Conclusions and Recommendations
7.1 The Australian Democrats and the Australian Labor Party accept the
evidence presented in the previous chapters. They draw the conclusions
and, in the case of the Australian Democrats, make the recommendations,
in the relevant sections below:
7.2 The Australian Democrats found this inquiry into the new tax package
in the areas of environment, telecommunications and the arts to be of
critical importance to our consideration of tax reform. It revealed that
the Government failed to properly consider the serious negative consequences
of its proposals, particularly in relation to greenhouse gas emissions
and air pollution. We are grateful to the hundreds of people and organisations
who contributed to the inquiry and who assisted us in framing recommendations
which we hope will help take Australia into a much cleaner and greener
7.3 The Australian Democrats do not support the full $3.5 billion reduction
in petrol and diesel fuel taxes. We take this view because of the overwhelming
evidence that the proposed measures to achieve the reduction primarily
the cut in diesel fuel excises for heavy commercial vehicles would
be highly detrimental to the environment and to public health.
7.4 We acknowledge the Government's wish to reduce transport costs in
regional Australia and to generate economic growth. In our view it is
possible to achieve both objectives, delivering the same quantum of cost
saving on freight whilst significantly reducing pollution and greenhouse
We recommend that: the tax package measures, which have the effect
of reducing the cost of diesel fuel and private road transport at the
expense of rail freight, public transport, cleaner (gaseous) fuels, renewable
energy and oil recycling, be substantially modified and that:
1. petrol and diesel continue to be taxed through the excise system
rather than the GST.
In other words, that petrol and diesel be zero rated under the GST but
excises be held such that the price at the point of sale is not reduced.
We recommend that the resulting savings be allocated to measures to reduce
business costs and to promote fuel efficiency and regional transport.
2. an additional sales tax be applied on new motor vehicles with low
fuel efficiency, based on a sliding scale.
This would be applied in addition to the proposed sales tax on luxury
1. the current Diesel Fuel Rebate Scheme be retained but modified(see
2. public transport be zero rated under the GST.
3. a range of non-tax related measures to reduce pollution be introduced
As specific measures, the Australian Democrats recommend that:
Diesel Fuel Rebate Scheme
a) the existing 100 per cent diesel rebate for all agricultural and
other fully rebatable off-road use be maintained.
b) the total amount of the rebate for other off-road uses be capped
at 1999/2000 levels and provided at a flat pro-rata amount for all off-road
This would bring into the scheme industries such as tourism.
c) $1 billion of additional assistance be provided to reduce the cost
of regional transport, as follows:
i) rail transport to receive a 100 per cent rebate as it too is
an off-road use,
ii) a regional transport rebate to be more tightly targeted to heavy
road transport, with the weight threshold increased from the proposed
3.5 tonnes to 20 tonnes,
It should be noted that, according to the ABS, 71 percent of freight
carried on articulated trucks (mostly over 30 tonnes gross vehicle mass)
is non-urban, while only 36 per cent of freight on rigid trucks (mostly
under 30 tonnes gross vehicle weight) is non-urban. 
Thus, the lower the weight threshold, the more the transport rebate
benefit will flow to urban transport thereby adding to urban pollution.
About 90 per cent of freight is carried on transport vehicles heavier
than 20 tonnes.
iii) companies with the above eligibility would receive a better
rebate if using cleaner or renewable fuels, with incentives such as
a sliding scale of rebates based on greater use of gas and ultra-low
Gaseous Transport Fuels
The proposed change to diesel taxation will significantly alter the relative
attractiveness of gas as a transport fuel alternative and we particularly
note the New Zealand evidence where cuts in diesel tax led to a dramatic
decline in the use of gas. A rise in the level of diesel use would have
very significant environmental and public health consequences.
To maintain the viability of gas as an alternative, cleaner fuel, the
Democrats recommend that:
a) the current exemption from excise be maintained for compressed
natural gas (CNG) and liquid petroleum gas (LPG).
b) grants be provided of up to 50 per cent of the cost of converting
heavy vehicles to gas use and for the additional capital cost of new gas
vehicles, giving priority to public transport vehicles; and that consideration
be given to more advantageous depreciation rates and/or tax deductibility
rates for the use of CNG and LPG.
Renewable Energy and Energy Efficiency
The Democrats recommend that:
a) purchases of equipment to utilise renewable energy be exempt from
GST or zero-rated.
b) consideration be given to measures to advantage and encourage purchase
of energy efficiency equipment.
The Democrats recommend that:
a) a levy be introduced on the sale of lubricating oil to fund re-refining
and collection infrastructure.
b) the current exemption from excise of recycled lubricating oil be
c) the tightening of emission standards for vehicles be accelerated
so that Australian's requirements match European standards by 2002.
d) tax rebates be introduced for the purchase of renewable energy
equipment and for expenditure to improve energy efficiency.
e) a higher diesel excise be imposed on fuel with a high sulphur content
(more than .005 per cent) as a means of encouraging the use of cleaner
The Democrats recognise the important contribution the arts make to our
cultural identity and the financial vulnerability of many arts organisations
and artists, and we recommend that:
1. government grants to arts and cultural organisations be clearly
2. the GST treatment of sponsorships be re-considered to exclude sponsorship
that does not bring with it pecuniary or advertising benefits to the sponsor
(in line with Canada).
