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Wednesday, 20 October 1999
Page: 11960


Mr COX (1:24 PM) —I have a few questions about transparency that I would dearly like the minister to answer. `Taxes will be subject to the GST unless the Treasurer declares them exempt'—that is in the original act. That raises the related issue of double taxation and the GST treatment of some state levies and charges. We have had a bit of confirmation in this bill that all of those state taxes and charges may be subject to the GST.

While the government has from time to time indicated its policy on the GST treatment of taxes, to date the Treasurer has made no declarations that any state taxes are exempt. Until lawful declarations are made in relation to some taxes, it will be difficult to say with any certainty that they are exempt. The Treasurer did say in parliament on 25 August this year:

. . . those services which are rendered for a fee are taxable. A fire service which is rendered for a fee can be taxable. I would have thought it was obvious.

Nowhere in this legislation is the test that a service is rendered for a fee specified. Normal practice is to classify as a government charge any payment which covers a reasonable assessment of the cost of providing a service. If the payment substantially exceeds the cost of providing the service, then it is treated as a tax. Essentially, that is why state liquor, tobacco and petrol franchise fees were struck down by the High Court. They were not a fee for a service; they were an excise, a tax.

With the mechanism that taxes which are exempt from the GST have to be declared by the Treasurer, that test may be somewhat arbitrary. But it is not just a case of the Treasurer being reluctant to declare taxes exempt. With the states receiving the GST revenue, they will have an incentive—at least the Liberal states will—to convert what are currently state taxes into fees for services. That way they can boost their own revenue.

Nowhere is there a more spectacular example of this process than South Australia's new emergency services levy. There was a fire services levy attached to insurance premiums which was collected by the state government and used to defray the cost of the state's fire services. Emergency services were also funded from consolidated revenue, from state taxes. Now the emergency services levy is being raised on the value of real estate and on motor vehicles, including cars, trucks, caravans and boats. On Mr Costello's definition of 25 August 1999, this will be treated as a fee for service and be taxable. The emergency services levy will be subject to GST. If these services had continued to be paid for from taxes which are declared exempt by the Commonwealth Treasurer, they would not be subject to the GST. In effect, the states will be getting an extra rake off of 10 per cent through the GST by converting services that are presently paid for using GST-exempt taxes into user-pays services with a fee or a charge which is subject to the GST.

The South Australian emergency services levy contains an anomaly with respect to its GST treatment. The levy covers a range of emergency services, including the Metropolitan Fire Service, Country Fire Service, State Emergency Service, parts of the surf lifesaving and coastguard operations, police rescue, parts of the state government communications network and the ambulance service. The ambulance service is a health service and therefore exempt. If the GST is levied on the full amount of the state government's emergency services levy, the GST will be being applied to a health service. I ask the minister whether he can come to the box and give me an answer on whether that will be the case. If it is not going to be the case, what administrative arrangements will the government institute to stop it being the case?