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Monday, 15 February 1999
Page: 2815


Mr Kelvin Thomson asked the Treasurer, upon notice, on 8 December 1998:

Will the imposition of a GST on the activities of credit unions make it more difficult for them to provide competitive services in areas that the banks have deserted; if so, what is the justification for imposing a GST on the activities of credit unions.


Mr Costello (Treasurer) —The answer to the honourable member's question is as follows:

The GST will be applied in the same way to banks and credit unions, as well as most similar financial services providers. This treatment is consistent with the international GST treatment of input-taxing financial services. This means that such financial service providers generally will not charge GST on their services, but will be ineligible for input tax credits on the inputs attributable to such services.

At the same time, the Government's tax reforms will lead to the removal of many taxes on the financial sector, including most stamp duties, Financial Institutions Duty and debits tax. On top of this, financial service providers will benefit from the removal of the wholesale sales tax which is a hidden tax imposed on many financial firms.

. The Treasury has estimated that after the introduction of the new tax system the industry costs of the non-bank finance sector will fall by around 1.2 per cent.

The justification for introducing the GST is to broaden the indirect tax base and, as part of broader tax reform, to achieve stronger sustainable growth, higher productivity, more jobs and rising living standards.