A NEW TAX SYSTEM (COMMONWEALTH-STATE FINANCIAL ARRANGEMENTS) AMENDMENT BILL 2003: Second Reading
Mr CADMAN (Mitchell) (11.08 a.m.) —The only problems that have been created with the collection and distribution of taxation have been created by the Australian Labor Party working in cooperation with the Independents and the Democrats in the Senate.
Every problem created for this government in the processing of taxation has been inspired by the opposition. They have the capacity to create this administrative nightmare of not allowing a complete taxation system—a clean and easily administered tax system—to be introduced to allow tax relief for a whole range of people, and then they claim it is the government's fault that it has not been introduced. I think the Australian people understand the opposition's role over a period of time and no amount of dissembling will bring back the credibility that they seek.
The A New Tax System (Commonwealth-State Financial Arrangements) Amendment Bill 2003 is an amendment of the financial arrangements that have been agreed to by the ministerial council which looks at the relationships on finances between the Commonwealth and the states and territories, and it has been ticked off by the treasurers and premiers of the states of Australia. It is a fairly simple process that allows the exact net amount of GST to be refunded to the states of Australia as decided by the Commonwealth Grants Commission. The process has not been clean to this point, and I notice that the Australian Labor Party is not opposing this legislation, despite what has been said.
The bill will allow that, where the Commonwealth is required to make refunds of GST—for instance, for travellers leaving Australia—those amounts can be discounted from the total collection so that the exact net amount collected by the Commonwealth is forwarded to the states. This is revenue which is collected by the Commonwealth for the states of Australia. They receive the lot of it. The requirements of this bill can be best summed up by looking at the ministerial council decisions that took place. The ministerial council issued a statement following its last meeting in March 2003, where it dealt with these issues, indicating that the GST revenue for 2002-03 was $29.4 billion and estimated that it would be $31 billion for 2003-04. It also announced the total budget balancing assistance, which is a top-up measure, to be $1 billion for those states still in need of support.
The agreement is that there will be no disadvantage for any state in this process and that all states will receive the growth factors agreed to when the new tax system was introduced so that, as the revenue from the GST grows over a period of time—due to our expanding economy and increasing use of goods and services—no state will suffer a disadvantage. But that is only one of the rules under which the goods and services tax is collected and distributed. The first rule, of course, is that the Commonwealth must pass all GST revenue, net of administrative costs, to the states. We are looking at some of those administrative costs today and some of the refunds required by law for the Commonwealth to make to citizens of Australia so that those refunds can be removed from the net value of the GST.
Under the agreements entered into by the heads of the Commonwealth, state and territory governments in June 1999, the states must spend all the GST as they wish. The no disadvantage rule has guaranteed that, in the transitional years following the introduction of the tax, no state is going to be worse off—I will come back to that—and therefore there is the concept of a guaranteed minimal amount to be received in each year by all of the states of Australia. It is also agreed between the heads of government of the Commonwealth, states and territories that the Commonwealth meet the difference between the guaranteed minimum amount and the GST entitlement, in the form of budget balancing assistance. The budget balancing assistance, as I have mentioned, for 2002-03 was $1.7 billion and for 2003-04 it is $1 billion. So it is a decreasing amount over a period of time.
The interstate allocation from the GST is based on the relativities calculated by the Commonwealth Grants Commission. The Commonwealth Grants Commission is a body set up by the Commonwealth and is expert in the process of the allocation of funds. I know that the states do not always agree with the processes adopted, but the principle is that all state governments should be able to provide services at the same standard if they make the same effort to raise revenue from their own sources and operate at the same level of efficiency. That seems a perfectly reasonable way in which funds should be distributed, that all states provide the same services at the same standard.
The states should be making the same effort to raise revenue—that is, they are not being low taxing and then claiming extra funds from the Commonwealth, cost-shifting, or raising more than they are indicating. They should also be operating efficiently. That means that they can be raising large amounts of money but doing it in an inefficient way, and that is taken into account by the Commonwealth Grants Commission. The Commonwealth Grants Commission distributes the funds to each state of Australia on a fair basis which is understood by the states, is agreed to by the ministerial council, which is comprised of Treasurers, and is ticked off by premiers.
The states undertook to abolish a number of taxes, reduce gambling taxes and administer a uniform first home owners scheme—which has been remarkably successful throughout Australia. The states have abolished some of their taxes, but stamp duty, in particular, is one that is costing young people in New South Wales many millions of dollars. The New South Wales government has the hide to apply the stamp duty on top of a GST, so the young home buyers of New South Wales are double taxed. I think that is unconscionable. I really feel for the home buyers of New South Wales, where every household has this tax on a GST. A house and land package costing, say, $500,000, will have the GST element of $50,000, over which stamp duty is applied. It is a horrific surcharge for home buyers. Home buyers are paying stamp duty of $15,000 and $20,000 to the government of New South Wales. It is a real rip-off. It is a charlatan operation which the states have refused to do anything about. I cannot for the life of me understand the Australian Labor Party allowing this corruption of the process to continue.
Of all of the innovatory things that are apparently being said by the new Leader of the Opposition, this is not one of them. When you come to examine the innovations of the new Leader of the Opposition, you find claims that we should not have 370,000 long-term unemployed in Australia. But, when you examine the facts of the matter, you find that the Australian Bureau of Statistics records unemployment for the December quarter at 117,000—not 370,000. A slight error, I guess, on the part of the Leader of the Opposition. There is a challenge to him to have the state governments of Australia do something about removing stamp duty on top of the GST. Stamp duty on a new home is placed on top of the $30,000, $40,000 or $50,000 that young people are having to pay for the GST. It is a rip-off; it is wrong; and it should stop.
