Appendix V

Answers to Questions on Notice from The Treasury

Answers to questions on notice by Senator Carr for the Senate Employment, Workplace Relations, Small Business References Committee's inquiry into aspects of A New Tax System.

Question 1

In Parliament, on 7 December 1998, the Education Minister (Hansard page 119) stated that the Government's tax reforms will be of great benefit to schools, both government and non-government. He added: They will reduce the overall cost of schooling in Australia, according to Treasury estimates, by some $240 million a year. They will leave the average family some $40 to $50 per week better off.

In estimating the net benefits to the cost of schooling in Australia at $240 million under the Government's tax reform measures what assumptions were made in relation to the following connected matters.

a. Were the estimates based on information in the Input-Output Tables and Expenditure on Education published by the ABS in June 1997 and June 1998 respectively?

b. What was the estimate of intermediate usage adopted for the purpose of the Treasury estimate and could it be related to the information in the above ABS publications?

c. What portion of the intermediate usage represents goods and what portion represents services?

d. What was the mark up assumed on the cost of intermediate goods in arriving at the base cost on which WST was collected previously and which will be relieved on the introduction of the GST?

e. What was the assumed average rate at which WST was paid on intermediate goods?

f. What percentage pass through of benefits, on the repeal of the WST, was assumed in arriving at the estimate of $240 million?

g. What was the estimate of the administrative cost of collecting input tax credits adopted in arriving at the estimate of $240 million?

h. Did the estimate of $240 million exclude the benefits to Australian universities?

i. What is the Treasury's estimate of benefits to Australian universities from the Government's tax reform package?

Answer

a to f. PRISMOD is based on the Input Output (IO) tables supplied by the ABS for 1993-94.

This was the most recent Australian IO table available when the data base was updated.

The IO tables were benchmarked to the Australian National Accounts for 1996-97 relying on expertise and data sourced from the Australian Bureau of Statistics, the Australian Taxation Office, the Australian Customs Service, and the Department of Finance and Administration.

PRISMOD assumes full pass through of cost reductions and the 10 per cent GST to final demand categories. This assumption gives a more conservative estimate of price effects than any other symmetrical assumption.

Treasury has received a number of requests for information related to PRISMOD. No further information has been released beyond that contained in Tax Reform: not a new tax a new tax system (ANTS).

g. No additional cost of administration was included in the education estimate beyond that

already incorporated in the PRISMOD database.

h. The estimates contained in ANTS for Education relate to ABS Input-Output Commodity Group level 840. This category includes universities.

i. Treasury has not undertaken specific modelling of the impact of ANTS on Australian universities.

Question 2

In stating that families will be some $40 to $50 per week better off when the WST is replaced with the GST under the Government's tax reform proposals, what assumptions were made in relation to the following connected matters:

a. Was the estimate based on private final consumption expenditure on education as indicated in Expenditure on Education 1996-97 - ABS Catalogue 55140.0 at $7.92 billion or related to it?

b. What percentage of private outlays on education was assumed to be intermediate outputs?

C. What portion of the intermediate usage represents goods and what portion represents services?

d. What was the mark up assumed on the cost of intermediate goods in arriving at the base cost on which WST was collected previously and which will be relieved on the introduction of the GST?

e. What was the assumed average rate at which WST was paid on intermediate goods?

f. Was account taken of the fact that GST may be payable on private tuition out of school hours or may be payable in arriving at the estimate whereas WST is not payable on tuition at present?

g. Was account taken of the likelihood that providers of tuition will charge higher fees for input tax paid on materials used for private tuition in arriving at the estimate?

h. What percentage pass through of benefits, on repeal of the WST, was assumed in arriving at the estimate?

i. What was the average family taken to be in arriving at the estimate and can it be related to any statistic in ABS publication Labour Force Status: Families Cat: 6224.0 (June 1998) or any other ABS publication?

j. What was the income of the average family taken into account in the estimate?

Answer

a to e. See response to Question 1 (a – f).

f to g. It has been assumed that areas of education not GST-free are fully taxable. At present, providers of private tuition do not benefit from a WST exemption. GST-registered providers of tuition, whether taxable or not taxable, will be able to claim input tax credits for the GST they pay on purchases of inputs.

h. See response to Question 1 (a-f).

Question 4

The Senate Employment, Education and Training References Committee report on the private and commercial funding of government schools (1997) acknowledged that parents are increasingly shouldering more of the responsibility for the resourcing of school programs.

Evidence presented to the current inquiry suggests that more than 50 per cent of school fundraising organisations generate more than $100,000 in turnover, over the threshold for registration for GST exemption.

Other evidence raised the spectre of volunteers involved in fundraising activities for schools becoming immersed in an uncontrollable labyrinth of GST compliance requirements.

a. In planning the New Tax System, was any account taken of the impact of the GST on the fund raising activities of schools?

b. If so, are there any figures available for the proportion of school budgets dependent on fundraising activities?

Answer

a. Schools and Parent and Citizen Associations will benefit from the concessional treatment afforded by the provisions relating to charities contained in the A New Tax System (Goods and Services Tax) Bill 1998.

b. Treasury has no information on the proportion of school budgets dependent on fundraising activities.