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Fightback! and the media



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/ών MEDIA RELEASE ^ 4 ^ 5 ' WARWICK SMITH M.P. Shadow Minister for Communications

19 May 1992

Fightback! and the Media

Warwick Smith, Shadow Minister for Communications, outlined the benefits of the Goods and Services tax to media and entertainment industries in an address to Club Media in Warrnambool, Victoria.

Mr Smith said the advantage of the GST is that the tax is borne only once - at the consumer level. The GST's input credit provisions mean that business would pay less tax on the cost of goods and services currently subject to sales tax.

'The removal of the Wholesale Sales Tax regime, which is equal to some $9.6 billion across the whole economy, would be of real advantage to all industries currently hit by the Wholesale Sales Tax.'

Mr Smith emphasised the overall effect of GST is not to produce a 15% rise in, for example, theatre admission and video rental prices. 'Recent advice from KPMG Peat Marwick outlines how the abolition of the WST, would see the disappearance of the current 20% tax on a range of items such as rental video tapes and exhibition copies of films.

'The GST will result in reduced purchasing costs to business and the profit margins of businesses will improve. Consequently, price increases to consumers will be less than 15%. In fact, a Treasury analysis of Fightback! shows a 0.14% fall in the price of video and sound equipment and a 0.2% fall in the price of

records, cassettes and tapes. It is important that business does not profiteer from the introduction of the GST which is why the Coalition decided to retain the Prices Surveillance Authority.'

'The KPMG Peat Marwick statement indicates, on the basis of surveys in New Zealand, U.K. and the EC, that GST procedure requirements may add marginally to the cost of a business's activities. However, it may also cause improved internal controls and even save money through better accounting controls.'

'KPMG point out x that the entire EC, Japan, South Korea and Canada have moved towards GST-type taxes. Any increase to their cost of business is marginal, as a result of maximum tax collection combined with lower avoidance levels. The tax also enables consumers to see the true cost of the indirect taxes

charged on various goods and services.'

In the entertainment area a 20% tax presently applies to such things as musical instruments, computers, office equipment, stationery, while television sets attract a 30% tax. COMMONWEALTH

PARLIAMENTARY LIBRARY MIC AH

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Ά recent Treasury Analysis of Fightback/ shows an overall positive impact on the communications industry. "Communications" sector (telecommunications and postal services) input costs would fall 5.67% or $688 million and there would be a 2.92% or $361 million fall in costs to the entertainment industry, a large sector of which comprises radio and television station services. There can be no doubt that the abolition of indirect tax charges will lead to a general reduction in industry costs.'

'What will be the effect on newspapers? It will not mean there will be an automatic 15% rise on the current sticker price of their product. Indeed, the Treasury analysis suggests a 10.4% rise for the category "Books, newspapers and magazines".

'It is not possible exactly to determine the impact of the GST package on input costs to the newspaper industry but each of the major input .components such as newsprint, salaries, motor vehicles, services such as communications, distribution costs, will benefit by the removal of a broad range of taxes. Furthermore, the major costs of most newspapers is labour - some *40%, so the proposals to change .

and make more flexible these arrangements in the industrial $rena will be vital to enhancing the competitive edge of the industry.

Before criticising a newer and fairer system all industries should conduct an analysis of their input costs under the existing tax regime. I am sure it will indicate that overall, they will be far better off and furthermore, so will the consumer when the huge personal income tax reductions are taken into account.

It is not sufficient to have a knee jerk response which does not take into account all the elements of Fightback?, Mr Smith concluded.

For further information: Contact (003) 31 4322

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