CHAPTER 2
EDUCATION
Preamble
2.1 A crucial commitment made by the Government in the formulation of
its New Tax System and Goods and Services Tax (GST) package is that education
will be GST-free. Statements embodying this commitment have been made
repeatedly by the Prime Minister, the Minister for Education, Training
and Youth Affairs and the Minister representing him in the Senate, Senator
Ellison. For instance, in a letter dated 24 September 1998 to the Australian
Vice-Chancellors' Committee, the Prime Minister said:
We have therefore decided that educational services will be GST-free
in the terms stated in our plan for a new tax system.
2.2 On 7 December 1998 Dr Kemp said in the House that the Government's
tax reforms would `reduce the overall cost of schooling in Australia'
and would `leave the average family some $40 to $50 per week better off'.
[1]
2.3 The Committee considers these claims to be completely false. At best,
they must be regarded as a selective representation of the situation potentially
created by the introduction of the GST, and a gross exaggeration of the
benefits accruing from it. While the Government points to some areas where
costs to education providers, students and families will fall as a result
of the new regime, these gains will be offset by increases in other areas
newly exposed to taxation and also by the compliance costs associated
with the planned system.
2.4 Further, the Government's insistence that services, rather than institutions
or organisations, be exempted, will, in the opinion of the Committee,
give rise to serious difficulties and disagreement in terms of definition
of activities and services, and also to grave and inequitable anomalies.
The result will be an administrative minefield where constant and time-consuming
argument characterises the application of the GST regime.
Summary of Major Concerns
2.5 The Labor senators' major and overarching concerns are summarised
in this and the next section to this Chapter. Most are taken up in greater
detail in the following sections.
2.6 A primary concern is that of equity. The Labor senators believe that,
with regard to education costs, the GST package as constituted will have
a disproportionately heavy impact on those at the lower end of the income
spectrum. The Government's compensation measures are inadequate. Tax cuts
bestow disproportionate benefit on high-income earners. The exemptions
that are proposed fail to address the full range of important and necessary
educational costs facing students and families, and in particular fail
to recognise certain costs associated with schooling; such as the cost
of remedial tuition and of ancillary subjects and activities essential
to the provision of a well-rounded education. These costs often fall disproportionately
on low-income earners because children of such families tend to be enrolled
in smaller, rural or less well equipped and endowed schools. The cost
of ancillary and extra tuition and activities must often be met privately.
2.7 Further, the Labor senators note the evidence of the Australian Education
Union (AEU) on the potential impact of a GST on low-income families with
children at school. [2] A survey by the Australian Scholarships Group identifies
the items which such families most frequently report as difficult to afford.
These items are generally speaking those most affected by a GST. Educational
opportunities will be limited and cost burdens on families will increase.
The quality of education available to the less well off will be reduced.
2.8 The Labor senators consider that low-income earners who are students
and trainees in tertiary education will not be adequately compensated
by the Government's taxation offsets, due largely to the fact that their
taxable incomes are in any case negligible. There are many students ineligible
for various reasons for a full Youth Allowance who nevertheless exist
on extremely small incomes. The impact of a GST on these students and
their families will be much greater than that applying to high-income
families and individuals.
2.9 The Labor senators note evidence given to the Select Committee that
no compensation was available to parents of any child aged between 17
and 24 years despite the fact that a very high proportion of young people
are dependent or semi-dependent on their parents. At this Committee's
second Canberra hearing, a senior officer of the Department of Family
and Community Services was reminded that youth allowance legislation passed
the Senate on a promise to Senator Brian Harradine that the new tax package
would address the issue of families with dependent children aged between
17 and 21. The officer disclaimed any knowledge of how this undertaking
given by the Government to Senator Harradine had failed to be honoured.
[3]
2.10 A second major concern of the Labor senators is the potential for
the GST regime as proposed to undermine the delicate balance in Commonwealth-State
relations with regard to the respective responsibilities of the two levels
of government for meeting public expenditure requirements. The return
of GST revenue to the States will shrink the Commonwealth's own revenue
base in real terms, as well as in direct comparison with that of the States.
Unless countervailing measures are taken, the ability of the Commonwealth
to fund existing and new programs in all areas of education will be seriously
reduced. This, in turn, severely reduces and restricts the practical and
policy impact of the Commonwealth in an area of high national priority,
with serious implications for Australia's economic and social development.
2.11 This issue was raised by many of the major stakeholders in education
in their appearances and submissions. The impact would be felt keenly
in relation to specific purpose payments by the Commonwealth to the States
in the schools and TAFE sectors. There would also be a generalised impact
on the level of Commonwealth funding available for higher education and
for research.
2.12 Related to this problem is the general issue of the adequacy of
the overall revenue base, however it is to be apportioned between levels
of government. The Labor senators consider that Committee heard evidence
from several major organisations concerned that the tax package as a whole
did not deal adequately with the problem of a shrinking revenue base,
and that it potentially exacerbated this trend. Meanwhile, following significant
funding reductions in almost all sectors of education and in the light
of existing needs and obvious shortfalls, a compelling case can be made
for substantial injections of public funds at all levels of education.
The new tax regime, the Labor senators believe, would place grave difficulties
in the way of the Commonwealth and the States in dealing with these problems
and inadequacies.
2.13 The Labor senators are of the view that the package fails to deal
with serious anomalies in the current tax system, especially those related
to the excessive tax burden borne by pay-as-you-earn (PAYE) taxpayers
as opposed to companies, and to individuals who are able to take advantage
of favourable company tax concessions and deductions. The GST package
takes only minimal measures to address this basket of problems and thus
the basic inequity in the sharing of the tax burden remains. This general
point has relevance to education because it highlights the potential for
lower-income wage and salary earners to face disproportionately high tax
burdens, including those related to a GST on certain education costs.
2.14 Beyond the specific effects of the GST on education, however, is
its potential to damage the economy as a whole. Modelling carried out
by the Centre for Policy Studies at Monash University, predicts that the
GST will lead to shrinkage in the economy after 2007, and a general fall
in living standards from 2004. [4] Job losses
will be a feature of this decline: more families will face poverty and
will consequently be denied access to high-quality education.
2.15 The application of a GST to books, educational software and similar
materials is also a grave concern to the Labor senators. This issue, which
is relevant to all levels of education, is taken up in part in a later
section of this Chapter, under a discussion of libraries.
2.16 Finally, the Labor senators note the evidence presented by the Australian
Principals' Association and others on the oppressive compliance costs
to be faced by schools in dealing with the administrative and accounting
requirements associated with a GST. It has been estimated that, for an
average secondary school, this cost will amount to at least the equivalent
of one administrative staff salary. This means, of course, that offsets
would need to be made in areas directly linked to the educational activities
of schools, and, inevitably, educational quality will suffer.
2.17 In general, the Labor senators hold grave fears about the impact
of a GST on education at all levels, in terms of its effect on quality,
on access and on equity. These concerns go both to issues directly affected
by the GST package as proposed, and also to more general issues related
to the adequacy of the future revenue base available to State and Commonwealth
Governments. In the view of the Committee the underlying inequities inherent
in the new tax system will, in the medium term, have an impact on educational
opportunities for the less advantaged, in addition to the immediate impact
of cost increases in education-related expenses. The GST package seriously
undermines any commitment to the maintenance and improvement of overall
educational quality and equality in Australia.
Looking at the Evidence
2.18 The clauses relating to the application of the GST to education
are to be found in Chapter 3, Subdivision 38B, clauses 38-83 and 38-110
of A New Tax System (Goods and Services Tax) Bill 1998. These clauses
set out the exemptions to the GST as they apply to education and require
to be read in conjunction with the Explanatory Memorandum.
2.19 The Committee noted that some submissions and evidence from some
witnesses in the education sector indicated a lack of familiarity with
the legislation. It also raises the question of whether familiarity with
the legislation was a sufficient basis for understanding its detail. Evidence
given to the Committee at public hearings and in the submissions it received
from organisations and individuals connected with education indicated
a considerable degree of uncertainty about liability to a GST. It was
clear to the Committee that in the weeks that it was uncovering this uncertainty
those responsible for GST policy effects on the education sector appeared
unconcerned about the alarm and confusion resulting from the Government's
new tax policy.
2.20 The reported lack of response from relevant ministers and their
departments to requests from education interest groups for clarification
of tax liability issues is inexplicable. The opportunity afforded by this
Committee to allow such confused organisations and individuals to air
their views and experiences of what passes for, in the Government's view,
`appropriate consultation', alone justifies this inquiry.
