil industry;

b) the massive opportunity and long term costs associated with these negative impacts.

Recommendation 6

A greater commitment by the Government to direct and indirect assistance to encourage the development of these industries and the take up of these more sustainable technologies.

Environmentally Friendly Products and Services

Recommendation 7

Should the ANTS package proceed, environmentally sound technologies, products and services should be zero rated, for instance:

• public transport fares; and
• solar panels

Non Profit Organisations

Recommendation 8

The Government explicitly acknowledge the significant increases in compliance costs associated that the community sector will face.

Recommendation 9

The complex definitions and distinctions associated with whether particular goods, services and payments are GST free be simplified.

Recommendation 10

Substantially increased funds be made available to assist the community sector with start up costs in addition to the $500 million currently available to small business, community and charity organisations.

2. Arts and Cultural Industries

The Greens (WA) also concur with the account of the evidence presented in the majority report in relation to the impact of the ANTS package on the arts and cultural community. The Greens share these concerns in relation to:

1. Increases in prices of tickets and costs of production to a significantly greater degree than other consumer disposables resulting in:

• reduction in artistic diversity and creative vitality
• reduction in employment;
• increased barriers to training and entry into the industry for new and upcoming artists; and
• decline in financial strength of individual organisations and the industry as a whole.

2. Increased compliance costs and administrative costs due to:

• complex distinctions and definitions as to what items are tax exempt;
• increases in record keeping; and
• decisions as to whether to register for GST purposes.

3. Lack of consultation that had occurred between Government and the arts community resulting in distortions, undermining broader cultural policy objectives and failure to take into account the peculiar nature of the arts industry including:

• the range of current WST exemptions;
• the role of Government grants in supporting artists and organisations especially in the initial stages of creative development;
• the role and sensitivity of sponsorships and the fixed nature of initial investment;
• inelasticity of prices for tickets; and
• low incomes of individual artists thus their vulnerability to even minor cost increases.

Recommendation 11

There should be an explicit acknowledgment by the Government of:

• the peculiarities of the arts and cultural industries and the value of the industry which exacerbate the negative impact of the ANTS package on the industry;
• the immense contribution the arts industry makes to the nature including contributing to employment, GDP, export potential, expression of Australia's diverse cultural identity, debate around current issues, promotion of a more imaginative and creative society, the showcasing Australia to the world.

Recommendation 12

There should be further inquiry into policy options to ameliorate the immense negative impact on this industry.

3. Communications Industries and Services

The Greens (WA) also share the concerns presented in the majority report in relation to the impact of the ANTS package on the communications industries and services particularly in relation to telecommunication prices and community broadcasting.

4. Conclusion

Taxation can help move Australia's economy from old dirty and wasteful industries, which employ relatively few people, to new clean green job-rich industries. Instead of relying on coal, especially brown coal for electricity generation, we can invest in energy efficiency, wind and solar energy. Instead of woodchipping native forests, we can invest in processing existing plantations to meet our needs for building materials and wood fibre.

The Greens (WA) and the Australian Greens believe the Australian Government is missing a rare window of opportunity during this tax reform process. The Australian Government should follow the example provided by Britain and other European countries as illustrated by the following quote:

“We said in our manifesto that what governments choose to tax sends clear signals about the economic activities they believe should be encouraged and those that should be discouraged. Just as work should be encouraged through the tax system, environmental pollution should be discouraged.

To that end, the Government will reform the tax system, so that we encourage growth that is environmentally sustainable. It will encourage the delivery of a more dynamic economy and cleaner environment, to the benefit of all.

The statement of intent establishes our position on the use of environmental taxes. It is backed, today, by a range of other announcements. Taken together, these measures demonstrate the Government's determination to place the environment at the centre of policy making.”

British Financial Secretary, July 1997

Footnotes

[1] 70% by weight of bulk freight movements and 90% by weight of commodity exports are mining industry products (ABS statistics). Coal alone was 30% of bulk freight movements. There are no measures of the actual amount of fuel used to transport different categories of freight; freight movements and exports are used as proxies.

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