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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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5. Special Action to Address the Position of Rural and Remote Area Indigenous Communities 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 Co m m o n [ t i e s _________________ 5.1 Why Special Action is Warranted There are a number of reasons why special compensatory action is warranted over and above the general compensation package to address the unique, or disproportionately disadvantageous, circumstances facing rural and remote Indigenous communities. These communities are amongst the lowest income groups in Australian society and are, therefore, among the least able to bear the additional costs the GST will impose on them. This is relevant both in terms of increasing their cost of living, and by potentially reducing income they are now earning from activities such as arts and crafts production and tourism enterprises. The fundamental reason for the disproportionate disadvantage to rural and remote area Indigenous communities from the tax package is the unusual nature of their expenditure pattern, which sees food accounting for 40 per cent, and in some cases more, of their total expenditure. Clothing and footwear expenditure lifts the share spent on these necessities of life to almost half of total expenditure. When this is combined with the fact that these items are currently zero rated under the wholesale sales tax, it is not surprising that the GST, from the point of view of rural and remote Indigenous communities, appears to apply without exceptions and with very few offsets. The Government, recognising that some groups in society would be disadvantaged by the GST, have included in the tax package a compensation package which itself has a number of elements. With the exception of the benefit that will flow to people in rural and remote areas from the diesel fuel tax arrangements, the main element of the compensation package relevant to the communities is the Governments decision to increase pensions and other welfare benefits by 4 per cent. This figure was struck on the basis that it was intended that people on pensions and other social security benefits should be more than compensated for the cost of living impact of the GST that is estimated at 1.9 per cent for the Australian community in general. But as our report shows, the cost of living increase for the communities is almost double that figure, at 3.7 per cent (on conservative estimates). Therefore, unless other action is taken over and above the existing compensation package, the communities will be further disadvantaged. Because of the special circumstances of the rural and remote Indigenous communities, it should in principle be possible to devise a means of providing additional compensation to them at a relatively low cost to the budget, given their small total numbers, without establishing a precedent for other groups in the community. Tlu; Alien C o n su lt in g < Jnitip 18