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Tuesday, 20 April 1999
Page: 3890


Senator LUNDY (5:11 PM) —I also rise today to speak of the devastating impact the GST will have on a significant number of areas in both our personal and professional lives. I will focus my comments on its impact on sport and recreation in Australia, and also take a look at its impact on emerging information technologies.

In blunt terms, regular physical activity—be it through a gym, aerobics class, competition sport or recreational and quite pleasurable activities like fishing—generally results in improved productivity, enhanced quality of life and lower mortality rates. Everyone in this country is entitled to have access to those types of opportunities. But this government is about imposing barriers rather than removing them. The GST will raise the bar for many lower income Australians who now will be forced to view sport and recreation as a discretionary expense.

The government's so-called tax experts have failed to acknowledge or detail how the GST will impact on sport and community health. The Vos report made a number of recommendations about particular health services that it believed should be GST exempt. In fact, the government's own Tax Consultative Committee separated the health sector into seven subsets. Apparently these experts did not consider physical activity as part of preventative health or as of specific benefit to the nation. If the Howard government had any understanding of the role of sport and recreation in Australian society, perhaps it would not be so happy to slap a 10 per cent tax on every single Australian who wants to participate in their own sport.

For the record, let me remind the Senate of what Mr Howard's so-called expert committee had to say to justify keeping a GST on sport and recreational activities. It said:

It was also recognised by the Committee that many recreational pursuits may have health benefits, but [we] decided that it was necessary to `draw the line' at a reasonable point. The Committee also kept in mind that such an extension could have had significant revenue implications for the Government.

There you have it. The government thinks that recreational pursuits having a distinct health benefit must be taxed, otherwise there might be revenue implications.

It is an interesting issue in thinking about the bigger picture and the way this government develops policy. How convenient it is for a government not to factor in something like preventative health through physical activity and recreation and acknowledge the fact that, indeed, the federal government itself invests a great proportion of money in this activity every year? So, whilst the government hands out with one hand support for community based sport and recreation, it takes away with the other. I should note at this point that commitment to federal funded sport and recreation has declined during the period of the Howard government.

During the GST inquiries, the Australian Olympic Committee gave evidence that the GST has the potential to impact adversely both on the AOC as an organisation that supports athletes and on Australian athletes themselves. It will also impact on the value of grants from the AOC to nonprofit sporting organisations, grants funding to athletes, the value of sponsorship programs and the medal reward scheme.

Womensport Australia's submission to the GST inquiry demonstrated that the GST is likely to have several negative impacts on women's participation in sport. They raise particular concerns about the taxing of membership fees, which many women's sporting organisations rely on, particularly due to the difficulty that Womensport have in attracting sponsorship for the sporting activities undertaken by them. They stated that any increase in the cost of memberships and sporting goods is likely to increase the barrier for women's participation in sport, as women are more likely to be on lower incomes.

An example of how the GST will negatively impact on sport is Riding for the Disabled. To date, that organisation has been sales tax exempt on purchases such as stationery and saddles and other riding tack. In addition, the services which Riding for the Disabled utilises—namely, farriers, veterinary services and horse feed—will now attract the full 10 per cent GST. As sport is not directly taxable on its output under the present wholesale sales tax system, the GST will effectively tax an activity that has previously been free of such impositions. For the first time we will see sport and recreational activities taxed, yet approximately 70 per cent of sport revenue is derived from the supply of services and goods to consumers who cannot claim GST input tax credits. As a consequence, many consumers may simply stop buying sporting equipment. This will have a tremendously negative effect on participation in sport throughout the country.

The GST will also mean that, for the first time ever, attendance at sporting events will be taxed. According to an Ernst and Young report, the GST will significantly increase admission charges and club membership fees. Under the coalition's GST tax package, it will cost more to register in a sporting competition. It will cost more to enter as an individual or a team in a sporting competition. It will cost more to attend a sporting event. It will cost more to buy equipment and to participate in sport generally, and it will cost more to buy uniforms. And that is not all. The GST also applies to coaching and training courses. So if you or your family members want to take swimming lessons, tennis lessons, aerobic classes or attend referee or umpire courses, you will be slugged with a 10 per cent GST on the costs.

