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
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.
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 d R e m o t e I n d i g e n o u s C o m m u n i t i e s The Governments tax study finds that the impact of tax reform on consumer prices for beverages will be an increase of 3.1 per cent and that the impact on tobacco will be an increase of 13.3 per cent. For the purposes of calculating the overall CPI effect of 1.9 per cent, the Government has not included the effects of the tax package on the price of tobacco products. This is because the Government has decided that no compensation should be paid for tobacco price rises, due to national health policy objectives. While not contesting the Governments decision to exclude increases in tobacco prices from the measurement of the cost of living impact of the tax package, it does not seem appropriate to proceed on the basis as if tobacco products were not part o f household budgets. The impact of the tax package on the price of tobacco products for rural and remote Indigenous communities, where expenditure on these products is a significant proportion of household budgets, will mean that less money will be available in the household budget for essential items. In these circumstances, we believe' that it is necessary to make some allowance for the effect of the tax package in increasing the price of tobacco products and we have allocated a price increase equal to that estimated by the Governments tax study for food. Taking the share of communities household budgets spent on alcoholic beverages and tobacco, and using the increase in food as a conservative proxy for the price impact of changes in the price of alcohol and tobacco, results in the communities cost of living increasing by 0.88 per cent. 4.2.8 Other Items o f Expenditure The survey shows that other items of expenditure (not including savings) account for 10 per cent of the household budgets of rural and remote Indigenous communities. Given the diverse nature of these elements of expenditure, the approach we have taken is to allocate to them the Governments tax study estimate for the total effect of the tax package in increasing the cost of living of 2.2 per cent. Taking the share of communities household budgets spent on other items o f expenditure together with the Governments estimate of the effect of the GST in increasing total costs, results in the communities cost of living increasing by 0.22 per cent as a result of the impact of the tax package on other items of expenditure. 4.2.9 Sensitivity Analysis The cost of living calculation presented in Table 2 depends on a food share o f total expenditure of 39 per cent. This is the average amount spent across all households surveyed. To test the sensitivity of the calculation to changing in the weighting's of expenditure components, we calculated what the cost o f living impact would be if foods share was instead increased to 44 per cent. This is a realistic test, as there are clearly some rural and remote Indigenous communities that spend 44 per cent of their household income on food (ie, households with 7 to 9 residents as presented in Table 1). In this case, the cost of living impact calculation presented in Table 2 would rise to 3.8 per cent. T in : A l ien C o n s u l t i n g i ii o u p 15