Approach to the task
The Committees task was challenging. It was required to review some complex areas of the design of the GST within a limited timeframe. The challenging nature of this task was accentuated by a widespread lack of understanding of the detail of the Governments proposed GST in the context of tax reform, as well as a general lack of public understanding of the Committees role.
In view of this, there are several issues the Committee wishes to record to ensure its recommendations can be properly viewed.
The Committees role
The Committee considered its main function was to identify the appropriate boundaries for the GST-free areas it was considering, as well as the appropriateness of the proposed transitional arrangements for motor vehicles. Its role was not to recommend changes to government policy nor was it to consider areas outside its terms of reference. In particular, a number of submissions raised issues relating to the general impact of tax reform, including the proposed reforms to the Fringe Benefits Tax. Clearly, the Committee could not make recommendations in these areas.
- The Committee has passed all relevant submissions on to the Taxation Task Force for their consideration of the issues raised.
Public inquiry not possible
The Committee decided that, in view of the timeframe given to it by the Government, it would not be possible to undertake a full public inquiry or to consult with individuals or groups. A number of interested parties provided written submissions and the Committee considered all those submissions in framing its recommendations. The Committee intends to provide a written response to each of these submissions.
What the Committee took into account
To ensure it was fully informed of the issues the Committee had regard to the following sources:
- details of the Governments proposed GST as outlined in Tax Reform: not a new tax, a new tax system as well as other Government announcements in relation to tax reform;
- information provided in the over 300 written submissions received by the Committee;
- information provided in submissions to the Gibson Inquiry, although this information was of a general nature and not directly related to the issues requiring consideration according to the Committees Terms of Reference;
- the Committees own personal knowledge of the relevant areas; and
- advice from officials in several Commonwealth Departments and Agencies ¾ the Departments of Education, Training and Youth Affairs, Family and Community Services, Health and Aged Care, the Treasury, and the Australian Taxation Office.
The Government is aware that the GST base will need to be changed and has stated:
The Commonwealth recognises that changes may be needed in the future with new developments in the business world, new technologies, and court rulings on tax matters.
While the Committee believes that it has obtained sufficient information to provide sound recommendations, because of the scope of the areas in question and the short time-frame in which to consider the issues, there may be some areas that were not drawn to the Committees attention.
The Committee therefore considers that the Government needs to adopt a process whereby future changes to the GST-free areas can be made to correct anomalies and inequities that may have arisen.
Accordingly, the Committee recommends:
- the Government establish an ongoing formal review Committee whose role it would be to provide periodic advice to the Treasurer in relation to the various issues or anomalies that will inevitably arise; and
- that the legislative implementation of its recommendations on GST-free activities be flexible enough to accommodate correcting these anomalies at short notice.
Structure of the Report
Given the importance of having a clear understanding of the Governments proposed GST, particularly in respect of GST-free activities, the Committee considers it is necessary to explain its operations. Chapter 3 does this as well as explaining how the GST operates in particular circumstances that appeared to be of interest to many who made submissions.
Chapters 4, 5, 6 and 7 deal with the four GST-free areas requiring the Committees attention (ie health, education, religious services and non-commercial activities of charities) and Chapter 8 deals with the issues relating to transitional arrangements for motor vehicles.
The Appendix lists all those who made submissions to the Committee.
The Appendix also reproduces the relevant text of Tax Reform: not a new tax, a new tax system as well as other Government announcements that were relevant to the Committees subject matter.
Finally, the Acts, Agreements, Determinations and other legislative instruments that are referred to in the report are documented as reference material. The legislation itself is not reproduced ¾ too much volume would be required ¾ but the titles are noted to provide ease of reference to readers of the report.