3. arts organisations be given favourable consideration in the allocation
of funding from the compliance compensation pool.
4. the higher $100,000 registration threshold for charities for the
GST be extended to individuals, organisations and businesses in the arts
industry and in community broadcasting.
It should be noted that only four of the 15 European Union countries
tax cultural services at the full rate of VAT and only 5 tax fully the
services of writers and composers.  The higher
registration threshold would at least go some way to assisting smaller
cultural organisations, thereby encouraging cultural diversity.
5. given the high price impact the GST may have on the arts and the
income of artists, the current Government inquiry into the arts take into
consideration the adequacy of arts funding in the context of the tax package
and that there be a further review within 12 months of implementation.
The Australian Democrats recommend that the health exemption be extended
to include telecommunications equipment for the hearing impaired.
Senator Lyn Allison
Australian Labor Party
LABOR SENATORS' FINDINGS
7.5 The evidence presented to the Committee overwhelmingly supports the
view that the Government's tax package will have a negative impact on
all the areas examined by the Committee, including:
- the environment, especially in urban areas;
- public transport services;
- emerging technologies;
- the arts, including books and literature;
- non-profit organisations; and
- information technology and communications.
7.6 Labor Senators support the evidence to the Committee claiming that
the Government's taxation reform proposals will cause huge job cuts and
will undermine the employment security of tens of thousands of workers.
7.7 In addition, Labor Senators accept the evidence presented to this
Committee and before other committees that the Government's so-called
compensation package will not sufficiently compensate for the damage inflicted
by the GST and other taxation reform proposals.
7.8 It is clear to Labor Senators that the Government did not consult
with relevant stakeholders about the impact of A New Tax System (ANTS).
However, it is disappointing that the Government has failed to even substantially
consider the impact of ANTS on the industries examined by the Committee.
Given the enormous upheaval ANTS would cause to the Australian taxation
system, it is unfathomable that the Treasury failed to consult with relevant
line departments about the impact of the tax reform proposals. This lack
of consultation was exposed in evidence before the Committee which indicate
that the taxation reform proposals contradict several other Government
policy statements and intentions. Alternatively, the lack of consultation
is clear evidence of a Government with only one policy intention; that
being to inflict an unnecessary GST on the community.
Impact on the Environment
7.9 Labor Senators accept the overwhelming evidence before the Committee
that the Government's taxation reform proposals will undoubtedly lead
to disastrous and long-term damage to the environment. This will occur
primarily through an increase in diesel fuel pollutants and greenhouse
gases, and a reduction in economic incentives to use alternative, more
environmentally friendly fuels and technologies.
Will ANTS Lead to an Increase in Diesel Fuel Consumption?
7.10 Diesel fuel consumption will increase as a result of the tax package
reforms, despite attempts by the Government Senators to suggest the contrary.
The Committee received evidence from a range of expert witnesses who all
argued that a cut in the diesel fuel excise would result in:
- a clear economic incentive to use diesel fuel transport and an increase
in business transport;
- switch from petrol vehicles to diesel fuel vehicles;
- a significant modal switch from more fuel efficient rail transport
to less fuel efficient and higher polluting road transport; and
- a reduction of the economic incentive to switch from diesel fuel
technologies to more environmentally friendly gaseous fuels and
7.11 An increase in diesel fuel consumption is certain to lead to an
increase in environmental degradation, despite claims by Environment Australia
to the contrary. In response to Environment Australia's claim that the
short term damage to the environment would be offset by the longer term
benefits of the taxation package, Dr Clive Hamilton of the Australia Institute
said that Environment Australia's submission was a `travesty':
Any economist will acknowledge that, if you are going to concede there
will be a short-term impact, then there will almost certainly be a larger
longer-term impact. Environment Australia goes on to argue, `Don't worry;
we have other measures in place which will offset the negative impacts
of the GST tax package and, as a result, we will meet our Kyoto target'.
You can immediately see the lack of logic in that.
First of all, the fact is that if you hold the rest of the world constant
which you always do when you are doing this sort of analysis
the GST package on its own will increase pollution. Secondly,
if you applied that argument `Don't worry about the negative
impacts; we are going to do things to offset them' to every upgrading
of a coal-fired power station or to every increase in urban air pollution,
then of course you would not meet your Kyoto target. So that argument
has no credibility at all. 
7.12 The evidence is conclusive that increased usage of diesel fuel that
will have a detrimental effect on the environment, especially urban environments.
Why Will the Greatest Impact be in Urban Areas?