This will have major ramifications throughout the sports sector. The select committee heard evidence on this matter. It will cause a downturn in equipment sales and a downturn in attendance at venues and competitions. For many Australian families, participating in organised physical activities is an essential not a discretionary expense. They should be encouraged and supported by government, not taxed beyond the means of most families. Many Australian families are also involved as volunteers and club administrators, and the imposition of the GST will place a potentially unworkable burden upon them.

The GST will turn every community based club into tax collectors, once they have obtained a GST number. For nonprofit clubs, volunteer administrators will have to calculate for the first time the taxation on the combined income of the club and then submit these returns to the government. Those clubs without qualified personnel will have to use their precious funds to pay for accountants to do their books. I recently spoke at a soccer function where I pointed out that the only people to benefit from the GST in the sporting community will indeed be accountants. Whilst there were some sports participants in the room who happened to also be accountants, the general consensus was that the GST was a bad thing for sport.

Instead of concentrating on promoting their clubs' activities, these volunteers will be fundraising to pay for the accountants they will need to calculate the tax on canteen profits and raffle ticket sales so they can forward it to the Treasurer. Sure, some of these clubs will be able to claim a rebate on the GST paid on equipment purchases, but the time and money involved in calculating and submitting these forms is beyond the reach of many of these organisations. If the New Zealand and Canadian experiences are anything to go by, the volume of work in keeping these records and transactions will cause many clubs to fold.

It should be obvious that it requires a high level of expertise in administration and accountancy for volunteers to keep these detailed records on fees, charges, equipment purchases, canteen sales and so on. Once again, New Zealand gives us a classic example of how the GST can cripple the sports sector. When the GST was introduced in New Zealand, there was a very marked decline in volunteers and those people affiliated with sport and recreation. This decline has not been arrested, and the outcome is that the GST has effectively stunted sports participation and undermined significantly the sports industry in that country.

When I talk about the sports industry, it is easy to think of it in terms of the clubs and the economy of sport and the growing industry that sport is in this country at the moment. But, beyond the damage that it will potentially do to our growing sports sector, we have to consider the impact on the role that community based sport plays as a force for social cohesion in our society, as a source of what creates a sense of local identity. Sport in Australia is far more than just something we do on the weekends, worthy of some government recognition. It is very much a part of Australian culture.

One of the most disturbing aspects of this whole debate around the GST is that the government are so keen to keep the debate narrow. They express concern and disdain about the absolutely thorough job that the select committee has been able to do in drawing out all of the aspects of how the GST will impact on the Australian community. We have stepped outside the accountancy books as part of this inquiry. The evidence presented and the subsequent report presents the Australian community with the real picture for the first time—the impact on people in this country as a result of the legislation that the government currently have before us in this place.

It is not good enough to approach the GST in that narrow fashion. It is not good enough because of the social price. I have traversed the issue of sport and recreation here today, and many other speakers from this side of the chamber have traversed the absolutely mind-blowing plethora of issues that the GST touches upon. Whilst sport is just one perspective, it forms this critical jigsaw that makes up our life experience in this country. Just by looking at the sport experience, I think you can see very clearly that the impact of the GST will be far from innocuous. It will go further than any compensation package could possibly address. We are dealing with a shallow government with a shallow plan that will no doubt have shallow outcomes.

There are many other areas that the GST impacts upon. One I would like to turn to now is the fact that the GST is a tax for times past. It does not suit the emerging information economy and what we call the `information society'. Convergence, the coming together of computers, media and content, is changing the way we live our lives and it is changing our economy in a fundamental way. It is changing the way we spend our time, in a social sense. It is changing the way we communicate. These changes and the tools of this new economy, like the Internet, start to change the rules on how people transact, how they exchange goods and services, how they express themselves in social terms and how they engage in electronic commerce. We have to have a tax system that addresses those changes. The GST does not; in fact, it moves it in the opposite direction.

