Howard’s Commitments to Meg Lees on the GST

Jun 22, 1999

This is the letter from the Prime Minister, John Howard, to the Leader of the Australian Democrats, Senator Meg Lees.

The letter sets out the agreement reached between the government and the Democrats to secure passage of the Goods and Services Tax legislation through the Senate.

Senator Lees
Leader of Australian Democrats
Suite SG 112
Parliament House
CANBERRA ACT 2600

Dear Senator

I refer to our discussions this morning regarding the Government’s tax package and the Government’s commitment to the outcomes reached.

Education

The Government will write to the Commissioner of Taxation to seek a ruling on the definition of education services that are to be GST free.

The ruling will address all instruction for students directly or indirectly related to the school curriculum, excursions supervised by schools and school camps. However, it is not intended that GST free treatment be extended to activities that are predominantly social in nature. The Government’s letter to the Commissioner of Taxation will include as an attachment your letter to me of 21 June 1999 on this matter as items which should be covered in the ruling.

The Arts

You will recall that the Government had previously agreed to review the need for additional assistance to the arts in the light of the Nugent Review of arts funding with a view to ensuring that the arts are not adversely effected by the impact of the GST. As the first step in that process, the Government agrees to fund a study to develop an appropriate methodology for measuring the likely impact of the GST and related measures on the arts and a preliminary assessment of the likely impact of the GST on various sectors of the industry.

The method will serve as the basis for an assessment of the impact of the GST on the arts. This study will be concluded no later than 31 December 1999 and the review will be completed by September 2001 at the latest.

Charities

The Government reaffirms that non-commercial charitable activities will be GST free. The Government is not disposed to extend the definition of a charitable institution to advocacy and other groups. In practice many community groups such as neighbourhood centres should be not be subject to GST because they are operated by charities or are below the $100,000 registration threshold. However, given the important community service role of neighbourhood centres the Government will review the impact of the GST on their operations in the context of the previously foreshadowed consultations between the Government and the Australian Democrats on the GST impact on charities.

It has been agreed that these consultations will now be brought forward and will occur no later than 31 December 1999. These consultations will also canvass the application of rulings regarding the divide between commercial and non-commercial charitable activities.

The Government confirms that relationship counselling will be GST free where it is provided by an appropriately accredited psychologist or social worker.

As recommended by the Vos Committee, the Government will monitor the possible impact of the GST on sheltered workshop services and will give careful consideration to providing additional compensation if necessary.

The application of the GST to membership fees payable by charities and tax-deductible bodies will be examined in the context of the consultations on charities.

In relation to emergency relief payments the Government confirms that where a charity pays for goods or services on behalf of a client, the charity would be able to claim a credit. As discussed at our meeting, where charities provide cash as emergency relief it would not be appropriate to give input tax credits because there is no control over how the money is spent by the client.

Food

Salads and savoury bread will be GST free. Muesli bars but not breakfast bars and the like will be subject to GST. Fruit and vegetable juices of at least 90% by volume will be GST free. Cordials and flavoured milk will be subject to GST. Products consisting of milk not less than 95% by volume will be GST free. Beverages consisting principally of soy milk or rice milk, but not including flavoured beverages, will be GST free. Bottled (still) natural water without any other additives will also be GST free.

Books

The Government has received your proposal regarding assistance for book writing and production and remains committed to developing a scheme that meets our shared objectives. However, it will take time to develop an appropriate scheme and the Government undertakes to consult the Democrats and agree on a scheme before the resumption of Parliament in August 1999. The scheme will pay particular regard to the educational objectives underpinning the Democrat proposal, particularly in respect of the price of text books.

Wine Equalisation Tax (WET)

Historically rebates for cellar door sales have been a State responsibility. The Government and the Australian Democrats agree on the importance of maintaining cellar door arrangements. The Government undertakes to ensure that the States keep arrangements which provide a tax exemption for cellar door and mail order sales up to $300,000.

The Government will also examine a number of definitional issues arising from the WET bill, which you have advised, and the scope for concessional treatment of low alcohol wine and intends that these be dealt with in a Bill to be introduced in the Spring sittings. As a consequence of these commitments the Government and the Australian Democrats are agreed that the WET legislation will be passed by 30 June 1999.