7.13 Families growing up in urban areas in Australia expect to live in
a healthy, clean environment. This is an objective governments should
assist in achieving. Australian living standards in urban areas are currently
among the best in the world, with variations across different regions
7.14 Unfortunately, the Committee heard evidence from a range of organisations
stating that Australia's urban areas will be highly disadvantaged by the
environmental impact of the Government's taxation reforms. The increase
in diesel fuel usage and the likely prevalence of more diesel powered
vehicles on the roads in urban environments especially concerns Labor
Senators. Families living in these areas should also consider the changes
in the safety of the urban environment.
7.15 Labor Senators found evidence presented to the committee about the
severely detrimental health effects of diesel fuel particulates in the
air disturbing. While estimates of the number of additional premature
deaths as a result of the increase in diesel fuel usage (increased pollution
and road accidents) varied, there seems little doubt about the linkage
between the two events.
7.16 Urban street scapes are also likely to suffer as cheaper fuels and
a reduction in the wholesale sales tax on cars encourages more people
onto the roads, resulting in an increase in traffic congestion. This will
have an obvious effect on road safety in urban environments and should
be of particular concern to Australian families with young children and
also older Australians.
7.17 The reduction in the quality and quantity of public transport services
as a result of the `vicious circle' described in evidence by Mr Paul Mees
of the Public Transport Users Association, will potentially diminish the
living standards of those who most rely on public transport. That is,
older and younger Australians living in outer urban areas.
7.18 Higher greenhouse gas emissions and air pollutants from increased
diesel fuel consumption will lead to an increase in highly dangerous diesel
fuel particulates released into urban environments. The inhalation of
diesel fuel particulates carries proven health risks, particularly for
families with young children who are more likely to suffer from breathing
difficulties like asthma.
7.19 The final word should go to Dr David Brand, President of the Australian
Medical evidence is mounting on the dangers of fine particles in diesel
exhausts. I am particularly concerned by the evidence that these fine
particles may lead to the premature deaths of 1,000 Australians every
year. My medical colleagues have linked these particles to increased
risk of lung cancer and a variety of respiratory disorders. The Government
should take heed of these medical indicators and take steps to reduce,
not increase the use of diesel in our cities. 
Impact on Emerging Technologies and Export Revenue
7.20 The Committee received evidence from a range of businesses operating
in the field of new environmental technologies that have massive potential
for export to other countries. In particular, the Australian renewable
energy sector leads the world in the development of new technologies that
will not only assist Australia in meeting its environmental obligations,
but also the rest of the world.
7.21 The Australia Institute and others argued that the renewable energy
sector would be disadvantaged by the proposed tax changes including a
GST, with prices rising by six to nine per cent compared to 4.6 per cent
for coal-fired electricity. The price of solar hot water systems is expected
to rise by around four per cent relative to the prices of similar gas
or electricity hot water systems. 
7.22 Pacific Solar Pty Ltd sells grid-connected solar photovoltaic (PV)
systems that generate clean, green electricity. There is no pollution,
no noise and virtually no maintenance.  Pacific
Solar were particularly concerned at the effect of the proposed new tax
system on billing:
By way of example, if a customer buys from a utility, say 100 units
of electricity in a given period, that will be subjected to the 10 per
cent; 10 per cent will be paid on that. However, during that period
the customer may have, for example, exported 30 units of solar electricity
back to the grid. Rather than having the GST applied to the 70 units
in other words, the net bought or supplied from the grid
advice from Price Waterhouse is that the GST would apply to the full
100 units bought from the grid. 
7.23 Mr Alan Pears, Policy Convenor for the Sustainable Energy Industry
Association told the Committee that the renewable energy sector competes
with 'very large, very well-resourced and very smart energy suppliers
who have a lot of scope to game the market'. He saw the proposed new tax
system as having a twofold detrimental impact:
Because we are competing with the conventional energy sector and the
conventional appliance and equipment industries, our products and services
have a much higher service component. That means that the incremental
impact of the GST is greater. At the same time, a number or our important
products are at present exempt from wholesale sales tax and, essentially,
lose an advantage when that exemption is neutralised. 
7.24 The testimony of Mr Peter Lawley, Business Development Manager for
Pacific Solar convinced Labor Senators of the potential of this sector
in Australia's export market. Mr Lawley informed the Committee that Australia
leads the world in PV development, and the potential for the PV industry
to generate revenue in excess of $1 billion per year. 
7.25 It is clear to Labor Senators that the Government's taxation package
will be highly detrimental to this critical and developing industry and
is likely to stymie the industry's export potential.
Impact on the Arts Sector
7.26 The evidence to the Committee confirmed that the arts will suffer
a serious decline in patronage as a result of increased ticket prices,
crippling compliance costs and complexities. Evidence to the Committee
on reduced grant and sponsorship funding will inevitably result in some
arts groups and performing arts companies, both large and small, having
to wind up as a result of the Government's changes.
