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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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[ 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 We also tested the sensitivity of the calculation if the price impact of the tax package turns out to be higher than the Government's estimation. For example, if the increase in the price of food was instead 5.5 per cent (ie, 25 per cent higher than the 4.4 per cent increase estimated in the Governments tax package), the cost of living increase contribution of food would be 2.15 per cent, rather than the 1.72 per cent shown in Table 2. A price of food increase of this order is not unreasonable given that food and essential items are typically more expensive in rural and remote areas, a result of high transport costs and a lack of competition between suppliers. Furthermore, as a GST is an ad-valorem tax levied at the final point of sale, it will have a more adverse effect on people in high cost areas, thereby resulting in greater horizontal inequities between rural and remote Indigenous people and other Australians. Other things being equal, this translates to an overall cost o f living increase as a result of the introduction of the GST of 4.17 per cent, rather than the 3.74 per cent shown in Table 2. 4.3 Community Businesses and the GST The introduction of the GST levied at the point of sale of retail products can also be expected to have an impact on community businesses such as housing associations and community health services, the community store, arts and craft production and tourism enterprises. The focus here is on the latter two. 4.3.1 Arts and Crafts Production This can be a significant economic activity in rural and remote Indigenous communities. Apart from its importance in cultural terms, it provides cash incomes for people (particularly elderly people) who would otherwise have no means of generating such an income. Under the existing tax arrangements, no wholesale sales tax is payable on items purchased directly from the artist/producer. Tax is payable if a retailer buys such works from a wholesaler. If the GST were to result in the sale of all arts and crafts work being subject to the 10 per cent GST at the point of retail sale, either the artist/producer will receive a somewhat lower price, or at a given price suffer a reduction in demand. The outcome in this case is negative either way. 4.3.2 Tourism Enterprises A number of rural and remote Indigenous communities are involved with tourism enterprises, either directly as owners or by having arrangements with them to receive visitors. Often visitors will travel to the community by a mixture of air and coach travel. The GST is expected to increase the price o f coach travel, airfares, accommodation and dining. Depending on the elasticity of demand for such services, the outcome could be to reduce the number of visitors to these tourism enterprises, and hence Indigenous incomes. 4.4 Effects of the Compensation Package The major elements of the compensation package designed to offset the cost of living increase associated with the GST and other Commonwealth and State government indirect taxes, are: T in : A l i e n C o n s u l t i n g ( in n ip 16