Boarding Houses and Caravan Parks

A separate note on the Government’s proposed treatment under the GST of boarding houses and caravan parks will be provided in due course.

It continues to be the Government’s intention that the full GST will not apply to long term residents.

GST Assistance Scheme for Low Income Persons

The Government is developing a scheme to provide assistance to low income persons who identify themselves as outside the income tax and social security systems and therefore ineligible for the compensation provided in this package. Particular attention is being given to identifying the groups to which the scheme will apply. The purpose of the scheme is not to provide a new, generally available income related entitlement but to catch those who may otherwise slip through the income tax and social security net. The Government’s intention is to develop a scheme in consultation with the Australian Democrats.

Disability Services

An amendment will be introduced so that any service funded under the Disability Services Act 1986 (or similar State/Territory legislation) will be GST free.

Rent Assistance

In addition to the previously agreed compensation package, Rent Assistance will be increased by a further 3 per cent in respect of eligible private renters at a cost of around $33 million per annum with effect from 1 July 2000. This will bring the total increase in Rent Assistance up front to 7 per cent.

Yours sincerely

(John Howard)

Filed Under: Australian Democrats, GST, Howard Government Tagged With: ,

Andrew Bartlett Statement Opposing the GST Package

Jun 14, 1999

This is the text of a statement by the Queensland Democrats Senator Andrew Bartlett, setting out his reasons for opposing the revised taxation package.

Senator Andrew BartlettI wish to indicate to my party and to the people of my electorate of Queensland that I am unable to vote for the revised taxation package that was announced by the Prime Minister just over two weeks ago. Whilst there are still some details of the legislation to be finalised, unless there are fundamental changes made to the package announced by the Prime Minister, I will not be able to support it.

My inability to support this package is not based on any philosophical objection to a GST. I have always willingly supported the platform the Democrats took to the last election and the position and recommendations that the party put forward in its Senate Committee reports on the tax legislation.

My personal concern is simply that, overall, the proposed changes will still make our tax system more regressive than it currently is, despite the very significant improvements to the original package which have been made so far by the Democrats.

It is worth emphasising that my vote alone will not stop this package being passed by the Parliament and I recognise that it is likely that it will pass into law by the end of this month. None the less, I take my responsibilities as an individual member of Parliament very seriously. It is important that my electorate of Queensland and members of the Democrats know that, for better or worse, I will not vote for something I am fundamentally opposed to. I believe the tax package partly contradicts Democrat policy, principles and objectives, and is significantly at variance with major commitments which the party gave many times, both before and after the last federal election.

I recognise that some of my colleagues genuinely believe differently on this matter and note the very significant improvements, in both fairness and environmental outcomes, which have been negotiated by people within the Parliamentary party. I know an enormous amount of work has been and continues to be put into this by some of my colleagues and I apologise for not being able to support the outcome of that effort. I welcome the repeated statements from my parliamentary colleagues and from the Democrat membership respecting and supporting my right to a conscience vote on this issue. I have consulted widely with Democrat members and supporters, particularly in Queensland, prior to coming to this decision. I know my concerns are shared by a significant proportion of Democrat members in Queensland and in other parts of the country. I urge all those members to recognise that the Democrats’ core principles have not changed and to recognise that the Democrats still represent the best vehicle in Australian politics to achieve significant social, economic and environmental advancement.

Voting separately from my Parliamentary leader is not something I do lightly, nor something I expect to do often. Despite the views expressed by some political commentators, I do not believe the taxation agreement which the Parliamentary Leader reached with the Prime Minister should be seen as signalling an ideological shift by the Australian Democrats. Every change that the Democrats forced to the original tax package was driven by concern for greater social equity or environmental protection. This demonstrates very clearly that the Democrats will be using our balance of power role to pursue the party’s core aims as strongly as ever.

Some comments on specific aspects of the tax package:

As a Queenslander, I am particularly concerned about the employment impacts of a GST, especially on the tourism industry, a major employer in my home state. I believe not enough has been done to minimise these impacts. I am also concerned that the extra revenue and the clearly identified revenue stream which was to be provided to local government in Queensland now appears to be at risk.