7.27 The Treasury estimates of a reduction in business input costs for
the sectors within the Arts industry were challenged by a KPMG report
for the Australia Council. The KPMG modelling suggested that where `libraries,
museums and the arts' were competing for consumers with the `motion pictures,
radio and television' and `sport, gambling and recreational services'
sectors, they may be at a greater disadvantage as a result of reform than
competitors, particularly when `the higher estimated increase in prices
for this sector, relative to the other industries' was taken into account.
7.28 These relative price increases are estimated by Treasury at 7.7
per cent for libraries, museums and the arts; 5 per cent for motion pictures,
radio and television services; and 0.9 per cent for sport, gambling and
recreational services. The Australia Council commented that this relative
disadvantage was `the third-highest estimated price increase [as a result
of the new tax system], exceeded only by Tobacco Products and Government
7.29 The Australia Council and other submissions raised a number of additional
issues relating to the impact on the arts sector. For example, all ticket
sales will be fully subject to a 10 per cent GST.
7.30 Because neither ticket sales themselves nor many of the inputs of
Arts organisations are currently subject to the wholesale sales tax, the
price impact on consumers in this sector as a result of the implementation
of the government's tax package will be significant. Printed music, for
example, is WST exempt. Also, the fact that the largest proportional cost
to most local arts organisations is labour and, therefore, not WST sensitive,
means that in overall terms the removal of WST adds little value to these
7.31 Furthermore, the abolition of bank transaction taxes (FID and BAD)
and stamp duties on commercial transactions will not have a significant
impact on the arts sector given that many arts organisations already have
charity status and/or income tax exemption.
7.32 In a submission on behalf of 25 of Australia's major Arts organisations
(including the principal symphony, opera, ballet and theatre companies
of the country) it is argued on the basis of New Zealand experience that
the price elasticity of ticket sales for the arts is about -0.5: ie. a
10 per cent GST will result in a 5 per cent drop in ticket sales. This
submission argues further that a 5 per cent fall in sales would result
in only three of the seven major national performing arts organisations
remaining in surplus.
7.33 Evidence presented to the Senate Committee from the Arts Industry
Council of South Australia indicated that quite apart from the impact
of the GST on the major performing arts bodies, the effect would be even
greater for local performing arts groups. The AICSA stated that at least
five local groups would go to the wall in the absence of GST compensation
given the paper-thin margins under which they operate at present. One
of the first casualties would be performances in local schools and nursing
7.34 A further major impact of the government's tax package will be corporate
sponsorship. Corporate sponsorship will attract the full 10 per cent GST
as sponsorship is considered a payment in return for the delivery of services
such as tickets or advertising. This will be the case irrespective of
whether the sponsorship is provided in cash or kind. Corporate sponsors
may be able to claim input tax credits for sponsorship where it can be
proven that this has been dedicated to advertising rather than entertainment
7.35 However, this will not be possible for financial services companies
(such as banks which are at present among the biggest sponsors) which
the government proposes will be input taxed. As with other business costs,
financial service providers will not be able to claim input tax credits
for GST paid on sponsorships.
7.36 Overall, therefore, there is likely to be a reduction in corporate
sponsorship levels - as occurred in New Zealand after the introduction
of the consumption tax there.
What Impact will the GST Have on the Price and Availability of Books?
7.37 The impact of a price increase on books caused enormous alarm amongst
Labor Senators. The evidence before the committee was compelling in its
description of the negative impact on Australian society if books are
subject to GST and become less affordable for low and middle income families.
This will have a devastating impact on literacy levels.
7.38 The impact of imposing a GST on books has resulted in strongly critical
submissions from the Australian Society of Authors (ASA), the Australian
Booksellers Association and the Australian Publishers Association.
7.39 A tax on books themselves is a tax on education, a tax on information
and therefore a tax on the future. The only exceptions are books that
are part of the course materials of primary and secondary
school curricula and are provided by schools themselves.
7.40 The critical issues are; the likely impact of the GST on the retail
price of books, the price sensitivity of changes in book prices to book
purchases and the impact that this has in turn on literacy, education
and economic performance. In the previously mentioned KPMG study, it is
estimated that the overall price increase for consumers in the libraries,
museums and the arts industries will be 7.7 per cent.
7.41 For the book industry in particular, the fact that there is at present
no Wholesale Sales Tax and that the impact of the abolition of bank transaction
taxes will have a marginal impact given the nature of the sector, the
overall price impact is likely to be comparable.
7.42 Even Econtech, the government's economic modellers of choice, conclude
that the consumers price of books, magazines and newspapers (all of which
are WST free) will rise by 5 per cent.
7.43 Furthermore, the demand for books is extremely price-sensitive.
1993 research in the UK (Fishwick, F. Cranfield School of Management)
demonstrated that books had a price sensitivity of -1.0: ie a 7.7
per cent price increase is likely to result In a 7.7 per cent drop in
7.44 A tax on books is a tax on literacy, both for children and for adults.
For children, the problem arises from the impact of price changes on the
relative affordability of books and the number of books and other printed
material in the home. The ASA point to a 1992 study (International
Assessment of Education Progress) which concluded that children from
households with ready access to a wide variety of books are more likely
to succeed academically and conversely, children from households with
less than 25 books will be 25 per cent-60 per cent less proficient in
subjects like maths and science.
