The Arts - Introduction
4.1 The Committee received a large number of submissions expressing concern
about the impact of the tax package on the arts and cultural industries.
Submissions were received from, among others, The Australia Council, The
Australian Major Performing Arts Group, The Australian National Theatre,
The National Association For The Visual Arts, The Arts Law Centre, The
Arts Industry Council, The Media Entertainment and Arts Alliance, The
Australian Dance Council and a range of smaller organisations. Representatives
from sixteen arts organisations presented evidence at hearings.
4.2 The submission and evidence from the Department of Communications,
Information Technology and the arts (DOCITA) also discussed the impact
of the package on the arts and attempted to reassure that sector about
its potential effects. The Department of the Treasury, which largely prepared
and researched the tax package, did not discuss the arts in its submission
and was not called by the Committee to give evidence.
The Significance of The Arts
4.3 All submissions emphasised the significance of the arts to Australia's
economy, cultural life and international image. Professor David Throsby,
former Chair of the National Association for the Visual Arts (NAVA), submitted
that the arts alone comprise more than $1 billion in gross value of output,
and if cultural industries are more broadly defined the figure increases
to $10 billion or more. 
4.4 The Australia Council, the Commonwealth's principal arts funding
and advisory body, submitted that the arts and culture sector is valued
at $19 billion. Eighty per cent of Australians attend a cultural activity
each year compared with forty-five per cent who go to a sporting event.
Each year more than seven million Australians attend a performance and
three million go to a gallery. Seven per cent of Australians earn some
income from arts work, and enrolments in arts courses increased 45 per
cent between 1990 and 1995. Private consumption of entertainment and recreation
(of which the arts is a subset) is statistically larger than the purchase
of clothing, footwear and vehicles. 
4.5 A 1997 Australian Bureau of Statistics survey, Public Attitudes
to the Arts, found that strong views about the significance of the
arts were held by large majorities of the Australian community. The survey
found that 97 per cent felt that libraries were important or very important,
with figures of 77 per cent for museums, 76 per cent for performing arts
venues and 72 per cent for art galleries. A majority of those surveyed
expressed approval of government support for the arts. 
4.6 Backbone Youth Arts Inc. of Brisbane emphasised that arts organisations,
particularly community-based organisations, are an essential conduit for
the participation of citizens in the arts and cultural life of their nation.
 On a larger scale, the Executive Director
of the Sydney Opera House Trust, Mr Michael Lynch, emphasised the importance
of the arts to Australia's international image and competitiveness:
when we have the Olympic Games and the Centenary of Federation and there
is a spotlight on the country that we have never had before, [it is important]
that we are in a position to take advantage of that opportunity to be
able to show that we are a diverse culture, we have the capacity to compete
internationally and we have the capacity to put our arts, and specifically
our performing arts, out on the international market. 
4.7 The National Association for the Visual Arts also suggested that
the arts and culture sector provides a platform for the growth and prosperity
of other industries, such as publishing, education and arts training,
advertising, tourism and film, media and information technology, products
supply and galleries. 
4.8 The Australian Society of Authors argued for the significance of
books and other printed matter to education, literacy and national welfare:
The way into the Australian workforce is education, the way into Australian
culture is education and the way into education is via the book. Whole
community literacy is a vital need. It is the only way we can compete
within the global economy and the only way we can continue as a coherent
4.9 The Australia Council, NAVA and other witnesses emphasised that the
importance of the arts and cultural industries was recognised in government
policy and enjoyed bipartisan support. Others cited the recently announced
Inquiry into the Major Performing Arts, to be chaired by Dr Helen Nugent,
as an indication of the concern felt within the Government about the health
of the performing arts sector. Professor Throsby suggested that the impact
of the tax package needed to be considered in relation to other Government
objectives in the area of cultural policy. 
4.10 Business structures and practices, and organisational size, vary
widely in the arts and culture sectors, from the individual artist and
performer to large companies. The sector includes individuals who subsist
on low arts-related incomes and subsidise their work through other income;
non-profit community organisations, which derive income from sales and
grants; and commercial organisations which receive no grants.
4.11 The Committee received evidence regarding the ways in which the
business activity of those in the arts sector differed from other businesses.
- the role of grants in sustaining artists and companies, particularly
during the development of creative work;
- the role sponsorships play in revenues;
- the reliance on ticket sales, and the relative inelasticity of prices;
- the need to make investments well ahead of hoped-for revenues;
- the fixed nature of investment costs regardless of later sales; and
- the very low, even loss-making incomes of individual writers and artists,
who nonetheless continue to practice, but are vulnerable to cost increases
as a result.
The Nugent Inquiry into the Major Performing Arts
4.12 The Media Entertainment and Arts Alliance (MEAA) suggested that:
`the impact of the introduction of a GST on the arts sector must also
be seen against a background of growing concern for the ongoing viability
of Australia's flagship arts companies'. On 24 February 1999 the Minister
for Communications, Information Technology and the Arts, Senator Richard
Alston, announced the formation of an inquiry into the major performing
arts sector, to be chaired by Dr Helen Nugent. The MEAA cited the Australia
Council's report, Managing The Future, as a catalyst for the inquiry.
The report found that despite improvements in the financial management
of the major companies, the combined losses of the sector had exceeded
$12 million over the previous four years. Announcing the inquiry, the
Minister said that: `the findings of the report cannot be ignored. Failure
to deal with the issues it raises could jeopardise the future of the performing
arts in this country.' 
4.13 The Minister also stated that the inquiry `is committed to finding
the best solutions to ensure the viability of the performing arts in the
[and] is determined to work with organisations to come
up with ways of ensuring that artistic standards are preserved'. The inquiry
will report on the current financial position of Australia's major government
subsidised performing arts companies, their cost and revenue dynamics,
factors driving further change, and measures for action by the companies
and Commonwealth, State and Territory Governments. 
