CONCLUSION
Labor Senators are of the view that the Government's ANTS package is
marred by several major flaws. The result is that we are left with a tax
reform package that nobody really wants.
The introduction of a GST will do nothing to assist in solving the problem
of unemployment. The services sector has been the most significant contributor
to employment growth in Australia over recent times. Yet, absurdly at
a time of high unemployment, the Government is now proposing an onerous
tax on this job-creating sector. A great deal of evidence from a range
of witnesses supports the view that the effect of the ANTS package on
the job-rich service sector will be overwhelmingly negative. There is
particular concern about the impact of the GST on the tourism industry,
which is currently a major (and growing) source of employment in regional
Australia.
The substitution of a GST for the wholesale sales tax system will result
in significant overall increases in the costs of services, which will
add up to an appreciable fall in living standards for ordinary Australians,
especially for low-income earners. The Government claims that the inflationary
effects of the GST will be more than offset by the compensatory elements
of the ANTS package. Yet Government officials now admit that the price
effect of the GST will be far greater than initial forecasts, thus throwing
the Government's claims that there is fair and adequate compensation in
the package into grave doubt.
The income tax cuts are highly skewed towards high-income earners. The
cuts for this group will more than offset any additional expense incurred
after the introduction of a GST. This will not be the case for low-income
earners. Certainly some low earners will receive income tax cuts, but
it will go nowhere near providing full and adequate compensation for the
introduction of the GST.
The implementation of the ANTS proposals will not bring the taxation
debate to a conclusion. In fact, the ANTS package opens up a continuing
political issue on compensation for low-income earners and the unemployed,
as well as other groups who gain nothing as an outcome of the package.
The ANTS package will do nothing except shift the ground of the tax debate
from questions of `how best to reform the system' to `how best to compensate
for the ineffective reforms'.
Labor Senators consider that the Government should have placed more emphasis
on making beneficial changes to the current tax system, such as a much
more determined effort to legislate against tax evasion. This would have
been a far more convincing indication of the Government's preparedness
to tackle tax reform in an area that has aroused widespread public cynicism.
Labor Senators have noted the concerns of the business community with
great interest. Evidence to this Committee has made it clear that while
the business community supports taxation reform generally, many accepting
a GST, they are not so supportive of taxation reform defined as the ANTS
package.
Industry groups heard by the Committee made note of a raft of concerns
that have not been addressed by the Government in the framing of the ANTS
proposals. Issues such as high compliance costs and the heavy administrative
burden, poorly targeted and inadequate compensation and a reluctance to
tackle genuine impediments to employment such as payroll tax, were all
raised in evidence.
Additionally, business appears to be suspicious of the Government's assumption
that the price reductions that occur under a GST will be passed on to
consumers. Labor Senators on the Committee share this concern, noting
that evidence would suggest that while business is quick to pass on price
increases, it is notoriously slow at passing on price reductions. Labor
Senators again note the model of Professor Dixon and Dr Rimmer, which
suggests that delays in passing on any price reductions could cost 15,000
jobs in the short term. The best that may be hoped for under the GST is
that prices will remain stable, as business uses the GST `cushion' to
satisfy accountants and shareholders. Prices will then rise again in line
with inflation and other factors.
As well as being a tax on jobs, the introduction of a GST also represents
a tax on learning. The Government's claim that education will be GST-free
has been shown to be baseless. The proposed application of a GST to certain
activities in the education sector indicates that given the choice between
social benefit and ideological posturing, the Government has once again
chosen to emphasise the latter.
The GST represents yet another attack by the Government on the right
of ordinary Australians to receive a decent education. The changes proposed
bear most heavily on those educational programs which draw heavily on
community participation for support, and those least able to either absorb
the costs or assume the additional responsibilities which will be needed
to keep school and community education programs operating effectively.
The proposed new tax on learning should be seen in the context of several
years of serious decline in government funding of the education sector.
The education community has been under siege since 1996, with program
cuts aimed at re-orienting all segments of the education sector –
schools, colleges of technical and further education and universities
– toward greater reliance on corporate finance sources. The result
of a GST on top of these developments will be a decline in participation
rates in adult and community education and a subsequent decline in the
incidence of older and less well-educated people entering the workforce.
There will be a continued heavy compliance burden which will divert scarce
human resources from the `chalkface' into administration and add additional
responsibilities to the workloads of many people engaged in voluntary
but essential work in the sector.
The Labor Senators agree that the tax system needs changing. This does
not, however, equate to a need to introduce a GST. Labor Senators are
alarmed that the Government continues to use the words `tax reform' as
a euphemism for the introduction of an unfair and highly regressive new
tax such as a GST. Tax reform refers to a process through which the tax
system is made genuinely fairer for ordinary all Australians, not just
high-income earners. Nor is it possible for Parliament or the community
to see the application of a GST in the context of other tax measures,
which may be in the mind of the Government. This is a deficiency in the
policy of incremental tax reform.
The ANTS package will not deliver a fairer tax system. Contrary to the
claims of the Government, it will do nothing fix the problems of inefficiency
and complexity that are inherent in the existing system. It will do nothing
to encourage job-creation in the economy, thereby addressing the problem
of unemployment. It will do nothing to improve the perceptions of inequity
and unfairness that exist about the current system. It does nothing to
address any of these issues.
Recommendation
Labor Senators recommend that the ANTS package not be passed by
the Senate.
Senator Jacinta Collins
Chair