7.45 Given the price sensitivity of books, a 10 per cent GST is likely
to result in decreased purchases of books by lower income families in
particular. The ASA also refer to foreign estimates of losses to the British,
US and Canadian economies as a result of poor literacy levels of 8.4 billion
pounds, $US 25-30 billion and $Can 10.7 billion annually. The GST therefore
flies in the face of the Howard Government's rhetorical posturing on the
importance of literacy programs in schools.
7.46 Literacy programs for adults as well as the range of post-school
training, retraining and education programs involving printed materials
will also become less affordable. This differential treatment of school-based
education and vocational education and training is both inequitable and
inefficient. Similarly, the full impact of the 10 per cent GST will be
felt across the range of written materials used in the nation's universities.
7.47 The negative impact of consumption taxes levied on books on national
literacy, education as well as broader economic and cultural performance
is the principal reason why in 18 of the 24 OECD countries which have
consumption taxes, and for which comparable data is available, books are
either zero rated or else taxed at a lower rate than other commodities.
That is also presumably why the Canadian Senate has before it at present
Bill S-10 that proposes removing the GST on reading materials altogether.
7.48 The differential taxation treatment of information that is screen-derived
as opposed to that which is print-derived will have a profound effect
on the future of the book publishing and retailing industries. More critically,
the existing impact of international on-line book wholesalers
on the Australian book retailing industry will be exacerbated as the relative
cost advantage of companies like `Amazon.com' increases. This, in turn,
will have a significant impact on employment in this sector.
7.49 Finally, authors themselves will be negatively impacted by the GST
package. Both publishers and retailers will further squeeze margins as
a result of the impact of the GST on themselves. In addition, authors
will not in any significant way benefit from the reductions in WST, FID
and BAD where they do not at present have substantial exposure.
What Impact Will the Tax Package Have on Visual Arts?
7.50 The National Association of Visual Artists has lodged a submission
on behalf of its 2,500 members nationwide concerning the impact of the
GST in individual visual artists and not-for -profit Arts organisations.
7.51 NAVA estimate that there are approx 19,000 visual artists in Australia.
7.52 At present there is a wholesale sales tax exemption on artists'
materials for painters, printmakers and sculptors. That will disappear
with the abolition of the WST and the universal implementation of the
7.53 Individual artists with an annual turnover of more than $50,000
will be required to register as a taxable business and become subject
to GST for all sales. Artists in this category will also be eligible (although
with considerable compliance costs) to claim tax credits on all business
inputs. These input tax credits are, however, not likely to exceed the
amount payable in GST. The overall price of art works for sale will therefore
7.54 For artists generating less than $50,000, registration for GST purposes
is optional. If artists do not register, they will not charge GST on their
works but will also not be eligible for claiming input tax credits.
7.55 Parallel problems arise for not-for-profit arts organisations. Those
with turnovers in excess of $100,000 will be required to register and
will have the same taxation impact as for registered individual artists.
7.56 The government applies a curious logic in granting GST status to
charities but not to not for-profit arts organisations.
7.57 NAVA have modelled the likely impact on a visual arts organisation
with an annual income of $258,500 and outlays of $258,500. Their calculation
is that as a consequence of the new tax regime, that organisation will
be a 12 per cent increase in annual costs, resulting in a $28,000 shortfall
or the loss of one staff person.
7.58 For individual visual artists, the GST presents further anomalies
and difficulties. These include the distinction by the ATO between primary
and secondary art markets. When a registered artist first sells for example
a painting, full GST is payable on the full sale price of the work. But
when the painting is re-sold, GST is only payable on the difference between
the buying price and the selling price. The bulk of the tax burden therefore
falls on the artist.
7.59 Artists also are liable for GST on royalties earned under copyright
agreements - eg for reproductions. If these negotiations are done for
artists by an agent, pressure is likely to be placed on the artist to
accept reduced margins in order to reduce increases in retail prices.
What About the Impact of the GST on the Australian Film Industry?
7.60 The proposed GST will have a significantly negative impact on the
Australian film, television and commercials production industry. This
industry currently generates $497 Million per annum for the Australian
economy and employs 9,500 people. It is an industry that is growing to
nearly eight times the national average.
7.61 The Federal Treasury has estimated that prices in the motion
pictures, radio and television sector will increase by 5 per cent
as a result of the government tax package. The Screen Producers Association
have argued that their price structure will increase by substantially
more because of a range of factors.
7.62 The Government's argument that costs in this sector will decrease
by 4.5 per cent is unbelievable. Not many of the inputs used by the industry
are currently subject to the WST. These include unexposed cinematograph
film and cinematograph cameras.
7.63 The Screen Producers Association of Australia (SPAA) also argue
that most producers generally do not own their own equipment but instead
hire specialist technicians who own their own equipment. Two problems
arise. Most of the equipment used in the industry requires only long term
replacement, in which case that which will benefit from WST removal will
only generate savings over the long term. Second, SPAA have genuine fears
( like many other end users in the economy) that much if any of these
savings will be passed on to producers.
