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Tax deal unacceptable to food & grocery industry

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To: Political editor Media Monitors

M E D IA RELEA SE Friday 28 May 1999



Statement b y the AFGC Executive Director, Mr Mitcheii H Hooke

The compromise hammered out between the Government and the Democrats to secure the passage of _ through the Senate of the Governments A New Tax System (ANTS) package of reforms comes at an unacceptable price to the food and grocery products industry.

It falls well short of our objectives and preferences. It is not good tax reform and should be no deal at all.

Food is only partially excluded, adopting what appears to be a hybrid of the Irish model, the current wholesale sales tax system and some o f the British model.

It presents industry with a definition complexity and administrative compliance nightmare.

The cost of this compromised package will fall disproportionately on the food and grocery industry and ultimatelyits customers.

The AFGC has from the outset of this process in the interests o f both the nation and our industry, supported comprehensive tax reform, including the introduction of a GST, on condition that ifc ■ removed inefficient indirect taxes, notably wholesale sales tax and payroll tax; ■ applied comprehensively at a uniform rate across goods and services, including all food;

■ delivered real personal income tax cuts and adequately compensated the needy; and ■ reformed Federal/State financial relations.

That the outcome to the Democrat and Government negotiations is a package o f reforms that includes a “bastardised” definition o f food, that fails to remove payroll tax, that maintains an inherently regressive “tax mix switch” and does not efficiently compensate the poor, is not good tax reform and should be no deal at all

Whatever short-term gains there might be to consumers and to the p o o r by narrowly and indeterminately defining food for its exclusion from the GST, will be significantly eroded by administrative costs and inefficiencies.

The overall cost of the shopping trolley will not markedly change. Prices will shift to recover greatly increased administrative costs in food and grocery businesses. And the poor will suffer because they can’t be adequately and effectively compensated under this deal

The “Irish model” is a “bits and pieces” with no rhyme or reason to the definition o f food for the purposes of tax. Its adoption in Australia will create an administrative nightmare for producers, retailers and for those in food service and for present and future Governments and tax officials.

If the Democrats were “fair dinkum” about the equity and efficiency of this Package, they would have at least accepted the offer of concessional treatment of food at a uniform rate o f 5% with improved compensation.

No reasonable person can argue the imperative for reform of Australia’s taxation system. There were always going to be winners and losers.

The borderline battle on the exempt definition of food has only just begun. What might be possible today will be wrong tomorrow. The two year battle and court case on the WST definition of frozen yoghurt w11 be repeated time and again.

Notwithstanding, the A FG C recognises the political reality1 of this deal and will move ahead to work to minimise the administrative complexities and costs imposed on our industry and its customers.


AFGC represents Australia’s largest manufacturing industry of consumer food, drink and grocery products

* a P Contact; M r M itchell H H ooke or Lina Melero Ph 02 62731466 or 0408 959 057