I recognise and share the concerns that many people have about the large increase which will be provided in subsidies for fossil fuel usage. However, I would urge environmentalists to consider just how significant some of the changes which the Democrats have forced will be. Whilst I am still unsure about whether or not these changes will balance out the negative environmental impact of significantly cheaper fuel, I do think the significance of the long-term improvements which the Democrats have gained should not be underestimated.

The Democrats have forced a Coalition government to take environmental concerns seriously and have made environmental issues a central component of the national political agenda for the first time in many years. This is a significant achievement and one which, as the party’s environment spokesperson, I look forward to building on in coming months. Any government which takes environmental issues seriously is more likely to receive the Democrats’ support. The significant gains in the social equity area, especially in areas such as increased pension rates, also need to be acknowledged.

However, despite these gains, the structural inequities will remain in our tax system. A significant shift towards indirect taxes will be entrenched in the new tax system. Also, as many others have stated, relying on compensation for unfair changes to the tax structure is dangerous.

I am also deeply concerned about the potential impact of a GST on non-profit organisations. This sector plays an invaluable role in the community, both socially and economically. It is already considerably under resourced and will clearly face a significant threat from the introduction of a GST. I know work is ongoing to minimise and eliminate that threat and I very much support my party’s efforts in that regard.

The need to exempt books from a GST is something I regard as a fundamental issue for the Democrats and one I will continue to support.

I also have concerns about the impact of the tax changes on housing costs. I know from my involvement over many years in housing issues how much of a factor housing costs can be on poverty levels and living standards. I remain to be convinced that the proposed changes will not have negative impacts in this regard, particularly on the less well off.

Final comments:

I don’t have a problem with taking hard decisions or unpopular decisions, if I believe them to be right decisions. I have never thought of the Democrats as a lobby group and I do not believe the party should act as one.

I have spent a good proportion of the last 9 years, holding a variety of senior positions within the party, encouraging the Democrats to be more pragmatic. I am not a person who believes the party should only support things that are in line with 100% of the party policy. I am happy to support anything that moves in even a small way towards achieving Democrat policy and principles.

I would urge all those who do have concerns to recognise that those who are able to support this package do so because of a genuine belief that it is best for Australia. I would also urge people to recognise that, regardless of whether or not they support the final outcome, every change to the tax legislation that has been achieved was driven by the Democrats’ traditional core concerns of a fairer society, a greener future and a strong, workable, sustainable economy. The Democrats will be in a much better position to effectively pursue and implement those core concerns if people continue to support and assist the party.

The introduction of a GST will not mean the end of tax reform or tax debates in Australia. Indeed, despite all the public focus and heat there has been on the GST, business tax reforms will be potentially much more significant.

The Democrats will have a major and important role to play in the ongoing debates on tax issues and I am keen to be part of ensuring that role is as effective and positive as possible.

Despite my inability to support this package as a whole, I will support any specific changes which improve on the government’s original highly unfair tax package. There is still work being done between the Democrats and the government to finalise the application of the tax changes in many areas, and I hope to be able to continue to do what I can to ensure those negotiations result in positive outcomes.

Filed Under: Australian Democrats, GST Tagged With:

Senator Brian Harradine Opposes the GST

May 14, 1999

This is an edited version of Senator Brian Harradine’s speech in the Senate announcing his intention to vote against the introduction of a Goods and Services Tax.

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Independent Tasmanian Senator Brian HarradineThis new tax system that has been proposed by the Government, we all agree, is a major revolutionary reform, and for good or bad we will have to live with it for decades to come.

A huge effort has been expended by the Government and by others in developing this new tax system proposal.

The executive Government has put forward this proposal pursuant to what it considers to be a mandate given by the people at the last election in October.

So much has been said about this question of mandate and I’m not going to enter into that argument at this point of time.

I’ve been honored to have been a member of the Senate select committee on the new tax system from December last year until it gave its report last month.

Millions and millions of words have been spoken about this package.

There have been arguments for and against this package. Reasons have been advanced by the Government for the necessity of this package, including that the current revenue-raising system is broken.

The family is the fundamental group unit of our society and whatever is done should be family-friendly.

Unfortunately, the GST proposal regards the cost of raising children to be discretionary consumption and I believe it very important that investment in children should be recognised as an essential and economic necessity for the future wellbeing of this nation.