7.64 The industry is also concerned about the impact of compliance costs
as production companies (like other taxable companies) will have to pay
suppliers GST inclusive prices, collect, maintain and record input taxes
and claim these as credits from the ATO.
7.65 SPAA also warn of the impact of general inflationary effects of
the tax package on the overall cost structure.
7.66 The industry therefore predicts that the retail price impact on
cinema tickets, sale or rental of home videos and subscription to pay
TV will be great. Pay TV is not currently taxed but with the introduction
of the GST may suffer disproportionately because pay TV subscriptions
are still regarded as a highly discretionary part of household expenditure.
There will also be an effect on the home video industry because although
blank videotapes are currently subject to a WST, this is a tiny proportion
of the total value of the video. Most is derived from its intellectual
7.67 Treasury does not estimate the overall effect of the tax package
on consumer demand for the sector. Econtech, however, the government's
economic modeller of choice, has estimated that demand for motion
picture exhibition will decrease by 5.9 per cent as a result of
the package. Even taken at face value, this figure would mean significant
reductions in activity and employment in the sector.
7.68 Furthermore, there is uncertainty about the impact of the GST on
investments from such bodies as the Australian Film Finance Corporation
and on grants from the Australian Film Commission. It is clear that sponsorships
will be fully subject to the GST thereby placing pressure on the
corporate sponsors to reduce the dollar value of their contribution to
the Australian industry.
7.69 Because the Australian film industry occupies a significant place
in the overall fabric of Australian culture, it is remarkable that the
government has not embraced the approach adopted by other counties with
consumption taxes, which offer a reduced rate at cinema houses. For example,
in Denmark, the VAT is 12 per cent at cinemas compared with a general
rate of 22 per cent. The challenge for Australian cinema is comparable
given that only 4 per cent of the total Australian box office last year
were made up of Australian films.
Impact on Information Technology and Communications
7.70 The information technology and communications sectors will also
be detrimentally affected by ANTS through increased costs, above what
was modelled by the Treasury, and a failure to pass any cost falls which
may occur on to residential consumers. In particular, evidence to the
Committee suggested that consumers would fail to benefit from any expected
cost reductions in telecommunications, especially internet connectivity,
and computer software.
7.71 Australians have generously embraced new telecommunications technologies.
This has led the telecommunications sector on a massive growth spiral
and has opened enormous opportunities to Australians from all walks of
life to embrace high technology. A GST on computer software and internet
connectivity is likely to limit low income Australians accessing these
vital communications and educative tools.
7.72 Evidence also suggests that the government's `compensation' package
will not sufficiently compensate consumers for price increases. ANTS is
also likely to have a devastating impact on community radio services.
7.73 The Consumers Telecommunications Network (CTN) expressed concerns
about the Government's compensation package for low income earners and
in the longer-term, wealth disparities are likely to increase
The tax package involves a level of risk for telecommunications consumers.
That risk is greater for low-income households than those on higher
incomes ... the GST burden is six times greater for those least able
to afford price increases. As a proportion of incomes, low income householders
will face an expenditure increase of 0.28 per cent of total income,
while the increase for the highest incomes households will be 0.046
per cent of total income. 
7.74 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
What About Community Broadcasting?
7.75 Approximately 15,000 people are employed in the community broadcasting
sector around Australia, many on a voluntary basis. Each station is run
on a non-profit basis, is community owned and controlled with 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.
7.76 In evidence before the committee, the Community Broadcasting Association
of Australia (CBAA) said that the Government's taxation proposals could
threaten the viability of many community radio stations:
community broadcasting stations are vital to the cohesion of local
communities and serve the interests of diversity in our wider community.
The financial wellbeing of every station is already finely balanced
and the Government tax reform proposals threaten their viability. 
7.77 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.
7.78 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,
may 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 do.
The Association argued that:
The concept of a GST as consumption tax i. e. ultimately paid
by `end point' consumers does not fit neatly with the production
and output of broadcasting services which are not a sold commodity,
but a public good provided freely. The principle of allowing input tax
credits all the way along the production and distribution chain, does
not recognise the bulk of community broadcasting inputs which are voluntary
and unpaid nor the real output of stations which are not `sales' but
broadcast programming. 
What Impact Will the Tax Package Have on Jobs?
