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Tuesday, 8 December 1998
Page: 1619


Ms MACKLIN (8:14 PM) —This package of GST and health legislation represents not only one of the most dramatic changes to Australia's taxation system but also the most secretive and poorly explained package of reforms that any government has ever tried to sneak through the back door of a parliament, especially in the area of health. The government went to the last election promising that health products and services would be GST free—GST free, it said. It papered over its broad promises, saying that the exact definition of which health products and which health services would be free of tax would be subject to a thorough scientific examination after the election.

But that was just another non-core promise—made to be broken. The so-called scientific examination has now been completed, and many Australians have a fair right to be more than disappointed. They have a right to be outraged at being misled. It was a 17-day inquiry—no scientific inquiry at all.

Health care is an area that historically has been free of tax. Public hospital services, medicines and other products and services have been free of most taxes. For Australian families, this government's decision to impose a GST on many health services and their day-to-day health expenditure is really another attack on the living standards of those families. Whether it is bandaids, cough and cold medication or aspirin, the whole medicine cupboard full of life's necessities is about to be taxed. No family would deny their children treatment for their day-to-day ailments, and no pensioner who relies on non-prescription medicines should have to pay tax on those necessary medicines.

As the National Vice President of the Pharmacy Guild said today, `I don't like to see medicines being taxed'—and Labor agrees. We do not like seeing medicines taxed because medicines are essential for many Australians' quality of life.

Under the Sales Tax (Exemptions and Classifications) Act 1935, goods `used' in the prevention of human sickness and items marketed in preventing and curing or treating sickness or disease have been sales tax exempt. This includes goods used in compounding or preparing drugs or medicines. The ambit is broad because it has been long realised that such goods should not be taxed and made more expensive.

On 12 August this year, just the day before the government announced its 10 per cent GST, an important taxation ruling was handed down which again confirmed this position. This ruling by Michael Carmody, the Taxation Commissioner, established detailed guidelines to determine sales tax exemption for drugs and medicinal products, making it clear that, if a product is marketed principally as a drug or for medicinal use, it is sales tax exempt.

But this government wants to change all that. This government wants to put a 10 per cent GST on essential everyday medicines that people buy over the counter and many health services on which they rely.

Since the release of the report of the Vos Tax Consultative Committee, not all problems have been solved. There is, in fact, much confusion about what will have a GST applied and what will not. Some goods and services have been identified as GST free; others not. We now know that much of household expenditure on health will incur a 10 per cent GST. As I have raised during the week in the House, many over-the-counter medicines and health products on which consumers rely will have a 10 per cent GST added to their cost. There will be minimal offsets.

There can be no doubt that these medicines are a major part of people's spending on maintaining their health. The ABS national survey found that, in a two-week period, 4.3 million Australians used pain relievers, 1.3 million used medication for coughs and colds, 1.7 million used skin ointments and creams and 4.6 million used vitamins and supplements. And what do they have to look forward to? A 10 per cent GST. Those items that so many Australians take for granted—Panadol, that is a medicine, Codral, Mylanta, Canesten, Strepsils, vitamins, bandaids, bandages, skin creams, sunscreen, sanitary products and many other items—will all be hit with a 10 per cent GST.

The definition which the government wants to use to differentiate GST from non-GST medicines is as follows: firstly, prescription medicines—that is, those listed on schedule 4 and schedule 8 as listed under the standard for the uniform scheduling of drugs and poisons; secondly, the Vos report has extended the exemption to include schedule 3 items, which can only be sold by a pharmacist personally. But all other over-the-counter medicines sold in pharmacies—that is, classed as S2—or those health products available in supermarkets and other stores will have a 10 per cent GST imposed.

This will create a world of complexity for the pharmacists. The classification of medicines into the above categories depends on all sorts of considerations—the type of packaging, the concentration of the active ingredients and how the product is to be used.

The exact wording of this legislation introduces even more complications, as some drugs can be obtained either on prescription or without a prescription; and there will be circumstances where the same product will attract a GST depending on how it is obtained. A number of commentators have already warned about the potentially high cost to government of people unnecessarily going to their doctors and getting prescriptions for items, which previously they did not need to do.

Items like sunscreens will also be subject to a 10 per cent GST—and, of course, their use has risen greatly in Australia due to skin cancer awareness campaigns. The government should learn from its own economic rationale: to increase the price of a health product, such as sunscreen, will discourage people from buying it. It is fundamentally wrong to increase the price of products such as sunscreens which are so important for public health.

While prescription drugs are GST-free, over-the-counter goods, medicines and other health products represent twice the amount families spend on prescriptions each year. Already the government has broken its commitment to keep all health services GST free. It has eliminated a category of drugs which represent two-thirds of the spending of ordinary Australians on medicines. This was backed up today by Peter Downing, Vice President of the Pharmacy Guild, who said:

. . . it's going to be pretty confusing, I think . . . more importantly, it's going to lead to confusion in the minds of our patients and it could disadvantage some people who need these medicines.

The problem that also arises out of the application of the GST to non-prescription medicines is the possible extra burden to be placed on our health system as a result. As I said, people wishing to get their medications cheaper will now look to getting a script from the doctor for anything that they might need. Those who simply cannot afford an extra 10 per cent on the cost of their medicine would understandably do such a thing. There will be the obvious problems of increased visits to general practitioners and increasing spending on Medicare.

