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Tuesday, 20 April 1999
Page: 3893

Senator GIBBS (5:31 PM) —I rise to speak on the A New Tax System (Goods and Services Tax) Bill 1998 and related bills which, if passed, will force the proposed GST on all Australians. Having been a member of the Community Affairs References Committee inquiry into the GST, it is abundantly clear to me that this package of bills is inherently unfair and inequitable, with the potential to adversely affect the living standards of many Australian households.

The so-called ANTS bills are indicative of this government's ongoing disregard for social policy. Its inability to comprehend the potential long-term implications of the GST for Australian society exposes a government that is seriously out of touch with the values and standards that prevail within the Australian community. Nowhere is this disregard more blatantly apparent than in the proposed GST's treatment of charitable and community organisations. The government's tax package would draw many charitable and community organisations into the tax net for the first time, forcing them to compete with profit making enterprises when raising funds for services. The implications of a GST on charities are enormous when we consider the size of the charitable sector and the magnitude of the work they do within the community.

Evidence provided to the Senate inquiry by the Industry Commission concluded that in 1993-94 the community welfare sector employed over 100,000 paid staff and had a total annual expenditure of $4.8 billion. The work of the sector is also supported by volunteers who donate 95 million hours of their own time each year. In 1995-96, nonprofit organisations spent over $25 billion in operating expenses, which was at least six per cent of gross domestic product. The NSW Council of Social Services also pointed out to the committee that the nonprofit sector in Australia is as large as the NSW and Victorian governments combined. Clearly, these groups have traditionally made a substantial contribution to helping Australians in a multitude of different ways.

The commercial activities undertaken by charities and community organisations are a means of funding the nonprofit services they provide. The funds available to such organisations will be severely diminished if they are forced to compete on an equal tax footing with regular businesses. Charitable and community organisations will also be hit with significant increases in administration and compliance costs under the GST regime. The effects of these costs will be intensified by the corresponding loss of funding from commercial activities.

The GST will therefore increase the operating costs of charitable and community organisations while their funding base will be significantly diminished. Ultimately, this will mean that these organisations will be forced to cut back on services to the community. Disadvantaged groups will suffer the most as they are the main recipients of charitable and community services.

The generosity and close-knit nature of the Australian community are manifest in the work of our many charitable and community organisations that are funded directly and indirectly by Australians in the form of donations, government assistance and general fundraising activities. The very mateship and camaraderie that characterise the Australian people were important enough to the Prime Minister for him to feel they needed to be incorporated in the language of the constitutional preamble. However, it now seems that he is unwilling to provide for the concept of mateship in his tax package. The willingness and ability of people to help others will henceforth be constrained by tax measures that inhibit the provision of services by charitable and community organisations. These groups are the very vehicles through which Australians are able to help their mates.

This government has chosen to attack charities in a tax package that will inevitably leave more Australian households needing these charities' help. Low income families and individuals will undoubtedly be among the big losers if the GST is allowed to proceed. This is because the GST is inherently regressive, whichever way you look at it. A family earning $100,000 a year pays the same amount of GST on the same purchase as a family earning $30,000 a year.

People on low incomes will also be disadvantaged because they tend to spend a higher proportion of their income on items that are currently untaxed. A 10 per cent GST on fresh food and clothing—which are currently free from wholesale tax—will impact heavily on poorer people. Such measures also have long-term implications for public health. Foods that are currently not taxed will become more expensive, and these include the very foods advocated in the government guidelines as vital for good health. Nutritious foods will become more expensive relative to many highly processed, unhealthy foods. Good nutrition is essential to ensuring good health. This government has obviously not thought through the implications of creating disincentives to healthy eating. Many poorer people may eventually become a drain on the public health system as a direct result of poor nutrition. Denying people healthy food therefore is not only morally and socially unacceptable but also demonstrates economic foolishness in the long term.

The so-called `compensation' package for families is significantly flawed and incapable of sheltering families from the effects of the GST. According to the government's tax reform manual, the GST will increase the costs of a couple with no children earning $30,000 a year by $9.33 per week. If the same couple had one child, their costs are expected to rise by $9.63 per week. This government is so out of touch that it thinks raising a child costs only 30c a week. No wonder their compensation package is such a joke. According to the Australian Consumers Association, a typical shopping basket of groceries will actually cost around 8.8 per cent more under a GST.

Families on low incomes will also be hit hard by the GST's impact on the housing sector. Queensland Shelter was one of the many organisations to point out to the committee that the government's $7,000 compensation package for first home buyers will not be enough to offset the effect of the GST. The Housing Industry Association argued that prices for new homes would rise by at least $16,000 for an average house and land package worth $194,000—a rise of eight per cent to $210,000. The GST on new homes will in effect become a `tax on a tax', as most current charges, such as stamp duty, will be retained. These taxes will be included in the price on which the 10 per cent GST is calculated.

