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Thursday, 16 March 2000
Page: 14870


Mr SWAN (12:03 PM) —The A New Tax System (Fringe Benefits) Bill 2000 seeks to bring further changes to the taxation treatment of Australia's many charitable and not-for-profit organisations. I think it is sometimes forgotten that there are something like 10,000 charities in this country which have virtually millions of members. Every one of these charities, under this government, is about to become a tax collector. That is something that we should think about. This bill is part of that process, where the government is, through a combination of the GST and FBT changes, placing a significant burden on many charities. In the process of doing that, it is effectively placing a tax on compassion and is effectively putting forward a tax on helping people. It is also going to be a tax on volunteering.

We have had a lot of debate in this House, particularly about the application of the GST to charitable organisations. We should recall the Prime Minister's commitment when he said:

I do not accept for a moment that the application of the GST will be damaging to the charitable sector.

It will, and that has been documented. We have heard evidence from organisations like St Vincent de Paul, the Uniting Church, the Adelaide Central Mission and many organisations throughout this community that the GST will place a huge burden on them. Recently we had a report from the Australia Institute which looked at all of the issues associated with the taxation of charities. That report found among other things that unregistered entities will not be able to claim refunds of GST on their inputs. That is the government's position. As a consequence of that, they will face cost increases of around seven per cent. That fact is being completely ignored or denied by the government, but it remains the reality for many organisations in this community. The Australia Institute found that if sales by charities fall by around 15 per cent due to a GST induced rise of 10 per cent in the price of giving—and that has been the overseas experience—individual charities could face losses of up to 11 per cent as a result of the GST. They also found the average real loss of income for the sector would be three per cent or more, and they found that the impact on volunteers would be severe. The report predicted that the potential reduction in a volunteer's donation of time would be around 30 per cent. That would be an economic loss to the nation of something like $230 million. So we are dealing with very important matters here which go to the heart of what sort of society we want to be and which go to the heart of the capacity of voluntary organisations in our community to serve their community. I cannot see how this government can talk genuinely about the concept of a social coalition when they are out there, through a combination of measures, taxing the capacity of voluntary organisations to help those most in need. It is completely inconsistent.

Most importantly, in the whole package GST compliance costs are not being compensated for at all. Fundraising and other activities that assist charitable organisations to deliver services are still being slugged by the GST, contrary to what the government says. The core problem with this government's approach to charities, and it is reflected in this bill, is its sheer ignorance about the reality of charities' daily functioning and how they operate. It is simply the case that it does not know and does not care. We have seen so much evidence of this in the bills before the House. The whole proposal to put a GST on site fees, for example, for those residents in mobile homes in caravan parks, simply reflected the government's ignorance. It did not know that there were 160,000 people in Australia who lived in these circumstances—it simply did not know. And it simply does not understand how charities operate and what the impact of these measures will be.

That brings us to the FBT proposals in this bill. The government do not fully understand the adverse impact of these proposals on many charitable organisations, which will cause for those organisations significant stress and significant pressure on their capacity to fund their existing levels of activity. What we on this side of the House say is that, if the government think that there is a very substantial problem with the FBT—and they do by the revenue estimates that they have produced—and if it is being rorted and if that needs to be stamped out, why don't we have a full independent inquiry into the combined impact of the GST and FBT changes on the sector? Why don't we get it all out there? Why don't we have an independent inquiry which gets to the bottom of this matter? We owe that to all the volunteers and all the participants in the charitable sector to at least give them the benefit of a hearing. What they have been saying to me as I move around this country is that there will be for some of them a severe adverse impact from some of these FBT changes. Nobody quibbles with the objective of eliminating rorting in the system, but equally nobody should be quibbling with the fact that some of these changes will not be doing anything other than hurting organisations which are working very hard within the framework of the existing law to serve the community.

So we do have the view that there should be an independent inquiry and that it should have the scope to examine the whole issue of how the charitable organisations are treated within the tax system—and that includes FBT and GST. We need that inquiry because there is insufficient information at present to properly evaluate the anecdotal claims of rorting on the one hand against the concerns on the other that some charities are going to be unviable if their current fringe benefits tax treatment is capped at the rate proposed by the government in this bill. Let us measure that; let us test it in a full independent inquiry. The Taxation Office gave the opposition a briefing on this matter and it admitted in that briefing that it does not yet possess the information on how charities currently use fringe benefits tax exemptions. It admitted that. In so doing, it confirmed that we do need a wider inquiry. Without further investigation, it is not possible to say how current rules should be changed to allow legitimate assistance while removing any abuse. If we fail to investigate this issue properly and thoroughly and this measure were to pass, some charities will have been punished without accurate evidence proving that there has been abuse in the system.

I have got to say that the level of concern that I have picked up as I move around Australia, and particularly in my home state of Queensland where there are not as many charities which may necessarily have people on big packages, indicates that the proposed cap may result in many of these organisations having to lay off staff or reduce services to the most vulnerable. That needs to be tested. They have come to me, and I am sure they have been to members of the government and members of the backbench right across this parliament. Many of these people are very genuine. So we have a serious problem here and it needs to be addressed in a very serious way. That is why we on this side of House believe that this whole matter should be tested in an independent inquiry. That is the position of the opposition. It is necessary because the combined impact may seriously disadvantage many charities in our community. The Senate Community Affairs Committee some time ago attempted to examine those issues, but at that stage the government refused to provide any detailed information on its taxation proposals or their impact, and we are not much further advanced from there. But there is plenty of evidence out there from people who work very hard to make this country a better place that if we do not have that independent inquiry we will be seriously punishing not only those organisations but also the people they serve.

Of course, when the sector contemplates the changes to the FBT, they have to do that in the context of the impact of the GST, which is applied right across the sector to these organisations. You could not find a starker example of why we say this is a government which is weak in taxing the strong and strong in taxing the weak. The starkest example of that is the impact of the GST on the charitable sector. When you strip away all of the rhetoric, all of the nonsense that the government talks, the charitable sector is going to be paying the GST, and that is why we say the GST is a tax on compassion and a tax on helping people. It is going to pick up the most basic fundraising activities of the charitable sector. This government will simply go down in history, when it comes to the GST component of this, as the first government in this country that decided to turn the charitable sector into tax collectors.

The charitable sector has already been caught with massive cuts to funding, creating an enormous social deficit. It has had massive increases in demand despite general economic growth, because the growth itself is not being shared fairly. Now the government comes along and says, `Well, you are not doing enough. We are going to take a lot more from you.' That is effectively what the application of the GST to the charitable sector means. We have said that this bill should be the subject of a full, independent inquiry. What we have said generally about the question of taxation is very simple: we will roll back the GST. We will do it with some consistent principles, the first of which is to alleviate its impact on the weakest and most vulnerable sectors of our society, namely, the charities. Secondly, we will alleviate its impact on small business, its impact on those areas which are supposed to be GST free and its impact on employment. They are the principles we operate on. This country is diminished by taking the steps that this government is taking across the board to turn each and every one of our charities in this country into a tax collector. Welcome to John Howard's social coalition.