The mess about which medicines will be taxed is yet another example of the government's legislation failing the simplicity test. The complications of the GST on medicines and other health products will be a nightmare for the small community pharmacist and for the millions of consumers who buy these products every week.

Another area that I want to touch on relates to the implications of the GST for good health. Of course, all of us should be concerned to make sure that any changes to tax arrangements encourage people to use healthy products, with an emphasis on healthy eating in particular. But what do we see this government doing? Under the current tax system, food items which none of us could say are much good for our health are the ones that have wholesale sales tax applied. The ones that are good for our health—basic fresh fruit and vegetables and other foods like bread and milk—do not have sales taxes applied.

This government wants to impose a 10 per cent GST on the very products we should all be encouraging people to eat: fresh fruit and vegetables, bread and milk—all the basics of life that go to a healthy diet. How can it be in the interests of Australia to discourage healthy diets when there is clear evidence that good nutrition has a significant impact on the health of the community?

The government's GST package stated that activities to be GST free include `virtually all health, education and child-care services'. The principal reason, and the policy uppermost in the committee's mind when the Vos committee considered what range of health goods and services should be GST free, not surprisingly from this government, was not a compassionate one, as we might have expected, but simply:

Applying taxes to health care would place the private health sector with its heavier reliance on direct fees at a competitive disadvantage with the public health system.

So there was nothing about good nutrition and encouraging good public health in our community; there was nothing about those medicines which people use every day, such as Panadol and all of those cough medicines that families rely on. Those things are going to have a GST on them. The government did not give any consideration to the impact that that would have. It is another example of the government not protecting the essential services that Australians so rely on.

According to the government, there are two categories of medical services that will be GST free: those that attract a Medicare benefit or those that are commonly used health services listed by the government. This list has been initially taken to be those items which the Vos report recommended should be added to the original services included in the tax package.

There are a number of qualifications that we need to look at. The concession for hospitals, for example, extends to drugs, dressings, meals and accommodation provided in hospitals and nursing homes but not to other items that are commonly used. There are various other groups that are providing natural health services who have given us various concerns about the impact of the GST. For example, the Association of Remedial Masseurs are concerned that they are excluded from the definition of `common medical services'. They argue that there is a category of `natural complementary medicine' which includes chiropractors, osteopaths and physiotherapists within the exemption but excludes them.

The Australian Acupuncture and Chinese Medicine Association have also raised the same issue with respect to acupuncture and traditional Chinese medicine. If acupuncture is delivered by a doctor, it is a recognised Medicare service. However, if it is delivered by a trained and qualified acupuncturist, it will have a 10 per cent GST.

The Australian Traditional Medicine Society is likewise concerned that its members' consultations and health remedies sold to patients will be subject to the new Howard tax. The Physical Disabilities Council raises the inequity of exempting health care costs such as accommodation, food, drugs and meals in hospitals, nursing homes and hostels, but not for people living at home. This will create economic pressure for people to remain in institutions.

The legislation limits the exemption to `medical appliances' for people with `an illness or a disability, and is not widely used by people without an illness or a disability'. Again, what is and what is not exempt is yet to be clearly defined. The Vos committee noted that it was `too difficult in practice to define the terms "severe medical condition or disability"'.

Thus it is not clear from the bill what is in and what is out. The bill states that the supply of certain medical appliances for use by people with medical conditions or disabilities will be GST free. However, there is nothing to protect people with disabilities who need specific services that will fall outside the list identified within the bill. If that is the case, where does it leave the many people who may need special equipment or items due to disability? Basically, if you do not manage to get on the list, you pay the GST. I refer, for example, to appliances used by people with temporary disabilities, and services and equipment used by people who are carers for people with disabilities.

The Physical Disabilities Council is concerned that the GST will apply to alterations to enable disabled people to live in their own homes: for example, kitchen equipment, removal of steps, voice activated equipment, door openers and many other types of disabled aids. The Deaf Society of New South Wales is concerned about the probable increase in costs of various technologies to assist deaf people as well as the application of the GST to sign language interpreter services. Some of these services are provided within public hospital settings but, increasingly, they are being provided outside in the private market. What does this mean in terms of the GST? The society has been trying to get subsidies to enable sign language interpreters to be present for medical consultations. The government's response is to increase the cost with the GST.

This legislation is not the simplification of the tax system that the government promised it would be. It is a tax that raises as many questions as it answers. If the government gets its way and the legislation gets through the parliament, we will be a very long way from finding out just how badly pharmacies, doctors, hospitals, the disabled and Australian families are affected. This tax does not deliver fairness; it does not provide opportunity for all Australians. Instead, it has the potential to hurt many people in our society who rely on health products and health services. Health is a long way from being GST free.

The Labor Party opposes this legislation and its effect on health and other essential services. The greatest misnomer in modern Australian political history is that given to the government's tax package. It is called `Not a new tax, a new tax system'. It is in fact for many Australians who rely on medicines and previously tax-free health services every day a massive and unfair new tax. It is a new burden for those in Australia who can least afford it, those who take medicines and rely on health services and products on a regular basis, people with children, those with disabilities, those who care for the sick, those people who look after their parents, those people who suffer from any number of ailments and those who require daily treatment. It was a bad tax at the election and it remains a bad tax now.