Public housing tenants pay a quarter of their income in rent and would therefore automatically lose one-quarter of their GST compensation in rent increases. The Queensland Shelter organisation also pointed out in their submission that, if rents charged by the community housing sector and the State Housing Authority are greater than 50 per cent of the market value, they may be treated as a commercial entity whose services are therefore subject to a GST.

Unlike the private housing market, state housing authorities and the community housing sector provide housing assistance to low income households and those with special needs. These organisations will therefore be stuck between a rock and a hard place, trying to decide whether to pass on the additional costs associated with a GST to tenants in the form of increased rents or to absorb these costs internally. The latter decision could further erode housing assistance revenue in the light of declining funds provided by the Commonwealth under the CSHA.

In addition, the government has misled pensioners by claiming that its GST compensation is in addition to existing pension increase entitlements. The government has merely `rebadged' normal indexation as GST compensation. The Australian Pensioners and Superannuants Federation provided some compelling evidence to the community affairs committee's inquiry into the GST, outlining the inadequacy of the government's compensation package. They said:

We do not believe that the compensation is adequate. Firstly, government figures are wrong in very many areas. One of them is that everybody spends the same proportion of their income on food and services. That is quite wrong. Aged pensioners spend a large proportion of their income on food and on things like housing and utilities.

The federation went on to stress the impact this will have on older people, who largely rely on a finite level of saving to get them through retirement. Pensioner groups were also highly concerned that the value of the already inadequate compensation package will be eroded over time. Anglicare Australia expressed its concern very succinctly to the committee inquiry, stating:

Compensation packages are unlikely to remain intact for long. They require highly visible government expenditure and there is always pressure on governments to reduce expenditure. This is likely to lead governments to allow inflation to erode compensation packages over time.

The concerns of Anglicare are reinforced by evidence from overseas. In New Zealand, GST compensation measures lasted only a few years, illustrating the very real danger that already inadequate compensation will be further eroded for the elderly and other low income and disadvantaged groups.

The GST will make independent living more difficult for people with disabilities. The tax package will apply to services which are luxuries for most households but essentials for people with disabilities. Services such as lawn mowing, home maintenance, home cleaning, cooking and shopping will all be taxed. These services make independent living viable for people with disabilities for whom institutionalisation is inappropriate.

Local government will be under increased financial pressure as a result of the GST. Services such as swimming pools, public transport, meals for seniors and school holiday activities will all be subject to a 10 per cent GST. In addition, administrative and compliance costs will have a large impact on the capacity of councils to provide services to the community. Local government expects the cost incurred to collect the GST will be $1 million per council initially and up to $100,000 per annum thereafter.

Even the Scouts and Girl Guides have not escaped the government's tax net. Membership fees will be subject to the GST while administrative and compliance costs will create an additional financial burden. The Scouts and Guides are already at the crossroads of financial viability and any new tax or loss of current earnings will result in fragmentation, closure and the ultimate reduction of services for youth in local Australian communities.

The Australian Council of Social Service has estimated that at least one million households will be worse off during the first year of the GST's implementation. This is a reflection of the GST's real impact on low income families and individuals. ACOSS data reveals most households that rely mainly on government income support would be worse off during at least the first year of the GST. This is because estimated price increases exceed the government's proposed four per cent compensation benchmark. According to the ACOSS data, the estimated price increases faced by various low income households after the first year range from an average of 3.2 per cent to four per cent when rent assistance is included and from 3.7 per cent to 4.9 per cent when rent assistance is excluded from household income. When considering these figures, it is vital to note that only a small minority of social security recipients receive rent assistance. Consequently, these figures suggest that a significant number of households would be worse off over the medium term, as well as the short term, under the government's proposed compensation arrangements.

In addition, this government has continued to demonstrate its disregard and apathy for those in rural and remote areas with the provisions of its GST. People in rural and remote areas are, on average, less well off than their urban counterparts. The GST on food in particular will therefore have an extremely harsh effect on country households. Country people already have more limited access to a range of nutritious foods due to greater costs, poorer quality and reduced availability. In North Queensland, for example, a basket of `healthy' foods has been found to cost 175 per cent more than Brisbane prices. This will compound the effect of price rises for low and middle income families in rural and remote communities. The consequences of imposing the GST on all foods are therefore likely to lead to a deterioration in the dietary situation of people in these areas.

Clearly, the government's tax package reveals a departure from social responsibility as much as it depicts the abandonment of community values. The concept of mateship, so revered by the Prime Minister, is nowhere to be seen in the GST, discouraging the charitable and community sector which has been such an integral part of Australian society. It will take more than a $20 million advertising campaign to convince the community that this is not an inherently unfair and inequitable tax. This legislation is complicated, unworkable and regressive and deserves to be thrown on the scrap heap.