2.21 The Committee heard from a broad range of stakeholder representatives
across the education sector: from parents' and citizens associations;
from teacher unions in the school; TAFE and university levels of education;
from teacher professional associations; from school principals; from organisers
of community and adult learning; and from university vice-chancellors
and heads of university residential colleges. Apart from expressing concerns
about the practical effects of a GST upon their particular operations,
there was a commonly expressed concern about the debasement of education
with the loss of its tax-free status. The Committee was left with a strong
impression of a sector of key public social institutions which had been
under siege for a number of years, and only just managing to cope with
an approach to educational planning and resourcing which puts more emphasis
on market-driven training and private funding. The education community
view the GST as another impost after years of State and Commonwealth funding
cutbacks to the sector.
2.22 The proposed application of a GST to the `peripheral' activities
of the educational sector is a revealing policy. It indicates that given
the choice between administrative benefit and ideological posture the
Government has chosen to emphasise the latter. The alleged simplicity
of the GST, in its claims for non-discriminatory application, and in its
(challenged) capacity to generate revenue for the Government, have been
signalled as positive advantages of the new tax system. Even if it were
true that these recommendations applied to the GST generally, they do
not apply to the GST in its application to the education sector.
2.23 Against that, it should be noted that the GST-free treatment of
education is actually regressive, because high-income households spend
more on education than low-income households, almost exclusively in the
private sector. While it must be ensured that access to education is not
impaired by the tax system, it should be noted that any concessions in
the area of discretionary expenditure deliver benefits more to high-income
families than low-income families, as the table illustrates:
Household Expenditure Per Week, 1993-94 [5]
| Service |
Lowest 20% |
Second 20% |
Third 20% |
Fourth 20% |
Highest 20% |
| Primary School Fees |
$0.37 |
$0.43 |
$1.29 |
$1.75 |
$2.68 |
| Secondary School Fees |
$1.25 |
$1.27 |
$3.43 |
$4.80 |
$10.02 |
| Tertiary Fees |
$1.13 |
$0.73 |
$1.81 |
$3.19 |
$4.25 |
| Fees to Other Educational Institutions |
$0.13 |
$0.34 |
$1.14 |
$0.89 |
$1.20 |
| Private Tuition |
- |
$0.10 |
$0.22 |
$0.18 |
$0.31 |
| Total |
$2.88 |
$2.87 |
$7.82 |
$10.81 |
$18.46 |
| % of Total Spending on Commodities and Services |
0.95% |
0.67% |
1.36% |
1.51% |
1.85% |
2.24 One of the most serious consequences of the absence of a blanket
exemption from the GST to the education sector will be the imposition
of onerous compliance obligations on institutions and associations ill-equipped
to deal with them. The result will be increased costs to institutions
and a deterrent to the involvement of parents and teachers in voluntary
associations and activities essential to supporting educational programs.
The Committee is of the view that the compliance costs are out of proportion
to the amount of revenue that is likely to be generated by imposing, for
instance, a GST on membership fees for the Geography Teachers' Association
or saxophone hire charges for a school band.
2.25 The Government's refusal to entertain the notion of giving a blanket
GST exemption to educational institutions is consistent with an ideological
stance which places less value on social institutions and the concept
of `public good' than it does on individual responsibility. This is a
continuing source of low-level tension in most liberal societies, but
in most countries it is recognised that educational institutions, as the
principal socialising agencies, should be established and funded as far
as possible so as to provide equality of opportunity. In practice, educational
opportunities are seldom equal, even in the most equalitarian societies,
but it is the role of government to minimise these inequalities, not exacerbate
them. The taxing of educational experiences is an impost which signals
to citizens the message that some forms of knowledge and skills are acquisitions
of lesser or no importance. Neither society or the state, so it may be
said, will recognise or value the social utility or the cultural importance
of particular human activities from which, in the vast majority of cases,
no individual material advantage springs.
2.26 That the emphasis of the tax is ideological because, in regard to
education, it does not acknowledge the existence of a public good, is
recognised in one submission which states:
…there is an unwillingness to distinguish between `not for profit'
and `for profit' institutions, even though this clearly has a fundamental
relevance to purpose. As a result, obvious solutions which would increase
simplicity and lower compliance costs for public and `not for profit'
institutions are rejected on the grounds that it may disadvantage private
institutions, even though the latter make up only a tiny proportion
of any area. [6]
2.27 This observation was reinforced in the submission to the Committee
from the National Council of Independent Schools Association (NCISA).
The submission stated:
The tax policy argument advanced by the Treasury in its evidence of
17 December 1998 to the Senate [Select] Committee that expenditure on
education is no different in principle to personal expenditure on jewellery
or overseas travel is to narrow a basis for addressing the needs of
a modern functional society. In reality, governments throughout the
world, in subsidising school education, recognise its essentiality in
an industrial or post-industrial society. It makes no sense, whether
in terms of fiscal or economic policy, for governments to both subsidise
and tax school education at the same time. That would be a recipe for
chaos, fiscally, educationally and socially, rather than a path to effectiveness
and efficiency. [7]
2.28 The Government's statement on cost/benefit to education resulting
from a GST has been referred to in the Preamble to this chapter. The information
provided by the Minister for Education, Dr Kemp, in answer to a question
in the House of Representatives was of an unambiguous $240 million a year
savings to the cost of schooling, leaving the average family `some $40
to $50 per week better off.' [8] The Committee sought to clarify this Treasury estimate
when it put on notice a series of questions at its second Canberra hearings.
The questions, in summary, were as follows:
- whether estimates were based on Australian Bureau of Statistics (ABS)
tables of Expenditure on Education, or related to information
provided by the ABS;
- the estimate of intermediate consumption adopted for the Treasury
estimate, and related to ABS information on education;
- the assumed consumption of goods and services and in what proportion;
- the assumed rate of wholesales sales tax (WST) compared to the levying
of the GST;
- the percentage flow though of benefits, on the repeal of the WST;
- the estimated administrative costs of collecting input tax credits
to arrive at $240 million;
- the percentage of private outlays assumed as outputs;
- the estimate of benefits to universities;
- whether account was taken of higher costs of private tuition; and
- the size and income of the average family taken into account in the
estimate.
2.29 At the eleventh hour the Committee received a response from Treasury
in which few of the questions were answered in detail. The response dealt
mainly with the use by Treasury of PRISMOD, based on 1993-94 ABS figures
to provide a `conservative estimate' of price effects under the GST. Little
other information was given. No additional costs of education were factored
into the data. No modelling was done on the impact of ANTS on universities.
2.30 The Government's tax reform policy states that most educational
services will be GST-free, including tuition at all levels of institutions
where students are enrolled in accredited courses. [9]
The five main concerns of those who were witnesses before the Committee
were:
- the likelihood of a narrow interpretation being placed upon a `curriculum
related' activity or excursion organised by a school;
- the likelihood of a narrow interpretation of what would constitute
an accredited course, approved as GST-free, which would adversely affect
a large number of people taking courses to up-grade their skills, and
those taking hobby and personal enrichment courses in TAFE colleges
and in university extension courses, as well as those undertaking community
and adult learning courses;
- the tax penalty imposed upon teachers whose energy and professional
dedication has maintained the various subject and curriculum associations
which are responsible for conducting a high proportion of teacher professional
development and acting as de facto extensions of systemic curriculum
agencies;
- the compliance responsibilities and costs placed upon educational
institutions and parents and teachers associations which will be obligated
to remit GST revenues to the Australian Tax Office (ATO); and
- the problems faced by universities in dealing with a number of tax
issues affecting their ability to offer accommodation, financial support
and scholarships and to attract research funds.
2.31 No level of education is untouched by the adverse impact of a GST.
Some levels of education are affected more than others. It appears to
the Committee that the impact will be felt more at those levels which
draw heavily on community participation to support their educational programs,
and those who use the services of those programs. They are least able
to absorb the costs of change, and the increased burden of responsibility
that is to be placed upon them.
A Dickensian View of Education
2.32 The decision to rescind blanket tax exemption to the education sector
is consistent with the creation of a distinction in the Government's mind
between what is perceived to be `practical' learning and what, presumably,
is perceived as `peripheral' learning. This is a view of education which
sees little advance from Dickens' mid-Victorian depiction of Thomas Gradgrind's
model school at Coketown. [10] The discrimination
between what Mr Gradgrind might categorise as `facts' and `frills' can
be nothing if not arbitrary in its application. It promises to open up
with fresh vigour an area of controversy well-known to curriculum planners,
but apparently unknown to taxation specialists. The Committee notes that
the Tax Consultative Committee has yet to advise on where the line is
to be drawn in the curriculum sand, but hopes that its membership is aware
of the controversial nature of the task it has undertaken.
