Terms of Reference

Inquiries by Senate Committees into the GST and a new tax system

(1) That a select committee, to be known as the Select Committee on a New Tax System, be established to inquire into and report, on or before 18 February 1999, on the economic theories, assumptions, calculations, projections, estimates and modelling which underpinned the Government’s proposals for taxation reform, contained in Tax Reform: not a new tax, a new tax system.

(2) That, in conducting its inquiry, the committee examine the following matters:

(a) the estimated levels of revenue to be generated or foregone due to the proposed changes, including the estimated level of revenue to be generated by imposing a goods and services tax (GST) on the basic necessities of life (such as food, clothing, shelter and essential services) and books;

(b) the effects of the proposed changes on:

(i) national Gross Domestic Product,

(ii) national export performance and national debt,

(iii) the national Consumer Price Index, and

(iv) the distribution of wealth in the Australian community;

(c) the effects of the package on future federal budget revenues, expenditures and surpluses, including a critical assessment of the economic assumptions underpinning the Treasury’s projections in this regard;

(d) the effects of the taxation and compensation package on disposable income and household spending power for a range of ‘cameo profiles’, including but not limited to those presented in the proposals, under the following scenarios:

(i) a GST extended to the necessities of life (such as food, clothing, shelter and essential services), and

(ii) a GST not extended to the necessities of life (such as food, clothing, shelter and essential services);

(e) with the aim of identifying families and groups who may be disadvantaged by the Government’s proposals, focusing on lower and fixed income individuals, families with dependent children or adult members, groups and organisations, and those with special needs, such as people with disabilities;

(f) the assumptions made as to consumption and saving patterns and the cost of living for the various ‘cameo profiles’;

(g) whether the stated objectives of the package can be met by using an alternative and fairer approach; and

(h) such other matters as the committee considers fall within the scope of this inquiry.

(3) That the committee also inquire into and report, on or before 19 April 1999, on the broad economic effects of the Government’s taxation reform legislation proposals 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, including:

(a) the effects on equity, efficiency and compliance costs of including, or not including, food or other necessities of life in the GST, together with any related adjustments to the package if food or other necessities of life were GST zero-rated;

(b) the effectiveness of the package in easing the poverty traps facing people on low incomes, and reforming and streamlining tax and income support for families with children, taking into account the static and life-cycle impacts on families with children;

(d) the findings of the Tax Consultative Committee chaired by David Vos;

(e) options for improving the effectiveness and fairness of the tax system and reducing inequitable or unreasonable tax avoidance and minimisation, including consideration of alternative areas for tax generation, either where there are current tax concessions or where Australia’s taxation system does not address major tax potential, and without limiting the foregoing, the consideration of taxation of foreign companies operating in Australia, including the relative merits of resource rent taxes, royalties or land taxes as compared to company tax in securing a fair compensation to Australia for use of its resources, whether the 150% tax concession for research and development should be restored and whether small companies should be allowed to be taxed as partnerships.

(f) the potential for tax avoidance and evasion, including an examination of the effects on the cash economy, and the potential impact of electronic commerce on the future viability of a GST;

(g) the effects on compliance costs;

(h) the potential for reducing payroll tax, including by providing incentives to create long-term employment and by replacing payroll tax with a carbon tax;

(i) whether there are other means available for rebating or reducing the indirect taxes or excessive user charges embedded in exporters costs;

(j) excises, including those on fuel, tobacco and alcohol - identifying the industries which benefit, and to what extent, from the proposed changes to taxes on fuels;

(k) the effects on interest rates;

(l) the effects on investment, in both physical and human capital formation;

(m) the effects on small business;

(n) the effects on the non-profit sector, including the total amounts of money contributed by the sector, administrative costs, impacts on the viability of the organisations, and the consequent effects on the wellbeing of the community;

(o) the effects of the GST on particular industries, including:

(i) key service industries such as tourism,

(ii) the Australian automobile and related industries, having particular regard to the effects of changes to fuel excises,

(iii) other ‘invisible’ export industries, such as education and financial services, and

(iv) the international competitiveness generally of Australian industries;

(p) the implications of not requiring that the GST component of goods and services be itemised on receipts;

(q) the effects of the taxation reform legislation proposals on rural and regional stakeholders, including:

