Chapter 4
ConclusionsLabor
Senators ReportLabor Senators are very disappointed that the Committee
was not able conduct specific hearings on this particular reference. The
Government has not provided any detailed information on the longer-term Commonwealth/State
financial outcomes that are projected under the new proposals, and the Labor members
wanted to obtain more specific information to properly assess the proposals.
Unfortunately, it was not possible to gain Government support to extend
the reporting deadline of the Committee to facilitate a detailed public examination
of these bills, nor to obtain testimony from affected stakeholders in the wine
and motor vehicle industries. Commonwealth-State RelationsTrue
Position of Labor PremiersThe Government has consistently and fraudulently
claimed that Labor Premiers support its GST package. Nothing could be further
from the truth. First, Labor Premiers insisted upon the insertion of a
specific provision into the Intergovernmental Agreement executed at the April
99 Premier's Conference. The preamble to that agreement (see attached), states
the agreement of NSW, Queensland and Tasmania to the reform
of Commonwealth-State financial relations does not imply their in principle endorsement
of the GST; Secondly, each of the Labor Governments have specifically
and publicly denied any support for the GST. For example, on 14 April 1999 the
NSW Government confirmed that Premier Carr did not support the GST but recognised
that it was necessary to negotiate funding arrangements with the Federal Government.
On the same day, Mr David Hamill, the Queensland Treasurer, stated in the
Queensland Parliament [1] Certainly, I
saw the Prime Minister last night on television asserting that the Senate should
now pass the goods and services tax because Peter Beattie, Bob Carr and Jim Bacon
were all supporting it. Nothing could be further from the truth. Similarly
Mr Jim Bacon, Premier of Tasmania, in his 1999 Premiers Conference outcome statement
to Parliament stated: We approached the negotiation on the Commonwealth-State
financial arrangements of the National Tax Reform package on the basis of ensuring
that Tasmania's financial interests are fully protected in the event that the
package, including a GST, becomes a reality. My Government remains opposed to
the GST on principle, we believe that it is not in the interests of Tasmania.
At our insistence, a position we share with NSW and Queensland, the preamble to
the Inter-Government Agreement signed last Friday makes our objection the GST
very clear. [2] The Prime Minister's
claims of Labor States' support for the GST are patently untrue and simply represent
the continuation of a pattern of deception by the Government, to the public, about
the GST. GST and the Growth Tax MythThe second issue that need
to be clarified is the so called growth tax issue. The Government is claiming
two contradictory outcomes from its' tax package: - That aggregate
taxes are to be reduced; and
- That over time, more money will be available
to finance essential services expenditure.
Both of these statements
cannot be correct. Less not More Services Over TimeIn fact, if
the general purpose revenue available to state governments grows over time relative
to the current arrangements, this merely signifies that revenue which would otherwise
be available to the Commonwealth Government, will instead flow to the State Governments.