Now the Government of course indicates through its tax cuts that that is what it is doing in the family tax cuts. Well, you can do that without a GST. That is evident by the Government’s own document, the ANTS package document.

Now, I’ve been told to keep in there and to try to develop a situation of compensation to try to get a better result. The Government has looked at this adequacy of compensation again and to be fair to the Government has sought to examine how best those compensation packages could be improved.

They were quite significant improvements, to my way of thinking, to the package.

The question is whether compensation is adequate … the question now in my mind is whether it is inherently regressive to such an extent that it should not be supported.

The pattern of expenditure for disabled people and for those who are chronically ill and elderly are more burdensome than those without such disabilities.

I’ve always been conscious of the fact that the true test of a civilised society is in how it regards and treats its most vulnerable. But I don’t claim here a monopoly on moral judgments in respect of this. I just happen to believe that the inherently regressive nature of the GST does not achieve that test.

The Government’s genuine attempt to compensate and to attempt to lock in that compensation is something to be commended, but it cannot be guaranteed.

But one thing can be guaranteed, and that is that a GST, once enshrined in legislation, will never be removed. We are making decisions here that will affect generations.

And the question that I have to ask myself is whether I’m going to be a party to imposing an impersonal, indiscriminate tax on my children, my grandchildren, and their children for generations to come. I cannot.

I know my name will be mud which ever way it goes. I did my best to see whether or not, in the end, I could support the measure.

Filed Under: GST, Howard Government Tagged With: ,

Premiers’ Conference: Howard and Costello Press Conference

Apr 09, 1999

This is the text of the press conference held by the Prime Minister, John Howard, and the Treasurer, Peter Costello.

It follows the Premiers’ Conference which reached a new agreement on Commonwealth-State financial arrangements.

PRIME MINISTER:

Ladies and gentlemen, today we have had an extraordinarily successful Premiers’ Conference. We’ve reached agreement on all outstanding matters relating to the financial agreement between the governments which has now been signed, sealed and delivered. And the last act in the dramatic transformation of Australia’s taxation system and the last deed required to take this country into the 21st Century with a financial and taxation system fit for the 21st Century is for the Australian Senate to take heed of what the governments of Australia, the Federal Government and the six State governments and the two Territorial governments of Australia have done.

It was a very good meeting, there was a bit of give and take. The Commonwealth was able to go part of the way in relation to the Queensland situation. We agreed with a number of the State requests in relation to the disputed items. We did not agree with one major request relating to the fringe benefits tax because that did not involve as alleged by the States any diminution at all of the goods and services tax. Overall it was an outstanding result. It speaks volumes for the constructive character of these meetings when they are backed by a decision of the Australian people. As one of the Premiers said today, the Federal Government has a mandate to implement taxation reform and of course we do. And the Premiers were recognising that and that is why they signed this agreement. But it would be wrong of us, of either of us, to discount the historic character of today’s agreement. This is the largest single transformation of Commonwealth-State financial relations at least since the end of World War II.

One of the ironic things to me about this whole tax debate is that the GST is the most pro-welfare sector tax system that this country could ever have. Because it’s through the GST going to the States that for the first time the States will have enough money to fund all of the services that they want to fund.

The other item that I’d like to mention is drugs. The Commonwealth has offered a new $220 million drug programme over a period of four years. This is over and above the $290 million under the Tough on Drugs strategy that I have progressively released over the last couple of years. The biggest single item in the new programme is a diversion strategy whereby the Federal Government will fund, we calculate up to 300,000 treatment places over a period of four years as part of a diversionary programme whereby people who have been apprehended by police that are not judged to be people who would benefit from going through the criminal justice system are offered the opportunity of going into treatment. And if, we believe that if we can through this approach divert a large number of those people into treatment facilities that will not only be of enormous long-term benefit to them but also to the community. The Commonwealth will provide the money, we will fund the places, the States and Territories will provide.

But it represents new money of $220 million over and above the $290 million which now takes to over $500 million the additional Commonwealth Government commitment to the war against drugs. We don’t argue for a moment that it provides all of the solutions but it will be another important building block. We have also indicated that we will to the best of our capacity at a federal level fast track the National Health and Medical Research Council consideration of the listing on the pharmaceutical benefits scheme list of Naltrexone and also when an application is made in relation to Buprenorphine we will adopt the same approach as well. That is the drug that has been mentioned by Mr Beattie, the Queensland Premier. And the Victorian Premier placed on the table for consideration by governments, and it will be a matter to which we will return later, the proposal to establish a national institute in relation to depression.

