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Wednesday, 7 June 2000
Page: 14787


Senator GIBBS (11:28 AM) —I rise to speak on the Local Government (Financial Assistance) Amendment Bill 2000 and take the opportunity to discuss how the GST will affect councils and the communities they serve.

Looking at the impact of the GST on local councils really drives home how insidious this new tax is. This GST will attack the heart of this nation. This GST will attack the very services that help hold our communities together. This GST will attack some of the most basic services that local government authorities around Australia offer. And that is not an exaggeration. Let me highlight some of the council services that will attract a GST in just a few weeks time. They include: cremation fees, fire maps, the sale of bins, sundry rubbish removal, library membership, library photocopying charges, library fax machine charges, sportsground hire, catering fees, dog obedience classes, plant and machinery hire, car parking charges, fire hazard inspection fees, sale of rainwater tanks, swimming pool admission fees, senior citizen centre hire fees, recreation centre fees, netball court hire, tennis court hire and fees for removing rubbish. Senator Abetz, could you tell me which of those is totally unimportant?


The ACTING DEPUTY PRESIDENT (Senator McKiernan)—Order! Address your remarks through the chair.


Senator GIBBS —Sorry, Mr Acting Deputy President.


Senator Abetz —Do not tempt me, Brenda.


Senator GIBBS —I would like any member of the government to stand up and tell me which one of those services is not important to any community. I would like any member of the government to stand up and say which of those services is so unimportant that everyday Australians deserve to pay more for them. Does the opposition really need to get up in this place and tell the government how important local swimming pools are? Three months out from the Sydney Olympics, do we really need to find examples of champion swimmers who had their first lesson in a council pool? Do we really need to explain to the government how important local halls are? Should we really have to explain how bad it is that not only will there be a tax on the books people buy but it will also be on any library services local governments charge for? I suppose we do have to explain all of these things because from 1 July the federal government will be making Australians pay more for these services. Some of them might not mean very much on their own but together they play a vital role in many communities, particularly small communities. Many of these services would not exist in rural and regional areas if it were not for the local council. Many of these services are not viable commercial activities in small regional areas: they simply do not make a profit. Make no mistake: when the federal government decided to tax these services, it was not just attacking local councils; it was attacking regional and rural Australia.

We are not talking about the odd fee here and an extra levy there. The Local Government Association of Queensland conducted a study for the Logan City Council which indicated that more than 260 of its charges could be subject to the GST. The Ipswich City Council is going to be hit very hard by this GST. Figures that have come from the chairman of the council's Finance Committee, Councillor Paul Tully, show how serious the situation is. The one-off cost of implementation of the GST for the Ipswich City Council is $200,000. That amount includes lost staff time. Since July last year, one staff member has been diverted from other duties to oversee the implementation of the GST. There are currently four staff working on the GST full time. The ongoing costs of GST implementation for the Ipswich City Council are estimated at $100,000 a year. The council also estimates that it will lose about $20,000 a year from lost revenue. That lost revenue comes from things such as parking meters and photocopying machines that have a fixed coinage charge, which are too expensive to change. Every time someone puts a dollar into a parking meter, the Ipswich City Council will pay 9c to the government, so by this time next year the ratepayers of Ipswich City Council will be $320,000 out of pocket. That is $320,000 that could have been spent on roads, $320,000 that could have been spent on parks and $320,000 that could have been spent on books for our libraries and other services that they provide.

Councils will now have to include a 10 per cent GST in the price of these services. They are not commercially viable so councils will have to decide whether they will increase these fees and charges by 10 per cent—and take the risk of putting the price above the level the community can afford—or subsidise the GST increase out of their rates base. Whichever way you look at it, local communities will be the big losers. These services provided by the local councils were never designed to make a profit. The charges were levied by councils to help cover the costs of these valuable services but rarely did they actually cover those costs so, in reality, the rates residents pay to their local council subsidise these activities, sometimes quite heavily. Of course, the councils are particularly upset about this because they were originally told these things would not be a problem at all. In the 1998 election campaign the government promised local government authorities that the non-commercial activities of councils for which a nominal fee was charged would be GST free. That made sense at the time because the services had a large community service, non-profit element. The advice was given to local government authorities through a letter written by the Federal Director of the Liberal Party, Mr Lynton Crosby, on behalf of the Prime Minister. The letter stated:

The non-commercial activities of government will be outside the scope of the GST. This means that where a service is provided free of charge, or for a nominal charge, the GST will not apply.

That gave local government authorities a bit of reassurance. Having been assured by the head of the Liberal Party in Australia, they felt reasonably confident that the community services they offered their local constituents would not be taxed by the GST—and so did the Australian community—but they had been misled. Then, less than six months later, they found out the whole thing was a sham. At a Senate estimates hearing last year, the Minister for Regional Services, Territories and Local Government, Senator Ian Macdonald, revealed the truth. He told Senator Mackay:

I am aware—and I guess you are coming on to this; perhaps I can pre-empt this long tortuous process—there is a letter from the Liberal Party campaign office prior to the election suggesting that nominal charges would be exempt. That is not correct. To all intents and purposes it is correct, because if the nominal charge is 10 cents the GST will be 1 cent. But it is on the charge that is made.

