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Thursday, 1 June 2000
Page: 16924


Mr BROUGH (Parliamentary Secretary to the Minister for Employment, Workplace Relations and Small Business) (11:30 AM) —I thank all honourable members for their contribution to the debate on this Local Government (Financial Assistance) Amendment Bill 2000. A number of the members have put political party politics aside in the debate and have remarked on the important contribution local governments make to this nation and, of course, the councils that sit in them. I understand that there are well over 8,000 local government councillors on around 730 local authorities throughout Australia. Their contribution often goes unheralded and it has been a good opportunity for parliament to acknowledge the work that they do.

However, unfortunately some members opposite chose to use the debate to bring out all the old scarecrows of the GST yet again, including the misleading and unsupportable assertion that local government will be disadvantaged by the new tax system. Perhaps they should read the letter from Treasurer of New South Wales—that is, a Labor state Treasure—to one of the constituents pointing out quite clearly that local government is, in fact, a winner. The truth of the matter is that local government, just like any other business, will be able to get the GST they have paid back on their input tax credits. They will also significantly benefit from the removal of embedded taxes and cheaper fuel costs. It is true, as government contributions to this debate have made clear, that the benefits to local government would have been much greater had the original tax package not had to be modified because of Labor's opposition to the original package in the Senate. However, there are still major benefits that have been achieved by local government: council rates, charges for water, sewerage, compulsory rubbish collection, regulatory and licensing services and phones and penalties will all be GST free. All councils will benefit from the removal of the embedded taxes in the wholesale sales tax system and some other business unfriendly taxes. This has been estimated to be a saving of some $70 million annually to local governments, far exceeding the $2.5 million for the cost attributed by the member for Swan for the introduction. For local government there will be cost savings from the payment of the diesel and alternative fuels grant for all heavy transport vehicles weighing between 4.5 tonnes and 20 tonnes GBM used to transport goods and passengers in regional areas, and the cost of diesel fuel will be reduced by around 23c per litre. Councils will save around 7c per litre on all diesel and petrol used for business purposes. Any council which uses diesel for marine purposes will benefit from the full removal of diesel excise.

The savings from the tax reform can be used by local government to improve the range and quality of services that they provide to their local community and/or to reduce their rates. Council customers will, of course, pay GST on the council's commercial activities, and that is fair enough where local governments compete with commercial operations that will also be required to charge their customers GST on those services. This is simply being consistent and fair. It must also be remembered that council customers will receive substantial personal income tax cuts and increases in pensions and allowances that will more than outweigh any increased prices of a council's commercial activity.

In this debate much has been said about the possible cost faced by local governments in preparing for the introduction of the GST. In this regard I should mention an independent report prepared by Arthur Andersen for the Victorian government which examined a sample group of four Victorian councils and identified annual savings ranging from $380,000 for a small rural council to $1.9 million for a large metropolitan council following the introduction of the government tax reform. Arthur Andersen's report does identify some one-off costs for upgrading software, staff training and other costs estimated to range from $45,000 to $200,000 depending on the size of the council.

The government has also acknowledged there will be some costs associated with the introduction of the GST. To assist councils with this implementation, we have provided particular assistance, both from the Department of Transport and Regional Services and through the ATO. Any implementation costs faced by local government will be more than outweighed by the savings available to councils from the removal of imbedded taxes and cheaper fuel costs.

During the debate the opposition has complained about the fiscal necessity of measures taken in 1996 to take account of the more than $10 billion deficit left to this government when we came to office and the fact that this had an impact on the escalation factor for local government financial assistance grants. Unfortunately, the extent of the economic mismanagement we inherited from Mr Beazley's time as minister for finance meant that the fiscal restraint had to be applied to all areas of Commonwealth expenditure, including grants to local government. It is quite clear where the blame attached to this unnecessary decision lies.

I thank all honourable members for their contributions to the debate on this bill. I note the opposition's indication that it will not fail to give the bill a second reading and that it has moved an amendment. I move:

That further proceedings on this bill be conducted in the House.

Question resolved in the affirmative.