CONDUCT OF THE INQUIRY

Reference to the Committee

On 25 November 1998, the Senate referred issues relating to the GST and proposed new tax system to this Select Committee and three References Committees: the Community Affairs References Committee; Employment, Workplace Relations, Small Business and Education References Committee; and the Environment, Communications, Information Technology and the Arts References Committee.

The Select Committee was instructed to undertake its inquiries in two stages. The initial stage of the inquiry focused on a preliminary analysis of the economic modelling and projections underpinning the Howard Government's tax reform package outlined in the document Tax Reform: not a new tax, a new tax system.

Stage two of the inquiry examined the broader economic effects of the Government's taxation reform package with regard to the fairness of the tax system; the living standards of Australian households, especially those on low incomes; the efficiency of the economy; and future public revenues.

This stage of the inquiry draws on the findings of the three related inquiries conducted by the Environment, Communications, Information Technology and the Arts References Committee, the Community Affairs References Committee; and the Employment, Workplace Relations, Small Business and Education References Committee. The three Reference Committees tabled their reports on 29 March 1999, 30 March 1999 and 31 March 1999 respectively.

Conduct of the Inquiry

The terms of reference for the Committee's inquiry were advertised in the national press on 2 December 1998 and submissions called for by the 29 January 1999.

The Committee received a total of 1437 submissions and 107 supplementary submissions. Submissions were received from a broad range of people and organisations. These included individual citizens, business groups, self-help, community and church organisations, academics, charitable and not for profit organisations and professional bodies. A full list of the submissions is detailed at Appendix I.

The Committee also received 777 form letters and 6 petitions. These are also detailed at Appendix I.

During the course of the inquiry the Select Committee conducted 23 public hearings. They were held in Canberra, Sydney, Melbourne, Adelaide, Brisbane, Perth, Hobart and Kalgoorlie. The three References Committees as part of their separate inquiries also conducted a substantial number of public hearings. Details of the Select Committee hearings appear in appendix II and witnesses in appendix III.

On 31 March the Senate referred the provisions of bills relating to Commonwealth-State financial relations, luxury cars and the wine equalisation tax to the Select Committee on a New Tax System for inquiry and report by 30 April 1999. The details of these bills are set out above in the terms of reference. In this report the Committee has considered aspects of the Commonwealth-State financial arrangements but will complete its consideration of that matter in the 30 April 1999 report. Luxury car and WET issues will also be addressed in that report.

Engagement of Consultants

For stage one of the inquiry the Select Committee commissioned a number of papers and reports.

Prior to the first public hearing Professors Ann Harding and Neil Warren were contracted to prepare a paper describing the steps involved in the construction of a static microsimulation model for assessing the revenue and distributional impact of tax reform options. The paper was titled An Introduction to Microsimulation Models of Tax Reform (Appendix V of the First Report).

Professor Peter Dixon was then engaged to prepare a report that analysed the government's tax package using the MONASH model. (Appendix VI of the First Report).

The Select Committee commissioned a review of Professor Dixon's report. Mr Chris Murphy of ECONTECH was contracted to complete this review and also to undertake a number of parallel simulations. (Appendix VII of the First Report).

For stage two of the inquiry the Select Committee commissioned a report involving the modelling of the distributional impact of the proposed new tax package. Professor Ann Harding and Professor Neil Warren of NATSEM were engaged to undertake this work. (Part 1 of this report is at Appendix IV)

Acknowledgments

The Select Committee would like to thank everyone who contributed to the inquiry by preparing written submissions, by giving oral evidence and by providing additional information and material where requested or by assisting with arrangements for the public hearings.

GOVERNMENT SENATORS STATEMENT

Government Senators wish to disassociate themselves from value judgements made in the body of this report where we consider there has been a biased and unfair interpretation of evidence received by the Committee. This particularly relates to the chapters on food and economic modelling where we feel the report does not contain a balanced view of the evidence received and does not reflect an accurate assessment of the submissions and evidence of witnesses. The inappropriate nature of the final deliberations of the Committee in preparing this report meant that many proposed changes to the Chairman's draft prepared by the secretariat were made by labor party staff and delivered well after the timing deadlines. Changes were made to the report without those changes being approved or sighted by a majority of the Committee.