That is what Senator Macdonald said. So, from that statement by the minister, one would surmise that it was clear that the government was going to define all the activities of local government for which a small fee or charge was levied as commercial. The government either missed the point entirely or chose to simply ignore that these activities are community services—services which are very heavily subsidised by ratepayers; services vital to the community which are not attractive to the private sector. The current government has shown again and again its ignorance of the importance of local government. This government has cut financial assistance grants to local government in real terms since it came to office. It has attempted to terminate the 25-year Commonwealth-local government funding partnership by trying to transfer the responsibility for local government financial assistance grants to the states. The government has also hit councils with major GST compliance costs but has provided inadequate compensation or assistance. On several occasions Senator Ian Macdonald told us how much local councils were looking forward to the GST. In question time on 26 November 1998, Senator Ian Macdonald said:

Local government is keen on the GST and the tax reform agenda of this government.

During estimates last year, Senator Ian Macdonald said that local governments understood the GST and were very positive about its introduction. We were dubious about that claim at the time, and now, as we get closer and closer to 1 July, more reports of councils complaining about the GST are coming to light. Let me take the Burdekin Shire Council, for example.


Senator Mackay —Whose council is that?


Senator GIBBS —This is the same council that Senator Ian Macdonald once served on.


Senator Mackay —Really!


Senator GIBBS —Absolutely. And I must tell you that the Burdekin Shire Council is not happy with the GST.


Senator Forshaw —I bet you they're happy that Senator Macdonald is no longer with them!


Senator GIBBS —I think so!


Senator Mackay —And what did they have to say?


Senator GIBBS —I will tell you what they said. This was in a short article that appeared in the Observer newspaper last week. The headline reads `Council fees will jump due to GST'.


Senator McGauran —That is a lie.


Senator GIBBS —I have it right here, Senator McGauran. The article goes on to say:

Burdekin Council has not ruled out fee increases of up to 20 per cent next financial year. Some service fees will rise at least 10 per cent due to the introduction of the GST but the Federal Government is yet to determine exactly which fees will attract the consumption tax. But coupled with the GST is a push towards the `user pays' concept for council services. Fearing public outrage, councillors gave the cost recovery principle a cold shoulder last week but stopped short of ruling it out altogether. A decision has been delayed until June 7, when a more detailed report will be considered.

A preliminary report at last week's council meeting claimed all current fees would have to be increased to ensure cost-recovery on services. But councillor Llew Davies said he thought council could not justify heavy increases. `Everyone hates the GST already and for us to double that impact is not going to make us any more popular,' he said. Other councillors agreed and refused to push approval for fee adjustments despite tight time constraints. Administration co-ordinator Tony Vaccaro explained cost recovery meant some fees would rise by 10 per cent which, when combined with the GST, meant the increases could add up to 20 per cent.

Get out your calculator, Senator. It continues:

`But it would not be a blanket 10 per cent increase. There would be some that rise by only seven per cent,' he said.

So there you have it: `Everyone hates the GST'. And that is from the very same council that the minister served on. Whatever you make of the arguments expressed in that article about cost recovery, there can be no doubt that the minister's claim that councils love this new tax is an absolute furphy.

But the impact of the GST on regional communities is not confined simply to local councils. Earlier this year I spoke on how the GST would impact on agricultural show societies. That situation needs looking at again. When I raised it, Assistant Treasurer Senator Kemp ridiculed me and said that I did not understand the implementation of the GST. However, on advice from the tax office, I can say that it will affect every small show society in Australia. These show societies will now have to pay GST on donated trophies, complimentary passes, sponsorships, gate entry fees, memberships, site fees and sideshow ground rent. They will also have to pay GST on the competitions that they run. So not only will the people in regional and rural communities have to pay the GST when they go to hire out a local hall or swim in the town pool, they will also have to pay the GST when they go to their local show. They are going to be hit from every side by this tax. I expect that Senator Ian Macdonald will stand up and tell us that local governments will not need to raise their prices for these services because they will enjoy savings in a range of areas. Senator Ian Macdonald has already cited the reduction in fuel costs and the removal of wholesale sales tax as potential areas of savings. Considering the blow-out in petrol costs over the last few months—and everybody has felt that—I do not see how anyone can now reasonably claim that petrol will be cheaper after 1 July. It just will not happen.

The opposition are not opposed to this legislation. Indeed, we are pleased that the government will continue direct Commonwealth assistance to local government, although under the original GST package this was not the case. Unfortunately, there are a few things the bill has not done. The first is that the legislation has not restored the $15 million that the government cut in 1997. It is also worth noting that there is no real provision for any substantial support for local government with respect to the costs of implementing this new tax. For most medium-sized councils, the cost of upgrading their computers and training their staff for the GST is about $100,000. The Local Government Association of Queensland has estimated that their members will spend $7 million implementing the GST. That $7 million has to come from somebody, and it will probably come from ratepayers. At present the government has allocated less than half that amount nationally.

The government tell us that after 1 July everything will be fine. They tell us that every Australian will be better off after 1 July. I do not think they are looking very hard, because every Australian out there knows that they are not going to be better off after 1 July. The government do not seem to have any idea that this tax is completely unfair and will hit regional and rural Australia much harder than it will hit the big cities. This is just another example of how the government are all talk and no action when it comes to the issues affecting regional and rural Australia.