(i) the effects on particular regions,

(ii) the effects on rural and regional communities of different tax regimes on fuel – especially the cost of transport of goods to rural communities,

(iii) the effects on primary industry of replacing the current sales tax exemption on agricultural machinery with a GST, and

(iv) the effects of imposing a GST on food and other necessities of life on remote communities, including Aboriginal and Islander communities;

(r) the effects of the Government’s taxation reform legislation proposals on state and local government administration, including:

(i) the effects of the package on future federal-state financial relations and the capacities of state and local governments to adequately finance their respective responsibilities in both the short-term and the long-term, including the effects of the proposed transfer of responsibility for local government financial assistance to the states, and whether it discriminates between states,

(ii) the implications for specific purpose programs,

(iii) mechanisms required to lock in commitments made by federal and state governments with regard to the new arrangements,

(iv) the implications for future federal-state financial relations of not extending the GST to the necessities of life (such as food, clothing, shelter and essential services) and books, and any adjustments to the proposed arrangements which would be required to federal-state financial relations,

(v) the implications of the package for the quality and affordability of public utility services and for the public utility concessions for social security recipients,

(vi) the effects of application of the GST, and of changes to tax status, on local government and its activities, particularly commercial activities,

(vii) the implications for the delivery of Commonwealth Government services, including employment services, welfare and other social and cultural services, and

(viii) the extent to which the proposed compensation arrangements are secure from change to below adequate levels;

(s) the adequacy of measures to ensure that consumers fully benefit from the abolition of existing taxes;

(t) the effects of the taxation reform legislation proposals on legal and constitutional matters, including:

(i) the constitutionality of the proposed mechanism for future changes to the GST, including whether such changes would present a significant hurdle to future increases, or reductions if deemed necessary to stimulate the economy,

(ii) the constitutionality of the proposed reorganisation of federal-state tax arrangements and whether the powers and functions of states and territories are materially affected by this reorganisation, and

(iii) the effects of the proposals on the cost of access to justice; and

(u) options for amending the proposed legislation to improve its fairness or efficiency.

(4) That, in reporting on the matters referred to in paragraph (3), the committee have regard to the reports of the references committees referred to in paragraph (17) and integrate the findings of those committees into its final report where relevant.

(5) That the committee consist of 7 senators, 3 nominated by the Leader of the Government in the Senate, 3 nominated by the Leader of the Opposition in the Senate, and 1 nominated by the Leader of the Australian Democrats.

(6) That the committee may proceed to the dispatch of business notwithstanding that not all members have been duly nominated and appointed and notwithstanding any vacancy.

(7) That:

(a) senators may be appointed to the committee as substitutes for members of the committee in respect of particular matters before the committee;

(b) on the nominations of the Greens or independent senators, participating members may be appointed to the committee; and

(c) participating members may participate in hearings of evidence and deliberations of the committee, and have all the rights of members of the committee, but may not vote on any questions before the committee.

(8) That the committee shall elect as its chair a member nominated by the Leader of the Opposition in the Senate.

(9) That the committee shall elect as its deputy chair, immediately after the election of the chair, a member nominated by the Leader of the Government in the Senate.

(10) That the deputy chair act as chair when there is no chair or the chair is not present at a meeting.

(11) That the committee have power to send for and examine persons and documents, to move from place to place, to sit in public or in private, notwithstanding any prorogation of the Parliament or dissolution of the House of Representatives, and have leave to report from time to time its proceedings and the evidence taken and such interim recommendations as it may deem fit.

(12) The quorum of the committee shall be a majority of the members of the committee.

(13) The committee set 29 January 1999 as the date for receipt of submissions.

(14) That the committee hold hearings in each state and territory as required.

(15) That the committee be provided with all necessary staff, facilities and resources and be empowered to appoint persons with specialist knowledge for the purposes of the committee with the approval of the President.

(16) That the committee be empowered to print from day to day such documents and evidence as may be ordered by it and a daily Hansard be published of such proceedings as take place in public.

(17) That the following matters be referred to references committees in accordance with the schedule below for inquiry and report by 31 March 1999, and that in undertaking these inquiries the committees have regard to the report of the Select Committee referred to in paragraph (1) and consult widely, holding hearings in each state and territory, as required. Submissions to these inquiries are to be made by 29 January 1999.

