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Thursday, 25 November 1999
Page: 12711

Mr JENKINS (3:53 PM) —It is very instructive when the Minister for Health and Aged Care, as a cabinet minister who was involved in the decisions that put in place the goods and services tax, does not have the decency to enter into the debate about how it is going to affect matters that are under his portfolio.

In this debate, it is very important to outline what is in fact the state of public hospitals at the moment. If we look at recent headlines, to say that public hospitals are in crisis is an understatement. We had yesterday in the Australian Financial Review an article headlined `Australia's health system is in a critical condition'. We have had a headline in the Australian of 11 November `Push mounts for hospital fix'. We have headlines in other states on the condition of the health system. For instance, a Canberra Times headline read `Health system on life-support'. In the Sydney Morning Herald of 10 November, a headline read `Pressure mounts for more hospital funding'. There are even emotive headlines like the one we saw in the West Australian of Tuesday, 9 November: `Fund cuts "kill patients"'. The purpose of raising this matter of public importance is to indicate that, in an environment where public hospitals are doing it tough, struggling and having to cut back to bare bones, where they almost are extracting the marrow, the effect that the consequences of the new tax system surrounding a GST are going to have on the administration of public hospitals should be looked at seriously. And for the minister to run away from such a discussion is a disgrace.

In his contribution, the honourable member for Parramatta entered into the distortion that surrounds the actual funding of public hospitals. But, if we look through those articles that have been out over the last couple of weeks and look at statements that have been made by state ministers, we find the truth of the matter. The truth of the matter is that, if the Commonwealth's effort was the same as the effort in 1994, in New South Wales there would be an additional $300 million this financial year. To criticise what is happening in New South Wales does not accord with the facts. If one analyses the facts in public hospital funding, it is clear that New South Wales is in fact doing what it undertook to do under the Commonwealth-state agreement. Dr Wooldridge really needs to acknowledge that fact and not use the excuse that the state governments are not doing the right thing as a blind.

In the article yesterday in the Australian Financial Review, Dr Wooldridge suggests that the New South Wales government should consider going down the Victorian road. As that article indicates, the Victorian public has made a judgment on the way that Jeffrey `Glib' Kennett destroyed the Victorian public health system. I have used many debates in this place to give examples of what happens just in the northern suburbs of Melbourne: the time that is spent by patients on trolleys awaiting admission, and the number of times patients are sent away because the pressure in public hospital casualty departments is such that they cannot get proper attention. When I say that, I have the greatest sympathy for the people that work in those situations. It is not a value judgment on their professionalism; it is an observation about the type of pressure under which they work, where they are told that they have to clear beds as fast as possible. I am sure that in the state of Victoria Minister Thwaites will be able to rectify a lot of the damage that has been done by the Kennett government, but it will take a long time. When next year public hospitals have to deal with the administrative effort that is required under the goods and services tax, as this matter of public importance indicates, it will be even harder.

A lot is said about health services being GST free in the main. If you say that quickly enough, people might be convinced. People might think, `By the magic wand the government has been greatly benevolent in the way it has treated the health industry.' It is not simple; it is fairly complex, like everything to do with this new tax package. If one refers to the Internet site and extracts `The Health Industry and the New Health System', one gets a 40-page document. It makes interesting reading. Perhaps there is a need to go through some of the terminology that surrounds this new tax system and the goods and services tax.

It is very instructive when one goes to the example that is actually given in this booklet about a GST-free supply. What is used is the supply of antibiotics through a pharmacy. I use it as an example because the same thing applies to whichever part of the health industry where you see `GST free'. As to what happens, we use something that is about $10, the pharmaceutical manufacturer sells it to the wholesaler, and it includes a GST of approximately a dollar, which the wholesaler has to pay to the manufacturer. The manufacturer has to send the dollar off to the Australian Taxation Office.

Of course, the wholesaler then on-sells it to the pharmacist. By then, as this example indicates, it is about $22 per unit including the $2 GST. The manufacturer sends that additional dollar in GST to the Australian Taxation Office. Then the pharmacist sells the antibiotic on to the customer for approximately $30 GST free. In that transaction there is no GST payable by the customer but, of course, the pharmacy has to put in the appropriate paperwork to get the $2 back from the ATO. So here we have a diagram that has six arrows and they are trying to say that this is very simple. For one transaction this is the type of thing that the pharmacy will have to be looking at.

I was interested to go to the Pharmacy Guild of Australia's Internet site to see the type of information that they are giving to pharmacies. They have a question and answer sheet and on it question 3 asks:

Is the sale of goods and drugs to a hospital taxable or GST free?

The answer, according to the guild—and this is the guild, a third party, and not the opposition, saying it—is:

Our interpretation is that the supply to a hospital would not be GST free because it would not meet the following tests:

the drugs can only be supplied on prescription;

the drugs can only be supplied by a doctor, dentist or pharmacist;

in the absence of pharmaceutical services, the drugs can be supplied by an assistant; or

the drug is an analgesic with a single active ingredient when they are the same as those supplied in larger packs by pharmacies.

So, as this answer concludes, the pharmacy would charge the hospital the GST. What is very interesting about this—given my six-arrow example from the Australian Taxation Office's document—is that we get a few more arrows in this one and what would have to happen would be that the hospital would require a tax invoice to claim the credit which is different from the invoices supplied to the public.

Just before question time, the opposition tried to get an amendment to the legislation that would ensure that ordinary customers would have on their invoice how much GST that they had paid, but an end-user customer who cannot claim back the GST input will not be told that. But in this case the pharmacy, if they are supplying the hospital, will have to treat it differently because, of course, the hospital requires the tax invoice to be able to get the input relief.

So the honourable member for Parramatta is deluding himself by suggesting that, simply by a flick of a switch in some sort of software, this can be easily solved. It is about time that the backbench members of this government started to get out of outer Mongolia, go to the Manchu court and ask questions, because they are being sold a pup. This is nightmare on main street and on main street you can find public hospitals, on main street you can find pharmacies, on main street you find doctors and on main street you get health services. (Time expired)