Bills Digest No. 54 1999-2000 Appropriation (Supplementary Measures) Bill (No. 1) 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details

Passage History

Appropriation (Supplementary Measures) Bill (No. 1) 1999

Date Introduced: 26 August 1999

House: House of Representatives

Portfolio: Finance and Administration

Commencement: Royal Assent

Purpose

The Bill provides for the appropriation of money from the Consolidated Revenue Fund for the Book Industry Assistance Plan, and additional funding for the Supported Accommodation Assistance Program.

Background

Book Industry Assistance Plan

The tax reform package announced by the Prime Minister in August 1998 proposed the replacement of the wholesale sales tax and nine State and Territory Government taxes with a uniform Goods and Services Tax (GST) of 10% on a broad base of goods and services. Under this proposal books, which have in the past not been subject to the wholesale sales tax, will be subject to a 10% GST. The Government has resisted claims for exemptions on the grounds that these would introduce complexity. In response to those advocating that books be GST free it has argued that the price rises will not be significant, that the tax cuts offered in the tax package will mean that consumers have more money to spend on goods and services, and that the price of books will not rise relative to other competing goods and services.(1)

The proposed Book Industry Assistance Plan is the outcome of negotiations between the Government and the Australian Democrats in return for their support in the Senate for the tax reform package. Though opposed to a GST on books(2), the Australian Democrats have accepted the plan by way of compensation for the GST on books.

The plan primarily focuses on compensation for the increase in the cost of books used specifically for educational purposes, but also provides some direct support to the book industry. It commits $240 million over four years commencing in 2000-01 ($60 million per annum) and includes:

  • An educational textbook subsidy totalling $117m to be paid to retail sellers. The subsidy is for books which appear on designated reading lists, and is equal to the amount refunded but capped at 8% of the price of each book
  • $48 million to enhance the Printing Industry Competitiveness Scheme which includes an Innovation, Infrastructure and Development Fund and a Skills Development Program
  • $38 million for a scheme to provide further support to Australian authors - the Educational Lending Rights scheme (ELR) - which will extend the libraries' lending rights scheme currently applying to Australian books held in public libraries, to those held in educational libraries
  • $1.2 million to enable the Australian Bureau of Statistics to collect annually, data on book publishing and retail sales
  • $8 million for a marketing campaign to promote books, reading and literacy, and
  • $28 million in grants to all primary schools to upgrade their holdings of Australian books.(3)

Supported Accommodation Assistance Program

The Supported Accommodation Assistance Program provides transitional supported accommodation and a range of related support services in order to help people who are homeless or at risk of homelessness to achieve the maximum degree of self-reliance and independence.

The additional funding of $15m per year for four years was part of an agreement reached between the Prime Minister and Leader of the Australian Democrats, Senator Meg Lees in the context of discussions over the tax reform package.

Position of significant interest groups/press commentary

Booksellers, publishers, and authors represented by the Australian Booksellers Association (ABA), the Australian Publishers Association (APA) and the Australian Society of Authors (ASA) ran a campaign against the introduction of a GST on books. Educational institutions and libraries also expressed their concerns. Issues raised have ranged from concerns about the potential adverse effects on education and literacy and the development of an information/knowledge economy, to concerns about the effects on the book industry - the creators, producers and sellers of books.

These concerns are largely based on overseas research which suggests that the demand for books is highly price sensitive; that for every percentage point increase in the price there is an equivalent drop in demand.(4) It has been argued that a drop in demand will affect reading and learning, that Australian authors already surviving on low incomes will be further disadvantaged, that Australian printers and publishers, particularly smaller establishments, will be unable to compete, and that the profitability of booksellers will be affected. In support of this line of argument the point has often been made that the majority of the major industrial nations either have no tax on books or a reduced tax on books.(5)

Despite their strong opposition to the introduction of a GST on books the APA and the ASA have welcomed the compensation package. The APA believes it will go 'some way to alleviating the impact that the GST will have on the book industry',(6) and the ASA is pleased with the introduction of the Educational Lending Right which they have long advocated.(7) However, while the ABA has welcomed the book marketing initiative, book retailers have been critical of the book subsidy on textbooks arguing that it will introduce an added administrative burden on booksellers, and that it will do little to compensate for the increase in the cost of the 70% of book sales which are made to consumers rather than to educational institutions.

