Communications Industries And Services

Communications Industries And Services


6.1 The Committee received a range of submissions, and heard from a range of witnesses in the communications sector about the potential impact of the proposed new tax system. They included submissions and evidence from the Consumers Telecommunications Network, the Community Broadcasting Association of Australia, the Australian Information Industry Association, the Screen Producers Association of Australia, the Media Entertainment and Arts Alliance, and the Department of Communications, Information Technology and the Arts (DOCITA).

6.2 The main concerns expressed by witnesses included the impact on telecommunications prices and access, potential disadvantages for non-profit community broadcasters, and problems that the draft legislation would pose for the screen production and information industries.

Telecommunications Services and Access

6.3 The Consumers Telecommunications Network (CTN) expressed a range of concerns about the development of the tax package and its potential impact on access to telecommunications services.

6.4 CTN stated that there had been an insufficient `level of informed debate or analysis of the potential impact on residential consumers'. A particular uncertainty was the exact increase in prices for residential consumers, with the ANTS estimate of 4.7 per cent across the whole sector being too imprecise to provide a reliable guide:

6.5 The ANTS document states that a `transitional price oversight regime will be established under special legislation which will give the Australian Competition and Consumers Commission (ACCC) special powers to ensure that price changes by businesses are consistent with changes in tax rates'. [2]

6.6 CTN stated that it did not believe that the ACCC would:

6.7 In evidence to the Committee, DOCITA stated that the Government had made an undertaking that it would use the legislated `price caps' to ensure that the standard telephone call remained at 25 cents. Where prices were not capped, the ACCC would be charged with ensuring that cost reductions were passed on. Asked about the CTN concern that residential consumers might not see the benefit of cost reductions, the Department declined to offer any comment. [4]

6.8 CTN also identified an added concern, which was that the nature of telecommunications markets and the rebate of GST paid on inputs to business would create further inequities:

6.9 In evidence, CTN told the Committee that in relation to the current review of price controls and price caps:

6.10 CTN also expressed concerns that the Government's planned compensation package for low income earners and pensioners `may not redress price increases in the longer term', given that:

6.11 Similarly CTN expressed concern that people with disabilities would be disadvantaged, given that they rely on the telephone far more than others in the community. CTN's concern was that the 4 per cent increase in disabilities pensions would not apply to all people with disabilities, nor that that increase would fully cover all price increases the disabled might face. CTN recommended that telecommunications equipment used by people with disabilities receive a prescription health aids exemption that is currently proposed for items such as spectacles and walking aids.

Community Broadcasting

6.12 The Community Broadcasting Association of Australia (CBAA) represents a sector with 150 fully licensed radio stations, 142 temporary radio licensees and eight television services, involving some 15,000 people, many working on a voluntary basis. It told the Committee that each station is run on a non-profit basis and is community owned and controlled. The gross revenues of the sector are approximately $25 million per annum. Only eight per cent of revenues derive from grants, with the bulk raised through the sale of sponsorship announcements, membership fees, subscriptions, donations, airtime access fees and subsidies from educational institutions. The CBAA stated that:

6.13 Many of the concerns raised by the Association relate to the registration dilemmas faced by much of the arts, which are particularly acute for non-profit organisations which currently enjoy widespread WST exemptions.

6.14 The CBAA stated that most of its members' revenues would put them below the GST threshold for non-profit organisations of $100,000. This would apply to 94 stations, including five television licensees. While these stations would not have to charge GST on their `sales', they would be unable to claim GST paid on inputs and thus lose the effect of the current WST exemptions. CBAA representatives told the Committee that this would cost each station at least 3.5 per cent of income. [9]

6.15 The Association also told the Committee that voluntary registration, while an alternative, would also create problems for such stations, in regard to compliance in particular:

6.16 The other main concern raised by the Association related to how sales (the majority of station revenues) would be affected for those stations who are either required to register, or do so voluntarily. Sponsorships would be taxed, while tied donations, and membership and subscription fees, might also be taxed because they are sometimes rewarded with services such as discount passes. Most of these sponsors, being individuals, would not have the input tax credits available to them that corporate sponsors would. The Association argued that:

6.17 The CBAA has appealed for the activities of the community broadcasting sector to be GST-free, based on their status as non-profit community organisations. Based on 1997-98 figures in which the gross revenue of the sector was approximately $25 million, the measure would cost the budget $2.5 million. [12]

Screen Production

6.18 The ANTS document estimates that `costs to the motion pictures, radio and television services' would fall by 4.5 per cent after the introduction of the new tax system, while Econtech estimates the same figure to be 5.1 per cent. While acknowledging these figures, the Screen Producers Association of Australia (SPAA), expressed concern to the Committee that the screen production sector would find it difficult to realise the whole amount of these projected savings:

6.19 SPAA also stated that the savings from the abolition of WST might not be fully passed through to their members because:

6.20 Another concern of the industry was that investment funds might be subject to GST, which would impact negatively on cashflow and fundraising for productions:

6.21 SPAA also appealed for the Government to ensure that offshore production within Australia be treated as exports and thus not subject to GST.

Information Technology

6.22 The Committee received evidence from the Australian Information Industry Association and Austar Entertainment (a regional Pay TV provider) about the potential impacts of the new tax system on the information industry. While being broadly supportive of the Government's plans, they expressed a series of concerns about some aspects of the draft legislation.

6.23 The AIIA appealed for the Government to clarify the position of services to non-residents, which it believes would be subject to GST, but should ideally be treated as an export.

6.24 A further concern was the burden that could be placed on its members, and downward pressures on IT sales, by the lack of transition provisions in the legislation to prevent the double-taxation of capital equipment purchased just prior to June 30 2000, which would be subject to WST (unrebatable) before that date, while services provided using that equipment would be liable to GST:



[1] Consumers Telecommunications Network, Submission 840, p 1.

[2] Tax Reform: not a new tax, a new tax system, p 15.

[3] Consumers Telecommunications Network, Submission 840, p 1.

[4] Mr Andrew Skewes, Department of Communications, Information Technology and the Arts, Hansard, Canberra, 1 March 1999, p 252.

[5] Mr Stephen Horrocks, Consumers Telecommunications Network, Hansard, Sydney, 3 March 1999, p 526.

[6] Ms Helen Campbell, Consumers Telecommunications Network, Hansard, Sydney, 3 March 1999, p 529.

[7] Consumers Telecommunications Network, Submission 840, p 1.

[8] Community Broadcasting Association of Australia, Submission 601, p 3.

[9] Mr Bruce Francis, Hansard, Sydney, 3 March 1999, p 518.

[10] Mr Michael Thompson, Hansard, Sydney, 3 March 1999, p 519.

[11] Community Broadcasting Association of Australia, Submission 601, p 2.

[12] Community Broadcasting Association of Australia, Submission 601, p 3.

[13] Mr Nick Herd, Screen Producers Association of Australia, Hansard, Sydney, 2 March 1999, p 493.

[14] Ms Jane Cordon, Screen Producers Association of Australia, Hansard, Sydney 2 March 1999, p 493.

[15] Mr Andrew Blaxland, Screen Producers Association of Australia, Hansard, Sydney 2 March 1999, p 495.

[16] Mr Damien Walsh, Arthur Anderson for the AIIA, Hansard, Sydney, 3 March 1999, p 532.