The ministerial council that agreed to the disbursement and the administration of the goods and services tax was established to oversee the implementation and operation of the whole process—the intergovernmental arrangements. One of the technical and practical problems with the current way in which things are working is that the refunds made by the Commonwealth under the tourist refund scheme have not been considered. This legislation rectifies that problem. The bill rectifies that problem and some other technical anomalies by allowing the Commissioner for Taxation to account for all GST refunds when making a determination of GST revenue.
One of the requirements of the legislation that was agreed to by the ministerial council is that the rate of the GST and the GST base cannot be changed unless each state agrees to a change. Such changes should be consistent with the maintenance of the integrity of the GST base, administrative simplicity and minimising compliance costs for taxpayers. There is also a further requirement that a minister is to only make a determination under the GST act that affects the GST base if the determination is made in accordance with a procedure to which all of the states have agreed. So to even slightly modify the GST, all of the states must agree. The states have agreed to this change, which does modify slightly the GST to allow the Commonwealth to count in its net payment any refunds it has had to make.
Looking at the disbursement of the goods and services tax, one sees that in New South Wales, for instance, it is expected that, by 2006, New South Wales will not be receiving any budget balancing assistance to bring it up to an agreed level for a no disadvantage claim. Already in Queensland, Western Australia, South Australia, Tasmania, the ACT and the Northern Territory, there is no budget balancing assistance. Determinations made by the Commonwealth Grants Commission are such that already in those states—that is, all states except New South Wales and Victoria—the whole revenue from the Commonwealth provided by the GST is much more than compensating for any previous grants by the Commonwealth. In this current financial year, $316 million will be paid to the government of New South Wales as budget balancing assistance and Victoria will receive $56 million. Next year, New South Wales will receive $92 million. The following year it will receive $65 million and the year after that there will be nothing at all. Next year Victoria will be free of any budget balancing assistance from the Commonwealth.
So there we have it: the states are awash with funds from the Commonwealth. They are awash with the GST revenue and they have received a guarantee for that money. We do not hear the premiers complaining about how little money they have. In fact, we had the Premier of Queensland saying in his election campaign that such a program was only possible because of the revenue received from the goods and services tax. At the same time, we have the states greedy for revenue, claiming more and more funds—particularly from the growth in property values, the sale of houses, and the way in which stamp duty is placed on those transactions by the states of Australia. It should be wiped out. That first state that wipes it out will gain a huge advantage compared with the rest of the states of Australia.
As a result of the meeting of the Ministerial Council for Commonwealth-State Financial Relations—and the outcome of the Loan Council meeting—in March last year on GST administration cost and related issues, the council agreed that the ATO's GST administration budget for 2003-04 was consistent with the requirements of the intergovernmental agreement that the states and territories compensate the Commonwealth for the cost of administering the GST. So every year, every change, every blink, every adjustment, no matter how slight, to the way in which the GST is administered is agreed to by the states of Australia at the ministerial council. There is no point in the Labor Party saying that this is not a states tax; the states control the way in which this money is collected and the way in which it is used. All the administrative charges and compensation payments back to the Commonwealth must be approved by the ministerial council, which comprises all state treasurers, and by the Loan Council, which comprises premiers of each state.
The premiers and the ministers involved in the meeting in July last year noted the long-term projections, which are indicative guides, of state by state reforms to the Commonwealth-state financial relationships, the impact on each of the states and the way in which the budget balancing process would be administered.
It is time that the Australian Labor Party moved on. They have been locked in this anti-GST mould for seven or eight years. They have not thought through how the system can be better administered, but rather seek to whinge and complain in the parliament about the original decision, which they opposed. Having opposed the original decision, the Labor Party allowed the states and the people of Australia to believe that Labor felt it was a terrible tax. They then fiddled with the tax system every day, every week and every month in the Senate by not allowing parts, manipulating other parts and agreeing to things that were never part of the proposition put to the Australian people by this government in the election campaign, which the Liberal Party won.
The objectionable part of the behaviour of the Australian Labor Party is that, having objected to the legislation and having lost that argument, they then manipulated it to a point where it was difficult to manage. Despite that, the states and the Commonwealth by agreement have come together and put these proposals in place.
I will give some indication of the way in which revenue to the states increased: since 2000 to the current year, 2003-04, New South Wales has had a 24 per cent growth in GST of $1.7 billion. Revenue has grown from $7.2 billion to $9 billion—a total increase over five years of 24.5 per cent with an annual growth over four years of 7.6 per cent.
Queensland has also had an increase in revenue during that time—it has had a population growth as well—of 9.5 per cent from GST. Victoria has had an annual increase in revenue of 8.3 per cent in the provision of the GST. There has been a massive growth. When the states increase their spending on hospitals and schools by a miserable two to three per cent, they do not disclose to the people of their state that the revenue base of the GST is growing at eight per cent, nine per cent or 10 per cent; they cover it over and blame the Commonwealth.
It is going to stop—and it is stopping—because the people of Australia understand that the states are short-changing them in the hospital and health services that they receive. They are short-changing parents and children attending public schools by not funding them at the level of revenue that they are receiving. I think it is deplorable. This is a shifty approach adopted by the states. They should come clean. They should pay for the changes that they implement in hospitals and schools from their own revenues. The money is there—they should use it. (Time expired)
Author: Hon Alan Cadman MP
Source: House Hansard - 19th February 2004
Release Date: 19 Feb 2004