The GST is a tax that applies to the concept of an identifiable commodity that is passed on, sold, et cetera, in a certain place at a certain time. What happens if you are dealing with a digital product or a digital service in a global environment with a GST based on a singular nation-state with a national economy? Suddenly, the challenge to revenues derived from the taxation system takes on a whole new meaning. It is not just a whole new challenge for the Australian government but also, as was traversed at the OECD Ministerial Forum on Electronic Commerce in Ottawa in October last year, a challenge for all governments to look at the revenue depletion capability that this global economy will actually introduce to governments as time goes on. It is not as if the government is not aware of this; it is not as if the Australian Taxation Office has not even begun to look at this; they are. It is an issue of international concern—how electronic commerce on a global scale can actually undermine a government's ability to derive revenue. A goods and services tax does not sit comfortably in this new environment.

So here we are in 1999 sitting on the brink of massive changes with respect to the information society, putting in place a tax system which has declining relevance. It can only decline because of the nature of this new economy. Surely that in itself is a reflection on a government that has its mind-set back in an earlier part of this century and is not thinking in terms of what comes next. It is not even thinking in terms of the year 1999, let alone what the circumstances are going to be with respect to the information economy in, say, the year 2005. Yet it is in this chamber today pushing through this taxation framework.

There is another aspect to information technology that is worth mentioning, and that is the practical side of things: how it will impact on a business's or a citizen's ability to involve themselves in the information society. I refer to the way taxation rates will be altered with respect to desktop products, computer services, telecommunication services and all of the expenses that go towards making it possible for someone living in Wagga to get on the Internet or for an emerging business in Perth which is trying to set up shop to look at global export markets through a digital environment. How these people enable themselves to participate in the information society will now be taxed like it has never been taxed before.

Obviously, the services which are a growing proportion of business and consumer expense in relation to information technology are starting to shift that balance—greater imposition, but at a tax to those services. It is not just a matter of a simple margin being added on the top; it is actually a significant cost increase that goes way beyond what would be a relative growth of 10 per cent across their expenses. That trend of costs in relation to enabling yourself to participate in the information society, from hardware to software and services, areas that have not previously been taxed, is significant and documented at length.

Input taxed organisations will also be unable to claim back the GST paid on their IT purchases, so for these organisations the cost of the IT hardware will also increase. Suppliers of IT equipment are expecting a large amount of volatility in the months of June, July and August 2000 as suppliers attempt to juggle massive fluctuations in supply and demand. This will be at a time when we should be focused as a nation not only on growing the capability of Australian citizens and businesses to participate in the information society but also on growing our own IT industry. There is a number of very sound and well-documented economic reasons for them to do that.

Large numbers of businesses associated with the Internet—where, as I said, it is technically difficult to impose a GST—will not be able to claim back those credits. Enterprises in some sectors, such as insurance and finance, are likely to have extensive layers of customised software in addition to their packaged financial applications to automate transactions, new services and the provision of those services. They will face even greater costs beyond those associated with the purchase of packaged software applications.

It goes on. Services such as credit cards provided by banks and emerging electronic commerce services will pay tax on hardware, software and the service inputs to the business sector, but they will not be able to claim them back unless these input taxed organisations force these cost increases onto consumers through other mechanisms, such as increased transaction fees and other bank charges. So the IT industry sector, like the sports sector in this country, will have to pass costs on to the ultimate end user, and that is the citizen of Australia who, through this package of bills, will have to find the bit of extra money from their weekly income to service all of these growing costs.

In closing, let me say a few things about young people. The generational perspective of this debate is devastating. For the first time ever I see young people shaking their heads, wondering why the focus is on the GST when we should be at a turning point as a country in terms of growth in the investment in education and looking at new job opportunities in industries. We have seen, through this contribution, that this is not going to happen with the GST.