7.79 There is little doubt that the Government's taxation proposals will
cause job losses. This conclusion has been reinforced both in evidence
before this committee and before other committees investigating the impact
7.80 Mr Ian Maloney, Chairman of the Autogas Committee of the Australian
Liquefied Petroleum Gas Association, said that as a consequence of the
relative price changes between petrol and LP Gas, there would a reduction
in the annual conversion rate of new vehicles from petrol to LPG would
be from 60,000 to 40,000. Mr Maloney said that the impact of that reduction
would result in about 2,000 job loses:
That loss of jobs would close about 400 of the over 1,000 small businesses
that are the backbone of the LPG industry. Our proposed solution to
prevent that happening is an environmental grant of $400 for each vehicle
7.81 In the area of waste oil collection, Mr Fred Wren, Managing Director
of Wren Oil which recycles waste oil, is able to compete with major petroleum
companies by collecting oil free of charge and re-refining it for between
25 and 40 c/L. Mr Wren told the committee that the proposed tax changes
would bankrupt his business and cost jobs:
The reason I am here today pleading for help is that the GST reforms
threaten us with closure, the loss of 19 jobs and personal bankruptcy.
In spite of competitive pressures and practices, we have continued to
grow over the past 19 years. It is the excise tax removal that might
just put an end to Wren Oil. Senators, I want to stay in business, so
please do not drop the diesel excise. 
7.82 Similarly, Mr David Braham, General Manager of Mulhern Waste Oil,
also said that his business would be bankrupted by the proposed changes
to diesel excise and said that more than seventy people would lose their
7.83 In the arts sector, the job loss story is no different.
7.84 The AMPAG and Econtech studies of the performing arts, which predict
such dramatic falls in production, suggest that one result of the introduction
of the new tax system in its present form will be substantial falls in
employment in the Arts.
7.85 Econtech, also predicts that `job shifting between sectors' as a
result of the tax changes would see a loss of 7,800 jobs in `cultural
and recreational services'. This loss would include 2,500 jobs from `libraries,
museums and the arts' and, within that, 800 jobs in music and theatre
productions and 400 in creative arts. 
7.86 Backbone Youth Arts suggested that the loss of employment opportunities
would have broader ramifications:
Reduced output by arts organisations, in particular youth arts organisations,
must lead to a reduction in employment opportunities for arts workers
in those organisations. It is inevitable that the result will be reduced
incomes and employment in the arts industry, through reductions in already
low rates of pay, reductions in the number of hours of paid work offered,
and reductions in the number of arts workers employed by some organisations.
7.87 This alarming evidence supports the conclusion that the GST will
be bad for youth employment in the arts sector, with much wider ramifications
than the Government has considered.
7.88 Labor Senators strongly support the evidence given to by the Australian
Society of Authors who identified a much larger issue relating to the
GST on books: employment. The Society argued that books and other printed
materials are of vital importance to education and literacy, which are
key skills that workers need to get jobs. Imposing a GST on books could
have serious consequences for 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
7.89 Evidence of Mr Peter Dixon to another committee supports the evidence
given before this Committee that many thousands of jobs will be lost by
the proposed tax changes.
Is the Government's Compensation Package Sufficient?
7.90 Throughout the hearings, Government Senators maintained that evidence
given by witnesses highlighting the negative consequences of the tax package
failed to take into consideration the Government's so-called compensation
7.91 However, it is clear in evidence before this Committee and before
other committees that the so called compensation package is inadequate.
In particular, witnesses were consistently critical of the Government's
claim that its $500 million start-up assistance package would adequately
assist small organisations and businesses with compliance costs.
7.92 Mr David Cox, Executive Officer of the Arts Industry Council of
South Australia, suggested that the $500 million earmarked by the Government
for start-up assistance to small and medium-size businesses would be inadequate.
He also expressed fears that compliance costs would shift jobs from artistic
product to administration. 
7.93 Mr Michael Lynch of the Sydney Opera House Trust expressed similar
My concerns are with ... both the major organisations, their stress
point and the reason [the Government has] called an inquiry into them,
and the smaller organisations. The range of changes and the range of
compliance issues they will need to deal with
are going to be extraordinarily
I took notice of the comments about the small business
package, but from my point of view a lot of small businesses in Australia
are going to be going for that $500 million. 
7.94 The Senate Select Committee on a new tax system is examining the
Government's compensation package and the Government's claims in detail.
The Committee's interim report cited evidence suggesting that the modelling
used by the Government to calculate the CPI increases grossly understate
the CPI impact.
7.95 However, even if the Government's compensation package was increased
to more accurately match the likely CPI increases, Labor Senators argue
that it is impossible to compensate for some changes. For example, how
will the Government compensate Australians for poor health resulting from
inhalation of diesel fuel particulates? How can Government's compensate
for the increased likelihood of road accidents. How can the Government
compensate reduced safety in urban streetscapes and increased in traffic
congestion? How can the Government compensate for the loss of cultural
capital as writers and artists can no longer afford to produce work? How
will the Government compensate pensioners and other low income Australians
for the loss of communications with the outside world? How will the Government
compensate people who lose their jobs?
Does ANTS Contradict Other Government Policies and Initiatives?