2.33 The Government has taken the national goals of schooling as the
basis of its definition of GST-free treatment of school education. While
it is difficult to imagine ATO officials zealously perusing the National
Statements and Profiles of the designated Key Learning Areas, or the voluminous
documents of State and Territory curricula, in a search for taxable `frills',
the Committee noted the concern expressed by teachers and school principals
about this possibility.
2.34 The Australian Secondary Principals' Association set out a number
of these points of concern in its submission. One curriculum related issue
was the cost of school excursions, particularly those excursions with
a sporting or cultural emphasis. Principals of country schools are known
to be particularly concerned as a GST impost was considered likely to
reduce the range of experiences which schools were able to offer students.
Country people did not believe that any cost offsets were likely to occur
as a result of changes to the diesel fuel rebate scheme. [11]Those
familiar with the economics of school excursions will be aware that package
tour costs have remained stable for some years, testimony to the highly
competitive road coach market which exists in both metropolitan areas
and in the regions.
2.35 The submission of the Australian Secondary Principals' Association
set out a list of key concerns relevant to the schools sector. [12]
These are as follows:
- inclusion of books – a measure which will increase the costs
of parents educating their children and involve schools in a complicated
accounting process for bulk purchases of textbooks;
- compulsory administration charges – complicated by varying State
arrangements which currently operate but which will require the complete
re-arrangement of these processes to maintain the policy of ensuring
that students are supplied with the materials they need at least cost
to parents, and with maintaining a minimal gap between the `haves' and
`have nots';
- compliance – a whole new problem that will require administrative
time and expertise as well as high initial funding, with little expectation
of government assistance;
- phasing in period – expected to see initial cash-flow difficulties,
with no expectation of GST savings flow-on in the short term, with smaller
schools relatively disadvantaged;
- excursions – unclear status of sports and culturally related
school visits, and particular difficulties for country schools;
- fundraising – status of fundraising programs in excess of $100,000
are unclear, with the likelihood that tax deductibility does not apply
to donations to government schools;
- goods sold or leased – likely additional costs and compliance
requirements may result in curriculum broadening experiences being unavailable
to many students;
- private tuition – students in smaller and country schools may
miss out on specialist subject tuition if current arrangements for contract
tutoring are subject to a GST; and
- uniform shops – a fundraising activity and as assistance to children
in need, uniform shops run by parent organisations will be faced with
compliance costs that may force their closure.
2.36 The GST implications of school excursions was raised at the first
Canberra hearing of the Committee with the Australian Council of State
School Organisations (ACSSO) and the NCISA. A representative of ACSSO
explained to Government members of the Committee that his organisation's
understanding of Government policy was that school excursions would be
zero-rated provided that they were not `predominantly of recreational
intent'. It was pointed out that school camps, which may have no direct
relationship to the curriculum, are nonetheless an important part of school
life and the educative process. Representatives of both ACSSO and NCISA
strongly supported the blanket exemption of schools and school activities
from a GST. [13]
2.37 When challenged to defend the view of blanket GST exemption for
extra-mural foreign languages courses run out of schools on weekends,
ACSSO representative, Dr Ian Morgan covered some broader issues of which
the Committee took careful note:
The dilemma we are dealing with is that there are grey areas whichever
way you go, but the grey areas and the onus of proof and the responsibility
are being pushed in a direction which narrows school activities and
opens up the possibility – particularly in the absence of a clear
and broad definition of `curriculum' - of the GST nibbling into more
and more school activities rather than picking up what may well be rorts
in the system. However, there may be broad community educational advantages
to Italian classes. If the classes, for example, are directed to kids
of Italian origin to learn Italian, I think you could defend this. The
thing that concerns me is the issue of public good, which seems to have
been left out of the whole approach to the tax package, and that all
activities are necessarily regarded as business activities. The phrase
`to prevent unfair competition with small business' is used over and
over again. [14]
2.38 Another worrying `grey area' for principals was the issue of private
tuition. As their submission stated:
There are circumstances, particularly in smaller and country schools
where the school cannot provide tuition in all curriculum areas from
their resources. These include aspects of music and technological courses.
A variety of arrangements are made with `private' tutors to allow such
schools to offer these courses for which students will receive much-needed
accreditation. It seems that schools will have to include a GST cost
in their payments to tutors which for smaller schools will be out of
the question, thereby effectively removing some subjects from the curriculum
to the detriment of their students. Even if a way was found to pass
on the costs to students the end result is likely to be the same. [15]
2.39 The Committee notes the recommendation of the ACSSO that the term
`curriculum' be defined to include `all school-related activities which
contribute to the achievement of the National Goals of Schooling, including
student goals, key learning area goals and social goals.' [16]The purpose of this would be to guide the ATO
in its rulings on tax exemptions. It would also put the onus on the ATO
to demonstrate that certain activities were not in accord with the National
Goals for Schooling, being recreational in nature.
2.40 In the view of the Department of Education, Training and Youth Affairs
(DETYA) this was not a desirable way to proceed. One of its officers informed
the Committee that in defining the term `curriculum' there was a risk
that it would be interpreted in a restrictive way. [17]
2.41 The Committee sees the logic of the Department's argument in relation
to this matter, although it notes that the legislation provides no guarantee
that the application of this tax will not be interpreted in a narrow and
restrictive way. The Committee believes that taxation officials lack the
expertise to make judgements on complex educational issues.
Vocational, Adult and Community Education
2.42 The Government's determination to tax short occupational courses
will have a direct impact on the cost and accessibility of those courses.
The proposed GST legislation distinguishes between courses undertaken
to obtain qualifications for the purposes of entering a profession and
those undertaken to maintain skills and qualifications. Only those former
courses are GST-free.
2.43 The Committee was interested to know what assessment had been made
by DETYA on the overall effect of the tax reform package on training,
both from the point of view of individuals and of employers. In an answer
to a question on notice, DETYA advised that the effects were difficult
to predict: that employers would be able to claim input tax credits and
that individuals would benefit indirectly from the usual widely quoted
flow-on benefit of the new tax system. The Committee found this information
less than helpful, raising the question of why the skills and information
sources of the Department had not been better employed by a Government
presumably concerned with presenting the best possible face to its policies.
2.44 The Committee has taken a close interest in adult and community
education as evidenced by its two reports on this vital but usually neglected
component of the education sector. [18] It
appears from evidence presented to the Committee that adult and community
education (ACE) will be one of the most seriously affected segments of
the education sector as a result of the Government's GST policy. From
evidence presented to the Committee it appears that many community courses
for adults and optional courses for students are highly price sensitive.
Even small increases in fees are likely to see diminished numbers enrolling.
2.45 There was considerable support for the view that if a GST were to
be charged in a way that was based on the artificial separation of accredited
and non-accredited educational programs then the cost impact in these
cost-sensitive programs would force numerous programs to close. A submission
from a Victorian community education organisation made this point:
The neighbourhood house and community learning centre sector has a
philosophical commitment to ensuring education is available to everyone.
In order to achieve this, houses and centres have implemented a number
of strategies including pricing policy. Houses and centres offer concessions
to people on low incomes and benefits and strive to meet the needs of
people with no income (recent migrants, young people ineligible for
benefits, women whose husbands control the family income etc). This
commitment requires extensive planning and financial management. The
financial balance that is required to maintain the provision of low-cost
adult education is tenuous and could easily be jeopardised. [19]
2.46 The case against a GST applying to adult and community learning
was put very strongly in the submission from its peak organisation, Adult
Learning Australia (ALA). Personal Enrichment Course enrolments were over
426,000 in 1996. According to ALA an anomaly exists in the way that these
courses are defined and described because of the blurred distinction between,
for instance, courses in wine appreciation that may be taken purely for
recreation or for the purposes of improving knowledge and skill as a restaurateur.
The ALA submission makes the point that course intentions are not recorded
in enrolment statistics, although some NSW research indicates that vocational
motives have a high significance for the majority of all participants
among adult and community learners. [20]
2.47 In evidence to the Committee on this issue, a DETYA officer put
the view that any person working in a particular field who took a course
relevant to their employment, and which was currently tax deductable,
would find the same concessions under the proposed tax changes. The Department
made no reference to any legislative provision to support this assertion.