The full terms of reference for the Inquiry are included as Appendix 3.
A New Tax System - The Scope of Consultation
4.14 The Department of Communications, Information Technology and The
Arts (DOCITA) stated in its submission that it had `not had any significant
role in the development of the [Government's tax] proposals'. Rather,
the Treasurer had primary responsibility for the new tax system, including
its application to the Communications, Information Technology and the
Arts sectors, while the Australian Taxation Office (ATO) would bear responsibility
for its administration and implementation. DOCITA stated that it had,
wherever possible, facilitated the flow of information between Treasury
and interested stakeholders (such as portfolio agencies and industry bodies)
to ensure that the proposals were well communicated. 
4.15 In evidence to the Committee, DOCITA stated that such a role in
the development of the package was not unusual. The Department also said
that they had carried out no independent work analysing the impact of
the package on telecommunications or postal charges, nor its impact on
the arts. Rather, they were basing their analysis on the Treasury's own
4.16 The MEAA expressed concern about the lack of consultation with the
sector during the development of the package, and `about the time frame
which the arts, entertainment and cultural industries have been given
to consider the details of the proposed new tax system':
While welcoming the Senate Inquiry, The Alliance nonetheless believes
that the quality of submissions and the subsequent analysis by the Inquiry
has been compromised
The Alliance urges the Committee to review
the implementation schedule and encourages the Committee to recommend
an extended consultation timetable. 
4.17 Witnesses from the arts expressed genuine disappointment about the
failure of their efforts to transmit their concerns to the Government.
Mr Michael Lynch, from the Sydney Opera House Trust, stated that in May
1998 when he was its General Manager, the Australia Council had made a
submission to the Government outlining its concerns about the possible
impact of the package on the arts:
There have been many attempts to try to attract the attention of the
Treasury with regard to these issues. The Treasury have not been particularly
sympathetic to the arguments that have been put by the performing arts
or by the arts sector as a whole in relation to the potential impacts.
These arguments have been well run publicly and privately over the last
18 months to two years. It has been disappointing in terms of the response
that we have had. 
4.18 In its document Tax Reform: Not A New Tax A New Tax System
(ANTS), the Government indicated that it would conduct `ongoing and targeted
consultation following the next Federal election to ensure successful
[and that] the final design and draft legislation
deliver the Government's policy objectives. Some reform proposals are
already well advanced in design, while with others the policy intent is
clear but the design would benefit from consultation with those most affected.'
4.19 The ANTS document indicated a four-stage process of consultation:
with Premiers, Chief Ministers and State Treasurers; a continuation of
the Taxation Task Force and its working committees `to consult on outstanding
areas of policy and associated legislation'; a Tax Consultative Committee
chaired by a distinguished Australian, including selected community representatives;
and a CEO reporting group to be established at the Commonwealth level
to report on the progress of implementation. 
4.20 Consultation with the arts was not specifically mentioned in the
document. The Tax Consultative Committee was appointed on 26 October 1998
and reported on 13 November 1998. Its terms of reference were limited
to providing guidance about defining exemptions in the health, education,
charities and religious services areas in line with the policy announced
by the Treasurer in August. Other areas, including the arts, were excluded
from its considerations. 
4.21 In evidence to the Committee, DOCITA said that its own activity
on tax reform had been prompted by an invitation to give evidence before
this inquiry, and that the tax taskforce formed within the Department
had otherwise been primarily concerned with the Ralph review of business
taxation. According to Mr Robert Palfreyman, Executive Director Arts,
two officers in the arts area had also been looking at the tax package
with regard to the arts. 
4.22 The Committee shares the concerns of witnesses about the lack of
consultation with the arts community over the possible impact of the new
tax system, and urges the Government to engage in a serious and widespread
process of discussion with the arts sector over its concerns about the
tax package. This lack of consultation has resulted in distortions in
the draft legislation, arguably undermines the Government's more general
cultural policy objectives, and exposes the sector to a very damaging
impact which could have been avoided.
 Hansard, Sydney, 2 March 1999, p
 Ms Jennifer Bott, The Australia Council,
Hansard, Sydney, 2 March 1999, p 447.
 ABS/Australia Council, Public Attitudes
to the Arts, Canberra, 1997, p 1.
 Backbone Youth Arts, Submission 890 p 3.
 Ms Tamara Winikoff, NAVA, Hansard,
Sydney, 2 March 1999, p 474.
 NAVA, Submission 828, p 6.
 Ms Libby Gleeson, The Australian Society
of Authors, Hansard, Sydney, 2 March 1999, p 478.
 Hansard, Sydney, 2 March 1999 pp
379-80, 447; Media Entertainment and Arts Alliance, Submission 921, p
 Ministerial media release 20/99, 24 February
1999; Major Performing Arts Inquiry Terms of Reference; Media Entertainment
and Arts Alliance, Submission 921, p 2.
 Ministerial media release 20/99, 24 February
1999; Major Performing Arts Inquiry Terms of Reference.
 Department of Communications, Information
Technology and The Arts, Submission 1350, p 1.
 Mr Robert Palfreyman and Mr Andrew Skewes,
Department of Communications, Information Technology and The Arts, Hansard,
Canberra, 1 March 1999, pp 247, 250-53.
 Media Entertainment and Arts Alliance,
Submission 921, p 1.
 Hansard, Sydney, 2 March 1999,
 Tax Reform: not a new tax, a new tax
system, p 32.
 ANTS, p 32.
 Report of the Tax Consultative Committee,
 Mr Andrew Skewes, Department of Communications,
Information Technology and The Arts, Hansard, Canberra, 1 March
1999, pp 258-60.