This will not provide higher levels of public services. Rather,
the other type of Commonwealth financial assistance to the states, ie Specific
Purpose Payments (SPPs), will undoubtedly be reduced as the Commonwealth Budget
has less capacity to finance these payments. The ideological underpinnings
of which is to force the Commonwealth to withdraw from its national financing
role of core government services and pass this responsibility to the states. This
will lead to an erosion of national standards of basic services such as health,
education and housing. Labor rejects this proposal as it will undermine
the minimum national standards achieved over decades of Commonwealth involvement
in providing and maintaining these vital public services. The Real State
Budget StoryThe following table has been prepared by the South Australian
Government on behalf of all the States and Territories. The figures contained
in the table have been confirmed by the Commonwealth Treasury. Incredibly,
this data had to be released by the Federal Opposition as the Commonwealth Government
has refused to do so. In keeping with this trend of secrecy, the Government members
of this committee opposed the table's incorporation into the main body of the
report. This is surely an unprecedented situation, but is indicative of the Government's
sensitivity to the truth about its' tax package being made public. Impact
Of National Tax Reform State By State Cwlth Guarantee ($m): 2,098.4 $million
Guarantee in Aggregate Plus State-by-State Redistribution for first 3 years
than State-by-State Guarantee
NSW $m | VIC $M | QLD
$M | WA $M | SA $M | TAS
$M | ACT $M | NT $M | TOTAL |
Net Budget Impact (Retaining Non-Residential Conveyance
Duty) | 2000-01 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
2001-02 (after loan repay-ment) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
2002-03 | 0.0 | 0.0 | 146.5 | 0.0 | 0.0 | 0.0 | 6.4 | 0.0 | 152.9 |
2003-04 | 70.0 | 251.7 | 373.0 | 24.1 | 8.9 | 0.0 | 26.7 | 0.0 | 755.1 |
2004-05 | 406.5 | 504.6 | 579.7 | 124.9 | 84.7 | 18.7 | 43.5 | 6.5 | 1,769.0 |
2005-06 | 760.2 | 771.2 | 809.4 | 232.9 | 164.2 | 42.5 | 61.1 | 18.2 | 2,859.7 |
Final Budget Impact (AFTER Abolition of Non-Residential
Conveyance Duty when Sufficient Surplus Available | 2000-01 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
2001-02 (after loan repay-ment) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
2002-03 | 0.0 | 0.0 | 146.5 | 0.0 | 0.0 | 0.0 | 6.4 | 0.0 | 152.9 |
2003-04 | 70.6 | 251.6 | 0.0 | 24.1 | 8.8 | 0.0 | 4.1 | 0.0 | 359.1 |
2004-05 | 445.1 | 169.0 | 183.8 | 136.7 | 71.0 | 11.2 | 18.5 | 5.3 | 1,040.6 |
2005-06 | 209.3 | 397.0 | 401.6 | 22.6 | 50.3 | 13.8 | 34.1 | 16.0 | 1,154.6 |
Bolded numbers (ie below lines) indicate years in which Non-Residential
Conveyance Duty has been Abolished | As the table shows, rather
than being a bonanza for state budgets, the GST package is projected to improve
aggregate state budgets by only $1.15 billion by the end of year six. This
comprehensively demolished the pre-election claim by the Prime Minister that the
GST will yield around $25 billion in additional funds for the states over the
first ten years of operation. In fact, even on the Governments optimistic figures
the actual gain will be around $8 billion cumulatively over ten years, and that
is conditional upon the following heroic assumptions: - That the Commonwealth
maintains its level of SPP effort;
- That the GST grows in line with future
economic activity as is assumed; and
- Economic growth continues at high
levels uninterrupted for a further 7 years.
It is simply not credible
for these conditions to be indefinitely maintained into the future. In
these circumstances Labor rejects the continual assertions by the Government that
this proposal will provide significantly more revenue to state governments over
time. The States' Budget Independence CompromisedIn keeping with
the false claims about the tax package, the Government pretends that it is providing
more financial independence to the States. In fact, the opposite is true. Critics
have often commented on the relatively high level of fiscal imbalance in the Australian
federation. This so called vertical fiscal imbalance (VFI) describes the situation
where the national government raises more revenue than it directly spends, and
the states have a higher level of spending responsibilities than their level of
direct revenue raising. The Commonwealth simply provides some of its (excess)
revenue to the states to correct this imbalance. Labor does not consider VFI as
a major problem, as there are also efficiency benefits that arise from the current
arrangements. However, the ANTS package significantly worsens VFI. Accordingly,
those who claim that VFI is a problem in Australia cannot logically support the
tax proposals as it actually exacerbates the existing situation. State
Governments are not reducing their reliance on the Commonwealth-in fact they are