The official indicated that providers would continue to have the choice
of bringing their courses toward accredited status, a process which varied
from State to State. [21]
2.48 It is acknowledged that there is an argument that practically all
`hobby' or `recreational' courses have some element of vocational purpose
for some learners. The value of the courses run in the adult and community
programs was recognised by the Australian National Training Authority
(ANTA) in its 1996 report on adult and community education and its relationship
with vocational education and training (VET). The report anticipated
that ACE providers would increase their delivery of VET programs but strongly
advised that national and State policies and practices supportive of general
adult and community education were needed to ensure that their increased
involvement in VET did not distort its primary role. [22]
2.49 The Committee was interested to note, in the light of ANTA's advice,
information included in the ALA submission in which it is reported that
in the briefing material provided to education organisations, DETYA `appears
to have taken the line that the appropriate response is not to extend
GST-free status to non-VET courses in this way, but for ACE to set about
trying to get more of its courses appropriately accredited.' [23]
The ALA points out that it would be impossible to gain accreditation for
a significant proportion of adult and community education courses because
there is no relevant or appropriate occupational framework within which
they could be assessed. It is difficult to see how such accreditation
could be consistent with, or compatible with, the Australian Qualifications
Framework (AQF) or the National Recognition Framework (NRF) or the endorsed
competency standards. Nor, as the ALA submission notes, has DETYA underscored
the seriousness of its proposal to accredit ACE courses by proposing to
allocate resources to this exercise in the way that was done with VET.
[24]
2.50 The accreditation of courses is a matter which crosses State-Commonwealth
jurisdictions via the National Training Framework Committee. The process
of accreditation can be protracted. In the time it takes, some courses
may disappear before receiving accreditation.
2.51 DETYA was asked a number of questions on notice at the Committee's
second Canberra hearing in relation to adult and community education which
resulted in little if any information of use in clarifying the anticipated
effect of the GST on `personal enrichment' courses. Nor was the Department
able to supply any information about the number of people likely to be
affected by the impact of a GST on Stream 1000 courses. The Committee
received a standard response to the effect that GST costs needed to be
seen as offset by savings from the abolition of the wholesale sales tax
and income tax cuts.
2.52 The Committee remains concerned about the GST exempt status of Stream
2000-4500 courses for people undertaking short-term occupational courses
and skills upgrading. It notes advice from DETYA that individual modules
of accredited VET courses will be GST-free but makes the point yet again
that many thousands of people will be disadvantaged in undertaking training
courses which do not lead to an AQF or RATE (Register of Australian Tertiary
Education) qualifications. DETYA has failed to reassure the Committee
that the Government's imposition of a GST will not effect even those in
the pre-vocational and vocational Stream 2000-4500 courses.
2.53 The Committee recognises that the threat to the viability of ACE
programs is no new phenomenon and will be increased by the levy of a GST.
This may see ACE providers forced into more formal arrangements with VET
providers, at the expense of their `real' clients, as ANTA has warned.
The problem was recognised in the second of the Committee's reports into
ACE, tabled in 1997, which had this to say:
What is doubly frustrating for the ACE sector is that, on the one hand,
its vitally important business of general, non-accredited adult education
remains undervalued and unfunded by the Commonwealth, while, on the
other hand, a small portion of its programs not only receive Commonwealth
dollars but gobble up a disproportionate amount of administrative resources
and ACE workers' time – through the need to tender for funds, track
students, report on outcomes and maintain statistics. [25]
2.54 The problematic nature of distinguishing between personal enrichment
and vocational programs was also pointed out to the Committee in a submission
and oral evidence by the National Centre for Vocational Education Research
(NCVER). Currently the definition is based on the intention of the curriculum
or the course, rather than the intention of the student at enrolment.
The inclusion of some vocationally useful content in a program does not
necessarily result in it being classified `vocational'. Compared to publicly
funded vocational courses, the annual hours given to personal enrichment
programs are small (about 3 per cent) but a large number of people are
involved (about 380,000). This is about 21 per cent of the delivery reported
in the national VET provider data collection. [26]
2.55 DETYA, in an answer to a question on notice, argued that the GST
must be applied to defined types of goods and services, rather than with
regard to individual intentions of those who purchase goods and services.
There is no mechanism to determine the intention of the person undertaking
a `recreational' or `hobby' course. Nor is any distinction made within
Stream 1000 courses, so that there can be no competitive advantage for
segments of the market.
2.56 One of the problems to be faced by the Government if it determines
to press ahead with a GST on ACE is determining the extent of courses
delivered for this purpose. Large numbers of non-government bodies deliver
such services on a non-profit basis. Currently, the only data collected
in this field is limited to organisations in receipt of public funding.
There are obvious compliance issues to be considered here. [27]
It is difficult to believe that the Government has any idea about the
magnitude of risk to ACE providers, or much idea of the task it is asking
them to take on.
2.57 The NCVER confirmed other evidence given to the Committee of the
important social function undertaken by the ACE providers. Its submission
pointed out that:
Courses classified as recreation and leisure courses can be a source
of education and training for disadvantaged groups who have limited
access to government services. Many programs in Aboriginal communities
are delivered by community providers in courses that are classified
as personal enrichment. Aboriginal communities are often remote and
isolated from TAFE colleges and other providers. Aboriginal communities
often feel the need to control the type and nature of training provided
to their community particularly when people are living contemporary
traditional lifestyles. [28]
2.58 There are two strong arguments which can be put forward for rejecting
the imposition of a tax liability on discretionary expenditure.
2.59 The first reason is that self-initiated learning, either for the
purposes of vocational training through skills improvement, or for social
or personal enrichment demonstrate a commitment to community advancement
and involvement. If the result of re-training through discrete, uncertificated
units is increased income, the community and the ATO is the beneficiary.
If units of recreational study for personal enrichment are undertaken
the community benefits in less tangible ways through the accumulation
of social capital.
2.60 The second reason is that adult and community learning offers many
young people a pathway to further learning. A second chance is offered
for people who dropped out of school early to enter the workforce, and
for women re-entering the workforce having left for family reasons. This
point was stressed in the submission from ALA, where it was stated that
the principal flaw in the proposal for a GST was the undermining of the
`pathway' character of adult education.
…Because it is open access, learner centred, locality based, locally
managed, and affordable, ACE offers the ideal path back to learning
and working for tens of thousands of adult Australians. Arguably, no
other aspect of ACE has been so extensively researched and documented
in the past ten years…Learners can experiment with new interests,
test themselves in a learning environment, begin to rebuild self-confidence
and self-esteem in a supportive atmosphere, with no fear of `failing'.
[29]
2.61 The substance of this argument is reiterated in the submission of
the Australian Vice-Chancellors' Committee (AVCC). Here it was stated
that many students of ACE courses progress to more formal courses. The
submission argued that in a era when the need for lifelong learning is
recognised by all concerned with Australia's future it was senseless to
exclude some courses from GST exemption because they do not have accreditation,
when that accreditation is focussed on direct vocational value rather
than longer term educational gain. The Vice-Chancellors' Committee recommended
that all courses provided by recognised providers across the university,
vocational education and training and adult and community education sectors
be recognised as GST-free. [30] This Committee supports that recommendation.
2.62 It is clear to the Committee that definitions in the bill as they
relate to a wide range of educational provisions are so vague as to leave
many educational groups in doubt. There are no adequate definitions or
legislative provisions that make clear the taxation liability of many
educational services. This point is highlighted by the submission of the
International Board of Lactation Consultant Examiners. Their submission
states:
As currently drafted, the bill does not appear to recognise the special
nature of this exam and the certification process, even though it should
clearly fall within the Government's promise of making education GST-free.
There is no difference in principle between this education activity
and others covered by the exemption clauses. It would be anomalous if
it were not to be included as GST-free. [31]
2.63 About 250 people sit for this exam each year and those who are successful
are given certification. The Committee was unable to find out whether
a certification process was GST-free under the proposed legislation in
the same way as a certified course would be. Like many other areas of
the education provision, the legislation appears to be inadequate and
as it currently stands the International Board of Lactation Consultant
Examiners will need to await an ATO ruling should the legislation pass.
Professional Associations Under Pressure
2.64 Several submissions and appearances were made by representatives
of teacher professional associations. They appeared as non-profit organisations,
run primarily on voluntary labour, but in some cases augmenting association
finances through the sale of curriculum materials written gratis by members.
Two issues arise from consideration of the evidence from these organisations.
The first is the likely impact of the GST upon the membership and level
of activity to be expected from these organisations. The second relates
to their indispensable work in undertaking the organisation of teacher
professional development programs.
2.65 The Committee heard that a GST will affect professional associations
in every avenue of their revenue raising activities, including membership
fees, publication sales, conferences and seminars. Another area of activity
affected will be the provision of teacher professional development. The
various subject associations are closely linked to the provision of such
courses, to the extent that they are the sole providers of such training
opportunities in most States and Territories. They receive formal recognition
for this work from State education departments and with the near disbandment
of curriculum branches in some State education department have become
de facto curriculum support agencies.