Overall, the drugs component of the conference was equally constructive. There’s a genuine desire Commonwealth and States across party lines to focus on our many common points of agreement and to make a further contribution towards fighting the scourge of drugs within our community. And I am particularly pleased at the very co-operative attitude displayed by everybody in relation to that.

JOURNALIST:

Mr Howard you mentioned give and take with the States on the tax deal. Are you ready to extend some give and take to the Senate in the form of enhancing the compensation package?

PRIME MINISTER:

Well, we think the compensation package is good. We think it has stood the test of scrutiny and examination and we look forward to the debate starting.

JOURNALIST:

Mr Howard can you guarantee that pensions under the GST will always be higher than they would otherwise have been without the GST?

PRIME MINISTER:

Well, I can repeat the guarantee that I gave in the election campaign and the guarantee on which we were elected and that is that under our arrangements people receiving the pension will always be in real terms 1.5 per cent ahead of the CPI. That was the guarantee I gave in the election.

JOURNALIST:

What about in relation to male average weekly earnings?

PRIME MINISTER:

Well, you know the arrangements in relation to male average weekly earnings. You know that as a result of our legislation there was a guarantee under that legislation that it would not fall below a certain percentage of male average weekly earnings and that’s always been the case. If as a consequence of the action of our proposals and our commitment pensioners are even better off, well that’s good.

JOURNALIST:

Is your drugs policy predicated on zero tolerance especially in schools?

PRIME MINISTER:

Look our drugs policy is not predicated and never has been predicated upon a particular description. Everybody around that table today is united in the view that there is no place for drugs in the schools in Australia, and that we will give the principals, the parents and the school communities every support in pursuing that objective. Some people like myself call that zero tolerance. Others might call it something else. But the name is not as important as the commitment, and the commitment is that there is no place for drugs in our schools full stop.

JOURNALIST:

On radio this morning you spoke of an element of compulsion for this treatment…

PRIME MINISTER:

Yes there is. There is an element of compulsion. I mean what happens is that if somebody is apprehended they have to be assessed. They might then decide not to comply with the, or enter into the treatment to which they have been assessed. But of consequence of that could be that they slip back into the criminal justice system.

JOURNALIST:

Mr Costello how important was your conversation with Senator Colston in arranging the extra money for Queensland and how important do you think your future dealings will be with him in terms of arranging passage of the GST legislation?

TREASURER:

Well it’s very important. Senator Colston had previously made representations to us concerning additional funds for Queensland. He’s a Senator from Queensland and I think he’s got the interests of Queensland at heart. I rang him again this morning. We had a discussion about compensation. He put his view to me and as it turned out the Commonwealth and Queensland compromised. Queensland had been seeking an additional top-up after the first year and we agreed to give a top-up after the second year. And so we met the Queensland demand half way. But Senator Colston was very important to that and I recognise the submissions that he made and they proved very successful, very good for Queensland if I may say so today.

JOURNALIST:

And what about the future of the GST? Did he express or do you expect to discuss with him any question of compensation for the poor under the GST plan?

TREASURER:

Well I think Senator Colston’s made the point before, that he respects the Government’s mandate in relation to GST. By the way it wasn’t just Senator Colston. Premier Beattie made the same point today. He accepts the Government’s mandate in relation to GST. We went to an election. We received a mandate and those people that recognise the outcome of elections, and that governments ought to be allowed to govern on the basis of their policy recognise that. And Senator Colston’s made that point previously I believe.

JOURNALIST:

Treasurer, the States, Premier Beattie…

PRIME MINISTER:

Speak up George. I can’t hear you and I always like to know what you’re saying.

JOURNALIST:

You said Peter Beattie respects your mandate but that still didn’t stop you from kicking in a bit of extra money. The Senate, even if it did respect your mandate, would be demanding extra compensation. Is that now the reality that we are in? That having compromised with the States, that we are looking at some sort of compromise with the Senate to get the package through?