Committee	Matters for Inquiry
Community Affairs	The impacts of the Government’s taxation reform legislation proposals on the living standards of Australian households (especially those on low incomes), including: (a) the scope and effectiveness of the proposed arrangements on charities, child care services, aged care services, welfare services, local government human services and all not-for-profit organisations in maintaining the quality and affordability of essential community services, including the implications for the public funding of these services and the implications for the commercial activities of these organisations, and whether unconditional GST-free status should apply to bona fide charities; (b) a detailed examination of the zero-rating of health services, including an examination of which services should be zero-rated; (c) the effects on community sector organisations of changes to their tax exempt status, and of the compliance costs of the proposed tax arrangements; (d) the effects of the proposed private health insurance rebate; (e) the effects on people with disabilities; (f) the effects on public, community and private housing, including the levels of rents; and (g) options for amendments to improve the fairness or efficiency of the proposed legislation.
Employment, Workplace Relations, Small Business and Education	The employment incentive and education impacts of the Government’s taxation reform legislation proposals, including: (a) the scope and effectiveness of the proposed zero-rating arrangements for education in maintaining its quality, accessibility and affordability; (b) the effects on employment; (c) the effects of the proposed GST treatment on the quality, accessibility and affordability of employment services; (d) the effects on education of imposing a GST on, or zero-rating or exempting books and associated education resources; (e) the effects on education of imposing a GST on ancillary resources, services and commercial activities, including the effects on overseas students; (f) the effects of the proposed changes to the tax system on employment; (g) the effects on wage costs, particularly if the basic necessities of life are taxed; (h) the scope and effectiveness of changing the unemployment benefits, pensions and Newstart Allowance ‘tapers’; (i) the effects of the proposed changes to the tax system on training and adult education; and (j) options for amendments to improve the fairness or efficiency of the proposed legislation.
Environment, Communications, Information Technology and the Arts	The broad effects of the Government’s taxation reform legislation proposals on the environment, the arts and information technology, including: (a) the environmental effects, and likely impacts of changes to fuel excises, particularly but not only diesel, and the replacement of WST with GST on vehicles and other transport services including: (i) possible increases in greenhouse gas emissions, (ii) increases by amount and type of air pollution, (iii) the effect on public and rail transport, (iv) the effects on alternative energy use in transport including, but not limited to, compressed natural gas, (v) the changed effects on native forests of logging or woodchipping due to the tax package, and (vi) the changed effects of mining in environmentally sensitive areas due to the tax package; (b) the environmental effects of the replacement of Wholesale Sales Tax by the GST and associated changes in fuel excises on electricity and natural gas; (c) the impacts of the proposed tax changes on the prices and existing and potential use of renewable energy particularly but not only solar energy technology and energy efficiency equipment; (d) the environmental effects of any changes to taxes on exports; (e) the consistency or otherwise of the proposed changes in taxation and excise arrangements with Australia’s international treaty obligations, including its obligations under the Framework Convention on Climate Change; (f) options for a tax system which better achieve environmental objectives,fincluding incentives for fuel efficiency and alternative energy sources, such as measures which promote both environmental protection and employment generation; (g) the extent to which environmental impacts were considered in the drafting and final copy of the Government’s tax package; (h) the scope of any consultation on environmental matters with experts in Environment Australia or any other Government departments other than the Treasury and Finance departments; (i) the impact of a GST on ticket sales for the performing arts; (j) the effects of a GST on the transfer of grant monies for arts projects; (k) the effects of the tax proposals on sponsorship provided by the private sector to individual artists and arts organisations; (l) the extent to which the package will block consideration and introduction of ‘ecotaxes’; (m) the effects of a GST on not-for-profit conservation and arts organisations; and (n) options for improving the environmental effects of the package.

(18) That the provisions of the bills implementing the proposed new tax system stand referred to the previously mentioned committees for inquiry and report in conjunction with the terms of reference authorised by this resolution, as soon as the bills have been introduced in the House of Representatives.

(19) That when the bills referred to in paragraph (18) are first introduced in the Senate and a motion is moved for the second reading of the bills, debate on that motion shall be adjourned at the conclusion of the speech of the senator moving the motion and resumption of the debate shall be made an order of the day for 19 April 1999 without any question being put.

How to prepare a submission