2.66 The major source of concern for teacher professional associations
is the likely impact of a GST on membership. The Committee heard evidence
in Sydney that most teacher professional associations ran an annual deficit,
or are living off accumulated resources from previous years. Subscription
bases are low and liable to spiral downwards. [32]A high proportion of secondary teachers attend
professional development courses but disincentives for teacher professional
development are increasing, with teachers having to pay increased fees
for discrete units in university courses in order to extend their knowledge
base, and with the removal of Commonwealth funding under the National
Professional Development Program. Over half of the professional development
courses for teachers run in New South Wales are provided by the associations,
and according to their representatives, these were now under siege by
the GST.
2.67 This Committee's 1998 report of its inquiry into the status of the
teaching profession referred to the parlous condition of teacher professional
development. While teachers, on the whole, took seriously their responsibility
to upgrade their skills and subject knowledge throughout their careers,
there were obstacles in the path to proper professional development. One
major criticism was the lack of serving teachers to plan and implement
these courses. Best practice is best demonstrated by classroom teachers
because they have credibility. The Committee reported that much professional
development was badly planned and poorly executed. [33]
Yet it is recognised that without good professional development, knowledge
and skill levels will decline, and teachers will become more isolated,
resulting in increased stress and diminished morale. The role of professional
associations is to counteract these debilitating tendencies and to involve
more teachers in continuing learning. The imposition of a GST will not
assist this work.
2.68 Evidence given to the Committee by the Tasmanian branch of the AEU
lamented the lack of a GST exemption for teacher professional development
and described its current provision as `absolutely woefully inadequate'.
Teachers in Tasmania received only one to two days professional development
each year, and this would be further restricted by the GST. It was considered
to be highly unlikely that State governments, certainly in Tasmania, would
make additional funding available to schools to cover this extra cost.
[34]
2.69 The Labor senators are of the view that the imposition of a GST
on education without consideration for the needs of education in the broadest
sense represents one of the fundamental weaknesses of the tax reform policy.
The Labor senators have no more idea than anyone else about contingent
plans, if they exist, to compensate institutions and organisations affected
by the GST. There is a contradiction between a Government policy to encourage
professional development on the one hand, and another policy which threatens
the existing organisations best able to run those programs. Education
is primarily a States responsibility but it is unlikely that the States
have plans to ameliorate the difficulties that their state teacher professional
bodies will face.
Compliance Demands in the Pre-School and School Sector, or, `Who will
stand for Treasurer now?'
2.70 School principals, along with the heads of other educational institutions
are often heard to lament that their `corporate leadership' role is a
far more burdensome responsibility than their educational leadership role.
This results from the increased expectation that schools will recover
a higher proportion of their running cost from the community. This responsibility
will widen further if and when schools become subject to the GST.
2.71 Currently, the making of a simple statement on a school order form
exempts them from sales tax. No accounting is required for this process.
Evidence was given to the Committee in Melbourne by representatives of
the Australian Secondary Principals Association which gave an estimate
of staff costs of GST compliance at Wangaratta High School. This school
of 1,200 students made around 1,000 payments each month, and processed
around 400 income transactions each month. The Committee heard that a
GST compliance factor would require between half and one additional administrator
to deal with it. [35] The cost of this would
need to be absorbed from the education program.
2.72 One submission dealt with the particular plight of small schools
having to deal with the burden of compliance, for which they would not
be adequately staffed.
The burden for small schools is particularly significant. Currently
there are approximately 484 schools with fewer than 100 students and
903 schools with fewer that 200 students in the non-government sector
in Australia. On average, these schools have a principal (with a teaching
load), four to five teaching staff and a part-time clerical staff member
whose duties include being secretary to the principal, receptionist,
bookkeeper, secretarial support for teaching staff and general assistant
to parents and students. The administration of the GST in such a school
setting with such stretched human resources will certainly have a major
impact on the workload of staff and will skew the focus of work disproportionately
away from those tasks which support the education of students to those
which are bureaucratic and administrative. It is this kind of work re-organisation
which demoralises dedicated teaching and support staff in schools. [36]
2.73 The Committee noted with interest (and not a little astonishment)
that in an answer to a question put on notice at the second Canberra hearing,
DETYA had not sought estimates of the start-up compliance costs for educational
institutions. The Committee believes that it is necessary to have such
information as a basis for making tax policy.
2.74 Compliance costs are also a concern for the teacher professional
associations. As a representative of the Institute of Technology Education
told the Committee at its Sydney hearings:
I am concerned that, with the changing HSC, the school certificate,
it is professional teachers' associations who support the teachers out
there to address those changes. Any GST on top of what we do voluntarily
in supporting the others will mean that we may have fewer people involved
in the professional teachers' associations. [37]
2.75 Compliance costs will effect universities as much as the largest
businesses. Administrative systems will need extensive modification. It
was reported to the Committee that in its first year of implementation,
it will cost universities as much as dealing with the millennium bug.
[38] Concern was also expressed by the AVCC that too
much discretion was left to the ATO, although this was unavoidable in
the circumstances. It was possible that taxation rulings would result
in the making of fine distinctions in all the details of university operations.
If this occurred it would be at odds with what the AVCC believed to be
the Government's intention to rely upon broad interpretations of policy.
2.76 The Committee considers this view to be unrealistic given the record
of this Government. The ATO will almost certainly embark upon the making
of a large number of public and private rulings and that there will be
no recession in the tax minimisation industry with the coming of the GST,
although the Committee has some faith in the likely result of the courts
setting limits to any interpretive adventures of the ATO.
2.77 Compliance difficulties were also raised before the Committee at
its Melbourne hearings by Kindergarten Parents Victoria. The Committee
was told that monthly reporting of the GST was possible only where facilities
for electronic lodgement with the ATO existed. Only six per cent of kindergartens
had access to such facilities: all the rest had to submit quarterly returns.
This presented cash flow problems for these kindergartens. Another dimension
to the problem was a human element, as the Committee heard:
…as an organisation, our fairly obvious concern would be that
we rely on skilled people to operate the services and provide quality
education for children. It would be very counterproductive if the outcome
was that parents believed that being on the committee was so daunting
that they did not put their hand up. If you do not have volunteer committees
then there is simply no service because the Government will not fund
the incorporated association that does not have a viable committee.
[39]
2.78 Parents' associations appeared to be particularly concerned about
their additional compliance responsibilities in view of the relatively
small proportion of `active' parents in any school who are prepared to
serve on Parents and Citizens or Parents and Friends executives. Yet they
have no doubts about the role they must play. As a representative of the
Tasmanian Council of State School Parents and Friends Association told
the Committee:
Consider the impact on education if these [Parents and Friends] funds
and parent volunteer support were to be withdrawn. Schools would not
function and the entire education system would collapse. In addition,
many school parent organisations would have some difficulty filling
the voluntary position of Treasurer considering the time and expertise
that will be required to comply with the new tax requirements. [40]
2.79 The issue of compliance was raised with DETYA by the Committee at
its second Canberra hearing. The senior DETYA officer present agreed that
compliance costs were a potential problem. It was agreed that `this is
certainly an area where I think we can offer some help, and it is right
that we should do so.' [41] The Committee noted,
however, that reference was made to the availability of funds for this
purpose coming from the $500 million made available to cover transitional
costs incurred by taxpayers, and which is referred to by some on the Committee
as the `magic pudding'.
2.80 The derisive comment that has greeted the Government's decision
to make $500 million available to small businesses to minimise start-up
costs associated with the GST is not difficult to explain. The `gross
inadequacy' of this amount has been so described in the submission to
the Select Committee by Arthur Andersen. [42]
This amount equates to approximately $300 each for the estimated 1.6 million
taxpayers who will register for the GST. As the amount was originally
targeted at small business, it is difficult to take seriously any subsequent
advice from the Government and its officials that the fund should be stretched
to include educational institutions, there being around 9000 of them in
need of compliance funding.
2.81 The Committee expects that the education sector, not least the State
and Territory education departments through the Ministerial Council on
Employment, Education, Training and Youth Affairs (MCEETYA), will extract
such funds from the Commonwealth as to ensure that compliance arrangements,
including additional staff in schools and minimal cost software for all
other institutions are made available. The Committee will, in the course
of its normal oversight of national educational issues monitor the compliance
costs of a GST to the education system should the legislation pass.
Higher Education and the Tax Reform Package
2.82 The Committee received submissions and heard evidence from the four
principal stakeholders in higher education: the AVCC, the National Tertiary
Education Union (NTEU), the Council of Australian Postgraduate Associations
and the National Union of Students (NUS). Their particular sectoral concerns
were overlaid by one common view of the GST: that it should not be based
on the notion of taxed and untaxed activities, but on taxed and untaxed
institutions and enterprises.