becoming more reliant. The fact that the Commonwealth is misleadingly classifying
GST revenue as state revenue, does not change the reality that the Commonwealth
Parliament retains the legal power to alter the claimed automatic on-passing of
the GST revenue to the states. The Commonwealth Parliament can at any time
alter these arrangements. In addition, even under the proposed legislation
the Commonwealth Treasurer retains the absolute discretion to determine the amount
of GST revenue that is actually provided to the States. For these reasons
Labor Senators conclude that the states are losing even their current level of
long term budget independence from the Commonwealth. The Lock-In FraudIn
order to attempt to mislead the Australian people into believing that the GST
rate will not rise in the future, the Government is pretending that has developed
a mechanism to limit future GST rate increases. This so-called lock in
mechanism has no legal validity. It is not disputed that the Commonwealth Parliament
cannot pass a law which limits the ability of future parliaments to amend that
law. Any provision which purports to bind future parliaments can simply be removed
or amended at any time by a future parliament. Accordingly, clause 10 of
A New Tax System (Commonwealth-State Financial Arrangements) Bill 1999 has absolutely
no legal affect in protecting consumers from future rate rises, nor from future
removal of the GST free status of particular categories of expenditure. Put
simply, the provision is a mirage. The only way to guarantee that the GST rate
will not rise is to enshrine that proposal in the Australian Constitution. Wine
Equalisation Tax (WET)The WET proposal only arises because of the proposed
introduction of a single rate GST. Labor is endeavouring to defeat the GST proposal.
If this is successful, the WET will not be proceeded with by the Government as
it is contingent on the passage of the GST. Notwithstanding the above,
we note that: - There is no industry support for the Governments WET
proposals;
- The proposed rate of WET will increase the aggregate taxation
burden on the wine industry by an estimated $146m per annum from current levels;
- This is estimated to cost 500 jobs, mostly in regional Australia; and
- The WET will apply to wine used for promotional, tasting and sampling
purposes, which creates an anomaly as the GST, does not apply to these transactions.
The WET proposal arises because the Prime Minister and Treasurer
refuse to acknowledge that a multi rate indirect tax is more efficient and equitable
than multiple different indirect taxes applying to the same goods. The
world renowned accounting firm, Arthur Anderson, eloquently described the situation
in its submission to the committee: As a third general comment, we
note that the Governments gaol of single rate GST has been meet artificially.
The WST has been replaced with three new taxes-GST at 10%, a new luxury
car tax at 25% and wine equalisation tax at a rate yet to be announced. Simplicity
should dictate that a multi-rate GST would be preferred. The strongest objection
to this structure, is of course, that these taxes compound. GST will be payable
on the wine equalisation tax itself
. [3]
Secondly, the use of multi tax regime must increase compliance costs for
taxpayers relative to a single tax regime. This is especially so as the WET base
differs from the GST base. The committee heard much evidence of the growth
and importance of wine tourism throughout the many and varied wine producing regions
of Australia. Wine tourism underpins many thousands of jobs throughout Australia.
Labor considers that the taxation system should encourage the further growth of
this important emerging industry. The best way to assist the future growth of
wine tourism is to encourage growth in cellar door sales. The proposed WET does
not achieve this. Accordingly Labor proposes that a significant exemption
for cellar door sales should be provided in order to assist the development of
small and medium sized wineries. Luxury Car Tax (LCT)As with the
WET the proposal for a separate LCT is flawed. Compliance costs are being unnecessarily
raised for taxpayers with no offsetting benefit derived. Due to the Government
not agreeing to an extension, Labor members regret not having the opportunity
to pursue in public hearings the many anomalies facing the motor vehicle industry
from the LCT and the denial of input tax credit over the transitional period.
Again, the LCT is contingent on the passage of the GST which Labor is committed
to defeating. ConclusionsThe defeat of the GST bills will result
in these bills not being proceeded with by the Government. Accordingly,
Labor members reassert their opposition to the GST.
Footnotes[1] Qld Parliament Hansard, 14/4/99,
P 1036 [2] Tasmanian Parliament Hansard [3]
Sub 927 p3
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