TREASURER:

Let me make the point about Queensland’s claim. Queensland’s claim was that the GST revenue ought to be distributed on a pure horizontal fiscal equalisation basis which would deliver them a bonus over and above the minimum guarantee, the current system. And they said that they should be entitled to that from the beginning. Our argument was that that money should be used to make the minimum guaranteed payment to the other States and that for the first three years any bonuses should be redistributed into the pool. Now we came to a compromise with Queensland so that Queensland gets the benefit after the two years. It wasn’t fully what they were seeking but it was a compromise. Now you’re asking about the Senate and compensation. The first point I make, and I think the Prime Minister said it, the Senate is the States’ House. It would be a funny day wouldn’t it if the Senate tried to vote down something that’s just been agreed by the Commonwealth’s six States and two Territories. And you may well ask…

JOURNALIST:

But on their assumption, pensioners get 30 cents in some cases.

TREASURER:

Well depending on the assumptions you make George, but I think I’m right in saying, and I think this has been accepted by Warren and Harding, and by anybody that’s looked at it, on all reasonable assumptions, under tax reform all identified category and classes are still winners – are still winners. In other words if tax reform were defeated they would go backwards. Now I know there are a lot of arguments that got around about additional compensation but that’s sort of premised on the fact of identifying people who would be worse off. We have still not, and none of our political opponents, and none of the modellers, have yet identified a category of person that is worse off.

JOURNALIST:

So are you ruling out additional compensation, Mr Costello?

TREASURER:

I’m saying that no additional compensation is required if all categories of person on all possible analyses, with all reasonable assumptions, are still winners.

JOURNALIST:

Does that mean you are ruling it out?

TREASURER:

Well I gave you the answer …

JOURNALIST:

At least three of the States are reviewing National Competition policy. Do you view that with favour and what is your concern about it?

PRIME MINISTER:

It wasn’t discussed. Nobody raised it with us.

JOURNALIST:

Premier Beattie…

PRIME MINISTER:

Well he didn’t raise it. I mean people can always, you know, have reviews in their minds and amongst themselves but they didn’t raise it with us.

JOURNALIST:

How much is the total value of the compromises you had to give today to get the States on board. They were asking $800-odd million, was it a figure of $600-odd?

PRIME MINISTER:

Nothing like that.

TREASURER:

The largest item of the claim from the States was a claim on fringe benefits tax of $750 million over three years which is not accepted.

PRIME MINISTER:

But look, can I just say in relation to that – it was give and take. And one or two of the items that the States put forward had merit and we agreed to them.

JOURNALIST:

But how much did you end up giving?

PRIME MINISTER:

Much less than they asked for. The precise amount I don’t remember, Paul.

JOURNALIST:

Was it $819 million over three years?

PRIME MINISTER:

Well, I haven’t done the calculation. We agreed to give, I think it was about $70 million a year in relation to the local government and then there was a certain amount going to Queensland and there was some in relation to housing and the tax equivalent payments.

JOURNALIST:

Would it have been more than you expected?

PRIME MINISTER:

No. It was about what we thought – look, you may find it very hard to accept but we actually did try and analyse the merit of the argument. And there was some merit in the Queensland argument, some merit, not as much as Queensland claimed. There was certainly some merit in relation to the local government argument. There was no merit in relation to the fringe benefits tax argument, none at all. There was some merit in relation to housing and some in relation to the tax equivalent regime. So we are reasonable men and we settled in a reasonable fashion.

JOURNALIST:

Given that, then one could assume if there were any merit in the arguments put by the Senate you’d have a little (inaudible)

PRIME MINISTER:

Well, we had an argument about merit last October and we were judged the more meritorious of the two teams and that’s why we won.

JOURNALIST:

Given the defeat on FBT is Victoria the only State that’s lost?

TREASURER:

The defeat on FBT doesn’t produce any loss in Victoria.

PRIME MINISTER:

No.