University Colleges and Halls of Residence
2.83 The compliance difficulties to be faced by university colleges and
halls of residence contain a number of complications which warrant some
detailed treatment by the Committee. They were touched upon both in the
submission of the AVCC and in evidence given to the Committee by the AVCC
at its first Canberra hearing, and in the submission and supplementary
information from the Association of Heads of Australian University Colleges
and Halls. The Committee heard from representatives of the Association
at its second Canberra hearing.
2.84 Both the AVCC and the Association of Heads of University Colleges
and Halls drew the Committee's attention to the anomalous situation of
having residential college accommodation subject to an input tax under
Subdivision 40B of the bill. The Committee notes that the Vos Committee
reviewed the argument that residential accommodation at university colleges
should be GST-free in the same way as secondary boarding schools are GST-free
under the provisions of Subdivision 38B. This was rejected for reasons
that are not clear. [43] The Committee also
notes, however, the Prime Minister's letter of 24 September 1998 in which
he explained to the AVCC that the granting of GST-free status to residential
colleges was inappropriate because they directly compete with accommodation
provided outside the institution. [44]
2.85 While it is clear that the Government's exemption of boarding schools
from the GST is an attempt to ensure the continued support of its traditional
constituency, the failure to exempt university colleges appeared at first
to be anomalous because their educational role should have been recognised
as being similar to that of boarding schools. The failure of the Government
and its advisers to recognise this was lamented by representatives of
the Association of Heads of Australian University Colleges and Halls at
the second Canberra hearing of the Committee:
In the eyes of the people who work in halls and colleges … and
in the eyes of the parents and of the students who use their services,
the halls and colleges are engaged in a quite different undertaking
from simply the provision of accommodation. Our institutions in the
eyes of all those people are more like the secondary boarding colleges,
which are being dealt with separately under the legislation, and less
like the boarding house or flat or house for rent down the road, with
which we have been categorised. We are being treated as chiefly housing
providers. [45]
2.86 The Vos Committee did, however, accept the argument that because
university colleges often provide tutorial assistance to students as well
as pastoral care and other support, these elements should be GST-free.
As the AVCC told the Committee at its first Canberra hearing, this exemption
would result in some `fairly detailed and complicated administrative burdens'
on residential colleges and considering the small amount of revenue to
be collected, it would be simpler to exempt them. [46]
The Committee agrees with this view.
2.87 These result from the application of different sections of the proposed
legislation depending on the nature of the activities to be undertaken
and the categories of people involved. As one witness described it:
…When some one rings up and asks, `What is your rate to stay for
a week?' or `What is your rate?' we are going to have to analyse the
situation and ask the question, `Well, are you on a GST-free course
or not?' When it comes to someone finishing their academic year of 34
weeks and then deciding to stay on a few extra days to show their friends
around Canberra, the extra days will effectively come under section
87-10 rather than section 40B, which relates to the residential rent.
…where we have a very large conference revenue during term time
– students are on a GST-free course and, therefore, are going to
come under section 40B. Because our conference guests are not going
to be on GST-free courses, our conference income will have to come under
87-10. If we have people staying in the long vacation, then section
87-10 has another watershed, namely. `Have you stayed 28 days or over?'
…so I can imagine my bursar switching eight times every year in
relation to which part of the bill we are applying. [47]
2.88 The Association argued before the Committee for adjustment to the
proposed legislation which would see the removal of anomalies which disadvantaged
colleges and halls in comparison with private lodgings and rental accommodation.
As it currently stands, the legislation will require such `accounting
acrobatics' as to add considerably to the compliance costs of these institutions.
Some colleges and halls spent less than $50,000 annually on upkeep and
expansion and in these cases input taxing would yield the Government less
than $50,000 in accommodation related GST receipts. The Association sought
relief under the `$50,000 or five per cent rule' contained in the provisions
of subsection 11-30(2). This would avoid a situation where additional
compliance costs exceeded the additional tax to be collected. The Association
used research done by the Chamber of Commerce and Industry of Western
Australia to estimate incremental compliance costs of $6,240 per annum
for a typical college. [48]
2.89 The Association further argued that the framing of the current legislation
did more than ensure that private off-campus accommodation was not disadvantaged
in comparison with university colleges. It tilted the playing field in
their favour. University colleges and landlords who supplied rental property
to students, often `negatively geared' investment properties, would do
so under the provisions of Division 40, and those offering private board
were not required to be GST registered entities because of their small
turnovers. On the other hand, student hostels and long-term commercial
accommodation came under Division 87. For reasons of both equity and efficiency
the Association argued that university colleges be permitted to choose
between being taxed under only one Division.
2.90 At its second Canberra hearing on 12 March the Committee put the
anomalous nature of university college fees to DETYA for comment. The
Department explained that no anomaly existed: that all types of accommodation
likely to be used by university students was input taxed. [49] In view of evidence presented by the Association
of Heads of Australian University Colleges and Halls the Committee is
confirmed in its view that an anomaly does exist, at least to the extent
that the legislation does not take account of the unequal treatment of
colleges and halls in their compliance obligations. The Committee also
takes the view that the Government has shown scant regard for the educative
value of these institutions and the fact that many parents of undergraduate
students are prepared to make additional sacrifices to ensure that their
sons and daughters receive the intellectual and pastoral support they
may need at university.
2.91 Another consideration with regard to residential accommodation at
universities is the element of relative isolation. The Vos Committees'
recommendation relies to a great extent on an urban perspective: of students
living in accommodation close to the campus, or commuting each day by
train from their boarding houses in the suburbs. As the AVCC told the
Committee, some students do not have any option but to choose to live
in a university college, either for reasons of cost or location. The Committee
recognises that for students in some regional centres accommodation can
present a difficult problem. Some universities are well out of town, particularly
the newer universities established on campuses distant from the provincial
cities to which they are connected, if at all, by infrequent bus services:
James Cook University at Townsville, Charles Sturt University at Wagga,
the Roseworthy campus of Adelaide University, the Australian Maritime
College near Launceston, the University of Ballarat and the Gippsland
campus of Monash University are among such institutions.
Effects on University Students
2.92 There are around 600,000 students in Australia's 36 universities.
The circumstances of university students are highly diverse, although
the NUS, whose representatives appeared before the Committee in Melbourne,
gave evidence of increased hardship likely to be experienced by many students
living on the margins. As the Committee was told:
Not only do a lot of students miss out on the tax breaks that are part
of the new tax system package, but they also miss out on many of the
compensation packages. As our submission shows, students who do not
rely on Youth Allowance or any other living allowances to sustain their
lives, and do so through part-time work and are thus low-income earners,
would be disadvantaged by the GST. [50]
2.93 The NUS, along with a number of other organisations which appeared
before the Committee, also argued that books be exempt from a GST on the
grounds that the cultural and intellectual life of the nation needed to
be encouraged rather than penalised, but in particular the NUS argued
for a GST exemption for textbooks. It was pointed out to the Committee
that there was something wrong with a system whereby an academic who buys
a textbook or a member of a profession who requires particular books for
work-related purposes can claim them back as an income-tax deduction whereas
a student buying the same book for the purposes of study would not be
able to. [51]
2.94 The Committee raised with the AEU the issue of tapering arrangements
applying to the Youth Allowance and the impact this change would have
on students. It was put to the AEU that the Government's policy on GST
compensation is to deny the full four per cent compensation payments made
to other recipients of social welfare in order to maintain work incentives.
The AEU saw this measure simply as another device to reduce expenditure
under the Youth Allowance scheme.
2.95 At its Melbourne hearing, the Committee pursued with the NUS the
issue of the impact of a GST on student union refectory services in view
of confusing or possibly conflicting information from the Government on
this matter, possibly as a result of its anticipating the successful passage
of a bill promoting voluntary student unionism. The NUS was firm in its
advice to the Committee that DETYA had given a written assurance that
amenities and service charges levied by universities would not be subject
to a GST. Subsequently, the Committee requested clarification from the
Department. The Committee notes that tertiary students are one of the
additional `cameos' to be reported in the final set of distributional
modelling commissioned by the Select Committee.
University Research
2.96 As the AVCC notes in its submission, the status of government grants
to universities has not been made entirely clear. While the Prime Minister
has clearly stated that the full range of university research and scholarship
will be GST-exempt, that status and range of research funding grants made
by government bodies has been left open. [52] Such funding is usually tied to particular research
in an area related to the function of the funding body, though usually
without the expectation of any financial return to the funding body.
2.97 The submission of the NTEU noted that there is a problem with categorising
research projects by reference to funding source. [53]
This is because many projects carried out in universities are actually
funded from a range of different sources, often exclusively from public,
even Commonwealth funds.
