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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

Details:

Title

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

Other title

Tabled paper 965

Collection

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

Date

1999-02-16

Description

Tabled by Sydney Stirling

Notes

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.

Language

English

Subject

Tabled papers

File type

application/pdf

Use

Copyright

Copyright owner

See publication

License

https://www.legislation.gov.au/Series/C1968A00063

Parent handle

https://hdl.handle.net/10070/295731

Citation address

https://hdl.handle.net/10070/394614

Page content

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 5.2 What Should Be Done The decision to apply the 10 per cent GST rate to all food products is the major single factor in producing a cost of living increase for rural and remote Indigenous communities that is almost twice as large as that estimated for the Australian community in general. If food is to be subject to the 10 per cent GST rate, then there is a strong case for special compensation action for rural and remote Indigenous communities over and above that provided in the general compensation package. The starting point for considering special compensation is to be clear about what is meant by the term compensation. Johnson, Cowling and Harding (1998) have recently discussed this matter in their paper to the EMBA Seminar on 10 October last year. They comment about compensation in the following terms. In a literal sense compensation is what is required to recompense those made worse (off) by reform. One necessary criteria for reform is that the winners from a change have the capacity to pay the losers so that everybody may be better off (Pareto Optimality condition). Where the change is enacted by government, it is their responsibility to redistribute income to bring about this effect. However the definition of what is meant by being worse o ff is not clear. There are a couple of options. Worse off may be defined in a narrow sense to mean a loss of income or an increase in cash costs or in a wider sense to also include a loss of claim on government...in this light compensation is not seen as merely meeting cash costs o f change but also any relative cost as evident in increased inequality. Having regard to these principles of compensation, two options suggest themselves in terms of quantum: First, providing additional compensation to rural and remote Indigenous communities so as to lift their incomes from Government social security payments and other income support programs by an additional 1.8 per cent over and above the 4 per cent provided through the existing compensation package. Second, providing additional compensation to rural and remote Indigenous communities to increase their incomes in an effort to maintain the ratio of the actual cost of living impact, to the compensation rate proposed in the Government's tax package (ie, equal to the ratio of 1.9:4.0). The first option would maintain the absolute position of rural and remote Indigenous communities, while the second option would maintain their relative position. The cost of these measures would depend on the precise definition of rural and remote Indigenous communities. Based on the ABS definition that identifies four locational groupings (major urban, other urban, bounded locality and rural balance) two options arise: First, a limited definition which would include the category rural balance which at the time of the 1996 Census of Population and Housing included 58,406 Aboriginal and Torres Strait Islander people.