TREASURER:

But the claim on FBT by the States was that because the gross up factor will be increased as a result of the GST, that revenue should go to the States and not the Commonwealth. The Commonwealth position is and was that fringe benefits tax, which is an adjunct to the income tax system, is a Commonwealth tax base and GST is a State tax base and that the States were not entitled to any of the proceeds off the Commonwealth tax base. That was that argument. The argument by Victoria that they haven’t done well is an argument in relation to the funding for 1999/2000. It’s not an argument about the distribution of funds under the new tax system. It’s an argument about the distribution of funds under the current tax system with the relativities as set by the Commonwealth Grants Commission. It’s the last argument of the ancient regime, that argument. And since they now have a guaranteed tax base in the future we don’t have to have those arguments anymore because they’ve got a guaranteed share of the goods and…

JOURNALIST:

Did Victoria go it alone on FBT or did the other States support…

TREASURER:

It was put forward this morning as a joint demand.

JOURNALIST:

Mr Howard, if the Senate continues to refuse to accept your tax package in its current form, now that the States have signed off on it, and if the Senate still refuses, will you consider a double dissolution election, now that you have the backing of the…

PRIME MINISTER:

Oh look, as I’ve said before, it’s not long since I was re-elected and I’ve got no desire to race back to the polls. I remain positive. I remain hopeful. I believe that today’s outcome sends a loud, unmistakable, powerful and emphatic message to the Senate – get on with it, do the will, do the bidding of the Australian people; do the will, do the bidding of the Australian States. I mean, if you can get Bob Carr and Jeff Kennett and Peter Beattie and Richard Court and John Olsen and Jim Bacon, all of them – three Labor, three Liberal – to sign up and to say this is the tax system for the new century, how on earth can the Senate hold out and preserve any sense of credibility. I mean, here you’ve got the most recently successful Labor leader in Australia, he’s offered Della yet again to visit Canberra…

TREASURER:PRIME MINISTER:

Which we accepted. The most recently successful Labor leader in Australia, the two most recent leaders – I mean, Beattie and Carr have won elections and those who have lost elections on the Labor side should take a bit of notice of those who’ve won elections on the Labor side and they should heed their message. But we will just take the Senate in its stride. The debate starts soon. We’ll listen to the debate. We’ll talk to people. We believe the Senate should do the will of the Australian people and I have no intention of hypothesising and speculating about entirely hypothetical situations.

Thank you very much.

Filed Under: Federalism, GST, Howard Government, States Tagged With: , , , , ,

Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations

Apr 09, 1999

The Prime Minister, John Howard, has signed an agreement with State and Territory leaders to reform Commonwealth-State financial relations.

This is the text of a statement released by John Howard:

I am pleased to announce that Commonwealth, State and Territory leaders have today signed a landmark Agreement that will transform Commonwealth-State financial relations, as promised in the Commonwealth Government’s Tax Reform: not a new tax, a new tax system.

The Commonwealth has introduced legislation to provide all of the revenue from the GST to the States and Territories and to protect the rate and base of the GST in accordance with this Agreement. The Agreement will commence on 1 July 1999. As a further sign of the Commonwealth’s good faith, the Commonwealth will attach the signed Intergovernmental Agreement to the A New Tax System (Commonwealth-State Financial Arrangements) Bill 1999 and similarly the States and Territories will attach the Agreement to their legislation.

The new arrangements will provide the States and Territories with a stable and growing source of revenue to fund important community services. The States have committed to abolish nine inefficient taxes, removing their reliance on these distortionary and growth-reducing taxes and charges. The Agreement will also remove the States and Territories’ current reliance on Financial Assistance Grants.

In each of the transitional years following the GST’s introduction, the Commonwealth will compensate any State whose budgetary position is temporarily worse off. It has also agreed to more generous transitional arrangements from the third year. As GST revenue increases, all States will receive large financial gains, even after abolishing stamp duty on non-residential conveyances.

The Commonwealth has also agreed to provide further assistance to the States and Territories in relation to the effects on State and Territory budgets of the abolition of wholesale sales tax equivalent payments by Government business enterprises and to ensure that local government benefits fully from the removal of wholesale sales tax and excises on their purchases. It has also agreed to provide funding to meet increased public housing costs as a result of tax reform, subject to the resolution of the new Commonwealth-State Housing Agreement.

A Ministerial Council, chaired by the Commonwealth Treasurer, will oversee the operation of the Agreement. It will meet at least once a year. It is also envisaged that the Council of Australian Governments will meet at least once a year for Heads of Government discussions.

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