2.98 According to the NTEU this problem is exacerbated by the fact that
university operating funds are now made up not only of Commonwealth funds,
but also of large amounts of funding generated commercially (through consultancies
etcetera) and from student fees. It would be difficult, if not impossible
to identify the appropriate proportion of the funds flowing to any research
project that emanated from commercial sources. [54]
2.99 The Vos Committee report set out the procedures whereby universities
would add 10 per cent to their contract prices, remit the GST and the
business would then claim the GST as a tax credit. [55]
The Government argues that there are no losers in this process. The Committee
argues, nonetheless, that with regard to compliance costs alone, the application
of a GST to university research is extremely problematic. It explains
why those responsible for the administration of universities, and indeed
all stakeholders in higher education favour a blanket exemption from a
GST extended to all educational institutions.
Foreign Students
2.100 The Committee's terms of reference include an examination of the
impact of a GST on foreign students enrolled in Australian educational
institutions. In most respects the increased costs to be born by foreign
students is similar to those which local students will face. The NUS submission
notes that all foreign students live in paid accommodation whose costs
will rise. International telephone charges, a normal burden for students
from overseas countries, will increase, For instance, a 15 minute off-peak
call to Malaysia will rise from $10.50 to $11.55. The NUS reports research
that once-off cost increases for foreign students will be 1.7 per cent.
[56]
University Scholarships
2.101 The AVCC drew the Committee's attention to the increased costs
to be incurred by universities as a consequence of the Government agreeing
to index Australian Postgraduate Awards at the same four per cent as pensions
and benefits. Universities will need to match this for those on university
postgraduate awards, but there is no indication that universities will
receive additional funding to cover these costs. The Committee urges the
Government to supplement university funds in the event that this inequity
comes about. This also raises the issue of privately funded scholarships,
and the compensation that is owed to those who sponsor them. The Committee
urges the Government to address this issue as well.
Student Loans
2.102 Universities also lend money to students in extreme cases. It is
likely that these loans of last resort would be subject to a GST even
though they are not provided to generate a profit. They are already exempt
from the full requirements of the consumer credit code because they are
not commercial arrangements. The AVCC is pressing for their exemption
from a GST. [57] The Committee support the
AVCC's stand on this issue, not least because of the absurdity of the
Government imposing a tax upon a part of its own appropriation intended
for the purposes of a grant.
Extension and Non-Award Courses
2.103 Reference has already been made to the additional burden that a
GST will place on teachers wishing to update their skills and knowledge
by taking discrete units of university courses. A great many other professionals
will also be affected. The Committee's observations about the value of
life-long learning in the ACE sector apply equally to university extension
courses and non-award courses.
Other Matters
2.104 The Committee heard evidence about a number of other serious concerns
on the likely impact of a GST for which the Government has been totally
unable to provide assurances to the education community. These concerns
highlight the lack of detailed understanding by the Government of the
complexity of programs and institutions, large and small which characterise
the education sector. At the very least the Government should acknowledge
the enormity of its task in introducing a tax regime to a sector that
has been, hitherto, largely untaxed. The Government should also have made
undertakings to address the legislative requirements in sufficient detail
to maintain the confidence of the education community. That it has not
done so explains the response of that community to this inquiry.
School Fundraising Activities
2.105 The issue of school fundraising was on the list of concerns of
some parent groups appearing before the Committee. There was some confusion
about the extent of GST liability on funds raised, and some advice was
given – in general terms – by Committee members in relation
to these matters.
2.106 While the Committee notes that the sale of goods for fundraising
purposes is to be free of a GST, it reports the concern expressed in the
submission from the Australian Secondary Principals' Association that
secondary school projects often require the raising of amounts in excess
of $100,000 and might therefore be liable to a GST. This could not be
off-set by tax deductions because this concession is not available to
government schools. They would therefore need to engage in `creative arrangements'
to limit funds raised by particular groups associated with the school
to $100,000 or less. [58] The Committee notes
that the Community Affairs References Committee has conducted an extensive
inquiry into the impact of the GST on charities and that this issue is
dealt with in more detail in that report.
2.107 The Australian Secondary Principals' Association also drew the
Committee's attention to the fundraising functions of school uniform shops.
Such shops run by parents' organisations were able to provide new and
secondhand uniforms at reduced or minimal cost. The Association put the
view that compliance arrangements might well persuade parents' associations
that this service was not worth the effort. [59]
Libraries
2.108 The Committee also heard from representatives of the Australian
Library and Information Association whose concern about the GST was its
impact on cash-flow. Libraries expected their costs to rise by 10 per
cent, and although this would be returned in the form of a GST rebate
every quarter, libraries would be `out of pocket' for these periods. These
tax arrangements did not sit well with zero based budgeting. [60] A number of other `grey areas' were identified
for the consideration of the Committee: whether or not municipal libraries
were zero rated because they were local government instrumentalities;
whether inter-library loans were a transaction rather than a service which
would attract a GST if an existing service fee applied; whether other
services currently charged for to recover costs, like photocopying or
Internet use would be subject to a GST.
2.109 On more general considerations, the Association described the users
of libraries as people who are unlikely to obtain any advantage from tax
breaks promised as part of the new tax policy. Clients included a high
proportion of school-aged children and older people on retirement incomes
of some kind. If books and magazines become too expensive as a result
of a GST, increased demand for library services will be felt. [61]
2.110 The Committee believes these concerns should be addressed immediately.
It fails to understand why the Government is unable to clarify matters
like these if only to remove vexatious grievances that stand in its way
of promoting its new tax system. The Committee's view is that, should
the GST proceed, all municipal libraries should be zero-rated.
Increased Cost Burden for Families
2.111 A number of submissions and witnesses drew the Committee's attention
to an increase in the cost of providing education because of the application
of the GST to school uniforms, books and stationery and other types of
school supplies not currently subject to a wholesale sales tax. The AEU,
among other stakeholders, has quoted studies in its submission to estimate
the increased costs resulting from the GST at $200 per child. It scarcely
needs restatement that many families are finding `free' education an expensive
commitment even before this tax is imposed. The Smith Family recently
indicated that of financially disadvantaged families it surveyed, 62 per
cent could not afford a blank computer disk, 50 per cent could not afford
the cost of a school camp, 24 per cent could not afford the cost of participating
in sports activities, and 15 per cent could not afford school excursions.
[62]
2.112 The had argued that the Government is placing too much reliance
on the hope that a general fall in prices as a result of the demise of
the wholesale sales tax, and the compensatory income tax reductions. The
Committee notes the advice it received at its Brisbane hearing from veteran
financial commentator, Mr Austin Donnelly, who observed that `some Sir
Humphreys in the public service happened to make the politically correct
but nonsensical assumption that every cent of benefit from other tax reductions
would be passed on to consumers.' [63] It notes
also the likelihood that low-income families have less to gain from a
GST because their tax rates are already low. The cycle of disadvantage
will find an echo in increased schooling costs for this strata of the
community.
Commonwealth-State Education Agreements
2.113 One issue of substantial concern to the education sector was expressed
in submissions by unions representing both government and independent
sector teachers that the Commonwealth may be signalling at least a partial
withdrawal from school policy and funding as a consequence of transferring
the proceeds of GST revenues to the States and Territories.
2.114 The AEU submission expressed the fear that the increased financial
independence of the States and Territories may result in them being more
reluctant to maintain the policy-making partnership with the Commonwealth
which has become closer over the past three decades. [64]
2.115 The Independent Education Union of Australia expressed a similar
view, although from a different perspective. It opposed the introduction
of a GST as the basis for tax reform for the reason that:
…the changed Commonwealth, State and Territory arrangements in
relation to the receipt of the GST by States and Territories may impact
detrimentally upon the stability and predicability of federal-funding
arrangements for non-government schools in the future. Further, it is
now strongly contested by a significant number of expert economists
that the GST, at the proposed rate of 10 per cent, will not provide
a sufficient revenue base to meet the increasing needs of a modern education
system in the twenty first century. The implications in this shift in
Commonwealth-State and Territory arrangements on education has received
little, if any, comment, in the public debate since the policy's announcement.
[65]
2.116 This concern extended beyond the school sector. The submission
of the NTEU also drew attention to a possible shift in relationship between
the Commonwealth and the States with regard to the funding of universities.