Pros and cons

The package includes a number of positive measures, which address some of the concerns of the various interest groups. The most significant measure, the subsidy on textbooks places the primary focus of the plan on educational concerns. At the same time however, there is also further direct support for the Australian printing and publishing industry, a book promotion and marketing campaign which has been welcomed by booksellers and the ELR which will now pay writers a fee for their books held in educational institutions.

However, there is still considerable concern that the package will not significantly redress the expected reduction in the demand for books resulting from price rises associated with the GST. In the first instance there is some debate as to whether the subsidy will actually compensate for price rises. Though the subsidy has been set at 8%, twice the original Treasury estimate of the likely effect of the GST on book prices of 4%, this represents the APA's best case scenario(8), and some have calculated the real cost to be as high as 15%.(9) Perhaps more significantly, Australian Bureau of Statistics data does appear to support the claim that over 70% of book sales do not fit within the education category and are therefore unlikely to be covered by the subsidy.(10)

It should also be noted that the details regarding the implementation and administration of most of these initiatives are yet to be negotiated with relevant groups, and the likely significance/impact of specific funding initiatives remains unclear. Booksellers have already expressed concern about the complexity of claiming the subsidy which requires 'proof of the number of textbooks sold, the percentage of price refunded, and a copy of the reading list...'.(11)

ALP/Australian Democrat/Greens policy position/commitments

The Australian Labor Party (ALP) has opposed the introduction of a GST. In response to the proposed plan the ALP spokesperson, The Hon. Bob McMullan, MP is reported to have said that Labor will not oppose the package, and that though it views the package as a minor improvement it is concerned about the administrative complexity for the book industry.(12)

Main Provisions

  • Clause 3 provides for appropriations from the Consolidated Revenue Fund in respect of each of four financial years commencing with 1 July 2000, for additional funding of $60 million for the Supported Accommodation Assistance Program and new funding of $240 million for the Book Industry Assistance Plan.
  • The objectives for the Book Industry Assistance Plan are set out in Clause 4.
  • Clause 6 allows for grants to be made to a State or a person or a body other than a State and does not prevent a grant under this plan from being a grant by way of a bounty within the meaning of paragraph 51(iii) of the Constitution.
  • Clause 9 refers to Schedule 1 which provides for an amendment to A New Tax System (Goods and Services Tax) Act 1999 in respect of undefined and foreshadowed arrangements referred to in that Act for the Book Industry Assistance Plan, and the Supported Accommodation Assistance Program respectively. It repeals subsection 1.2(2) a condition precedent to the commencement of the A New Tax System (Goods and Services Tax) Act 1999.

Endnotes

  1. Australian Society of Authors Newsletter, No. 7, Oct. 1998.

  2. Senator Meg Lees, Leader, Australian Democrats, Media release, 98/752, 28 Sept. 1998, 'GST on books is just not smart: Lees launches anti-GST on books campaign for Australian Publishers Association'.

  3. Senators Meg Lees and Lyn Allison, Parliamentary Leader and Schools spokesperson, Australian Democrats, Media release, 20 Aug. 1999, '$240 million books plan will cut textbook prices, assist authors, printers and schools', Letter from the Prime Minister, The Hon. John Howard is attached to the Media Release.

  4. Australian Publishers Association, Media release, 27 July 1998, GST is a tax on literacy, a tax on education and a tax on knowledge.

  5. ibid.

  6. Australian Publishers Association, Media release, 20 Aug. 1999, 'Publishers welcome GST book industry compensation package'.

  7. Australian Society of Authors, Media release, 20 Aug. 1999, 'Australian authors welcome the introduction of ELR'.

  8. op. cit., Australian Society of Authors Newsletter, No. 7, Oct. 1998.

  9. McCalman, Janet, 'The real cost of GST on books is 15 per cent', The Age, 30 Sept. 1998, p A19.

  10. ABS, 'Cultural trends in Australia: a statistical overview', 1997, ABS No. 4172.0.

  11. Prime Minister's letter to Senator Meg Lees, in op. cit., Lees and Allison.

  12. Peake, Ross, Subsidy on educational books to counter GST, The Canberra Times, 21 Aug. 1999.

Contact Officer and Copyright Details

Carol Kempner
1 September 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1999.

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