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Impact of the Governments Plan for a New Tax System on Rural and Remote Indigenous Communities Report Prepared by ATSIC January 1999 The Allen Consulting Group



Impact of the Governments Plan for a New Tax System on Rural and Remote Indigenous Communities Report Prepared by ATSIC January 1999 The Allen Consulting Group

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Tabled paper 965


Tabled Papers for 8th Assembly 1997 - 2001; Tabled Papers; ParliamentNT




Tabled by Sydney Stirling


Made available by the Legislative Assembly of the Northern Territory under Standing Order 240. Where copyright subsists with a third party it remains with the original owner and permission may be required to reuse the material.




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I m p a c t o f a N e w T a x S y s t e m o n R u r a l a n o R e m o t e I , v o i c e n o u s C o m m u n i t i e s Low income indigenous households appear to spend a high proportion of their incomes on the basic necessities of life, such as food, than the lowest income households among the total population. They also concluded that: ...such expenditure patterns probably reflect the high price o f consumer goods and services in remote and rural areas vis a vis indigenous incomes as much as cultural differences in the value o f such goods. Stanley (1998) points out that people in Indigenous communities spend a much larger proportion of their incomes on food than does the average person, firstly, because they are extremely poor and, secondly, because the prices of food in their communities is much higher than the national average. The AMA (1997) suggests that in some communities the proportion is almost 60 per cent. The survey initiated for this report confirmed that expenditure by the communities on food was indeed consistently high as a share of total budgets. We believe there is strong justification for adopting a share of expenditure on food of 39 per cent for the purposes of estimating the effect of the Governments tax package on the communities CPI. The Governments tax report estimates that the GST will cause food prices to increase by 4.4 per cent. This estimate takes account of the effect o f the 10 per cent GST rate in increasing food prices and the effect of the abolition o f the wholesale sales tax in decreasing prices of those foods which had previously been subject to a 12 per cent rate of tax. Taking the estimate of the share of the communities expenditure on food in household budgets o f 39 per cent, together with the Governments estimate that the GST will cause food prices to increase by 4.4 per cent, we estimate that the tax package through its effect on food prices will add 1.72 per cent to the communities CPI. We also note that concern has been expressed by nutritionists (see AMA (1997)) that the GST has the potential to lead to a worsening in nutrition in Indigenous communities. This is due to the fact that the imposition of the GST on food at 10 per cent will result in less-healthy processed foods becoming cheaper, while fresh foods will become more expensive. A change in their relative prices could potentially change demand and have negative nutritional consequences. 4.2.3 Clothing and Footwear The survey suggests that the communities spend about 6 per cent of their household budgets on clothing and footwear. As previously noted, clothing and footwear are currently zero rated under the wholesale sales tax. This means that there will 6e no offsetting savings to the 10 per cent GST, unlike in the case of food (where some processed foods will drop in price under a 10 per cent GST). The Governments report estimates that the impact of the tax package on consumer prices for textiles, clothing and footwear will be 5.9 per cent. T in ; A l len C o n s u l t i n g < ii*< >n|> 12

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