The NTEU's basis for concern was the medium term projection of a decline
in Commonwealth revenue from income tax. Under current GST arrangement
proposals the States and Territories would have access to an increasing
tax revenue base at the expense of the Commonwealth. The submission argued
that universities were particularly susceptible to any decline in the
total public resources available to the Commonwealth. [66]
2.117 A continued lack of confidence by the teaching profession in the
capacity and commitment of the State and Territory governments in relation
to school policy and funding is evident from the submissions of teacher
unions. It appears that even a less than sympathetic participation by
the Commonwealth is preferable to none at all. The Committee will monitor
the performance of both tiers of government in the way that they collaboratively
address the problems which will face the education sector should the New
Tax System legislation pass.
Conclusion
2.118 The Labor senators are of the view that Australia's education community,
over recent years, perceives itself as having been under a constant state
of siege. A reduction in Commonwealth funding has been accompanied by
equally drastic budget reductions in the States and Territories, whose
`rationalisation' measures and staff `efficiencies' have seen morale in
the teaching profession plummet. The timing of this onslaught on the education
sector could hardly have been worse: when the consequences of social distress
are more than ever manifested in the problems that children bring with
them to school; when the effects of globalisation require a massive response
in terms of improved VET programs and higher school retention rates; when
universities should receive the funding to promote the research and training
required by new industries.
2.119 In the overview to the Governments' manifesto on tax reform is
the aim of making education and training policy `more relevant to the
changing nature of the Australian workforce into the next century', including,
`the revitalisation of apprenticeships and traineeships', and a reference
to `a genuine pathway to jobs'. [67] The Labor senators are of the view that nothing
in the tax reform proposal appears relevant to this stated policy. Instead,
it contains obvious disincentives for the creation of a skilled workforce
and a virtual end to programs which offer a second chance for educationally
disadvantaged people to enter the workforce.
2.120 The Labor senators consider that opposition to a GST on education
has unified the entire education community like no other issue and widespread
mistrust of unsubstantiated government assurances has been evident. Despite
this obvious lack of trust, it is clear to the Labor senators that the
Government is intent on creating a marked change in the culture of tax
revenue collection in Australia. It is based on the idea that all expenditure
represents a choice which individuals make to both serve their needs and
to gratify their desires and that there can be no useful distinction made
between purposes of expenditure. Taxes according to the Government, should
be `value neutral'.
2.121 The Labor senators adhere to a more traditional view that distinguishes
between discretionary expenditure on the one hand, and on the other, those
costs we are obliged to bear by virtue of our membership of the community,
either as individuals or as family members. The obligation of governments
is to strive for the greatest good for the greatest number, providing
a safety net for those who need it. While the Labor senators accept that
many anomalies may exist in the rates of tax applying under the current
operations of the wholesale sales tax, the principle of differential sales
tax is sound, just as is the practice of exempting from tax a range of
essential goods and services.
2.122 Having reviewed the evidence before it, the Labor senators' opposition
to the GST on education is based on the following findings:
- as currently provided for in the bill, a GST will result in a decline
in learning opportunities and the quality of adult and community education
programs, and to the extent that the resources of this sector are transferred
to VET, will leave few resources left to its core clientele; and
- as currently provided for, a GST will place a huge burden of compliance
on the whole education sector, with voluntary associations and smaller
institutions bearing the brunt of these impositions to the point where
their existence may be in jeopardy.
2.123 In addition, the Labor senators see no merit in the application
of a GST to educational services of any kind because is not an efficient
way of raising revenue when most has to be returned as a rebate. Nor is
it a fair or equitable tax because those most affected by the tax are
least likely to benefit from any compensatory income tax reductions. The
Labor senators reiterates their view that the `ideological purity' of
the legislation with regard to its application to the education sector
calls into serious question the effectiveness and value of this proposed
legislation.
Recommendation
2.124 The Labor senators recommend to the Senate that this bill
not be passed.
Footnotes
[1] Hansard (House of Representatives),
7 December 1998, p. 1464.
[2] Roy Martin, Increasing the Burden: The
GST and Parental Costs in Government Schools, Australian Education
Union, February 1999.
[3] Hansard, Canberra, 12 March 1999,
p. 828.
[4] Australian Education Union, Submission No.
626, p. 4.
[5] Australian Bureau of Statistics, 1993-94
Household Expenditure Survey, Catalogue Number 6535.0, Australian
Government Publishing Service, Canberra, p. 14.
[6] ibid., p. 6.
[7] National Council of Independent Schools
Association, Submission No. 773, p. 2.
[8] Hansard (House of Representatives),
7 December 1998, p.1464.
[9] Hon Peter Costello MP, Tax Reform: Not
a New Tax, a New Tax System, Australian Government Publishing Service,
Canberra 1998, p. 94.
[10] Charles Dickens, Hard Times, 1854,
Chapter 2.
[11] Australian Secondary Principals' Association,
Submission No. 493, p. 3.
[12] ibid., pp. 2-4.
[13] Hansard, Canberra, 19 February
1999, p. 100.
[14] ibid, p. 101.
[15] Australian Secondary Principals' Association,
op. cit., p. 4.
[16] Australian Council of State School Organisations,
Submission No. 824, p. 12.
[17] Hansard, Canberra, 12 March 1999,
p. 815.
[18] Senate Committee on Employment, Education
and Training, Come in Cinderella: The Emergence of Adult and Community
Education, Senate, Canberra, 1991 and Beyond Cinderella: Towards
a Learning Society, Senate, Canberra, April 1997.
[19] Association of Neighbourhood Houses and
Learning Centres, Submission No. 627, p. 4.
[20] Adult Learning Australia, Submission No.
852, p. 6.
[21] Hansard, op. cit., p. 814.
[22] Australian National Training Authority,
Think Local and Complete. The Role of ACE in the Implementation of
a National System for VET, Australian Government Publishing Service,
Canberra 1996, Appendix 1.5.
[23] Adult Learning Australia, op. cit., p.
9.
[24] ibid., p. 10.
[25] Senate Committee on Employment, Education
and Training, Beyond Cinderella: Towards a Learning Society, Senate,
Canberra, April 1997, p. 25.
[26] National Centre for Vocational Education
Research, Submission No. 787, p. 4.
[27] ibid, p. 5.
[28] ibid.
[29] Adult Learning Australia, op. cit., pp.
7-8.
[30] Australian Vice-Chancellors' Committee,
Submission No. 827, p. 3.
[31] International Board of Lactation Consultant
Examiners, Submission No. 224, p. 2.
[32] Hansard, Sydney, 22 February 1999,
p. 134.
[33] Senate Committee on Employment, Education
and Training, A Class Act – Report on the Status of the Teaching
Profession, Senate, Canberra, March 1998, p. 218.
[34] Hansard, Hobart, 4 March 1999,
p. 783.
[35] Hansard, Melbourne, 3 March 1999,
p. 719.
[36] Independent Education Union of Australia,
Submission No. 930, p. 14.
[37] Hansard, Sydney, 22 February 1999,
p. 133.
[38] Hansard, Canberra, 19 February
1999, p. 53.
[39] Hansard, Melbourne, 3 March 1999,
p. 621.
[40] Hansard, Hobart, 4 March 1999,
p. 780.
[41] Hansard, Canberra, 12 March 1999,
p. 818.
[42] Arthur Andersen, Submission No. 927, p.
5.
[43] David Vos, Peter Tannock and Judith Whitworth,
Report of the Tax Consultative Committee, Australian Government
Publishing Service, Canberra, November 1998, p. 60.
[44] ibid., Appendix A
[45] Hansard, Canberra, 12 March 1999,
p. 849.
[46] Hansard, Canberra, 19 February
1999, p. 52.
[47] Hansard, Canberra, 12 March 1999,
p. 850.
[48] Association of Heads of Australian University
Colleges and Halls, Supplementary submission, p. 3.
[49] Hansard, op. cit., p. 823.
[50] Hansard, Melbourne, 3 March 1999,
p. 695.
[51] ibid., p. 696.
[52] Australian Vice-chancellors' Committee,
Submission No. 827, p.7
[53] National Tertiary Education Industry Union,
Submission No. 1095, p. 9.
[54] ibid
[55] The Report of the Tax Consultative Committee,
p.55
[56] National Union of Students, Submission
No. 1073, pp. 7-8.
[57] Australian Vice-Chancellors' Committee,
op. cit., p. 5.
[58] Australian Secondary Principals' Association,
op. cit., p. 2.
[59] ibid, p. 3.
[60] Hansard, Canberra, 19 February
1999, p. 41.
[61] ibid, p. 47.
[62] Australian Education Union, Submission
No. 626, p. 17.
[63] Hansard, Brisbane, 24 February
1999, p. 400.
[64] Australian Education Union, op. cit.,
p. 7.
[65] Independent Education Union of Australia,
op. cit., p. 4.
[66] National Tertiary Education Industry Union,
op. cit., p. 3.
[67] Hon Peter Costello MP, op. cit., p. 13.