7.96 During the course of the hearings, it became quite clear to Labor
Senators that the impact of ANTS on the industries examined by the Committee
contradicted several of the Government's previous policy statements and
intentions. Specifically, the ANTS package contravenes the Government's
previous policy statements on:
- the environment: by making it almost impossible to meet the
Kyoto greenhouse gas reduction targets;
- improving literacy standards: introducing a GST on books
will increase the cost of books which will invariably lead to a reduction
in reading and access to printed materials, particularly for low income
- the inquiry into Urban Air Pollution: by facilitating increased
usage of diesel fuel in urban areas and a likely decrease in public
- corporate philanthropy: introducing a tax disincentive for
corporate entities to sponsor arts companies and organisations, a relationship
which has been longstanding and symbiotic, is likely to reduce corporate
philanthropy, despite the Prime Minister's pleas; and
- encouraging emerging artists: by limiting employment opportunities,
particularly for young, emerging artists, and damaging the long-term
skills base, creative resources and diversity of the arts.
7.97 Evidence to the Committee from the Department of Communications,
Information Technology and The Arts (DOCITA) indicated that it had not
played a major role in the development of the Government's tax package.
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
have 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.
7.98 DOCITA officers also stated that it 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 estimates. 
7.99 In evidence before this and other committees, it has become quite
clear that the Government has not considered the impact of its taxation
package on a range of industry sectors. The inconsistency with other Government
policy statements and initiatives makes this glaringly obvious. This leads
to the conclusion that the Government's taxation package lacks credibility.
The claim that it has a mandate to implement its package, apart from all
the other arguments against the mandate theory, is further undermined
by this evidence.
7.100 The evidence presented to the Committee has convinced Labor Senators
that the Government's tax package will have a devastating impact on the
environment, the arts and communications.
7.101 Urban environments and streetscapes will alter dramatically as
a result of increased traffic consisting of highly polluting diesel fuel
driven vehicles. Public transport services are likely to decline in quantity
and quality impacting heavily on older and younger Australians alike,
who are most reliant on public transport for access to inner city areas
7.102 The demise of the more environmentally friendly gaseous fuel industry
must occur as a result of the reduction in incentives for conversion to
gas fuel driven vehicles. This could have detrimental effects on Australia's
capacity to develop and export emerging environmentally friendly technologies
in which we are among the world's leaders.
7.103 The impact on the Arts community will also be devastating. Ticket
prices will definitely increase and patronage will definitely decrease
as a result of the GST. Evidence from overseas has shown that a similar
tax imposed on the arts sector wiped out many arts companies and organisations,
particularly smaller and medium sized companies. Individual performers
are also likely to have to seek other forms of employment in order to
7.104 Information technology and communications costs will also rise
causing a reduction in access and equity for low income earners to communications
7.105 As predicted, the evidence before the Committee clearly demonstrated
that Government's taxation reform proposals will cause huge job cuts and
will undermine the employment security of many workers.
7.106 In addition, Labor Senators accept the evidence presented to this
committee and before other committees that the Government's so-called
compensation package will not sufficiently compensate for the damage inflicted
by the GST and other taxation reform proposals.
7.107 Labor Senators have no choice but to conclude that the Government's
taxation package including the GST will profoundly disadvantage the sectors
examined by the Committee.
Senator Nick Bolkus
Senator Kate Lundy
Senator Mark Bishop
 ABS Survey of Motor Vehicle Use cat. No.
 European Union Directorate-General XXI VAT
rates applied in the Member States of the European Community XXI/148/98
 Hansard, Canberra, 1 March 1999,
 Australian Conservation Foundation, Taking
your breath away
How the Tax Reform Package affects Air Pollution
and Human Health, March 1999.
 Submission 120, p vi.; Mr Alan Pears, Sustainable
Energy Industry Association, supplementary material, 8 March 1999, p 2.
 Pacific Solar Pty Ltd, Submission 823.
 Mr Peter Lawley, Pacific Solar Pty Ltd,
Hansard, Sydney, 2 March, 1999, p 396.
 Hansard, Canberra, 1 March 1999,
 Pacific Solar Pty Ltd, Submission 823, attachment.
 Australia Council, Submission 298, p 4.
 Australia Council, Submission 298, Cover
Letter from Dr Margaret Seares; ANTS, p 172.
 Consumers Telecommunications Network,
Submission 840, p 1.
 Community Broadcasting Association of
Australia, Submission 601, p 3.
 Community Broadcasting Association of
Australia, Submission 601, p 2.
 Hansard, Canberra, 1 March 1999,
 Hansard, Perth, 26 February 1999,
 Hansard, Adelaide, 24 February
1999, p 160; Mulhern Waste Oil Removal Pty Ltd, Submission 234, p 3.
 The Effects of A New Tax System (ANTS)
on The Arts - Modelled using MM303, Report for the Australia Council,
Submission 298B, p 23.
 Backbone Youth Arts Inc. Submission 890,
 Ms Libby Gleeson, Hansard, Sydney,
2 March 1999, p 478.
 Hansard, Adelaide, 24 February
1999, p 191, 197.
 Hansard, Sydney, 2 March 1999,
 Department of Communications, Information
Technology and The Arts, Submission 1350, p 1.
 Hansard, Canberra, 1 March 1999,