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Legislative Assembly for the ACT: 2000 Week 1 Hansard (17 February) . . Page.. 254 ..

MR QUINLAN: My question is to the Treasurer. An article in the Canberra Times today, referring to the Australian Economic Review, states that the intergovernmental agreement in relation to the GST covers only the direct impacts of a GST on state budgets, the taxes to be abolished, the first home owners scheme and the embedded wholesale tax savings. It also says that the reality is that the GST and related reforms will have significant indirect impacts upon States' budgets. The particular reference is to the fact that amendments to the tax package will reduce the available money to fund the promise that no State will be worse off under the GST regime. One part of the intergovernmental agreement is that if a Territory such as the ACT is worse off as a result of the new tax system, the Commonwealth funding will come in in forms of loans and grants to cover the shortfall. Can the Treasurer please clarify that in relation to the draft budget, where he has claimed there will be no effect of the GST? Will there be any effect in relation to interest free loans as opposed to revenue income?

MR HUMPHRIES: Mr Speaker, I have repeated several times, I think, in this place and outside, the guarantee which has come from the Commonwealth that the States and Territories are no worse off as a result of the implementation of the GST. I recorded that on every occasion as the Commonwealth's guarantee to the ACT and to States and Territories generally. I certainly should not be seen in this place, or anywhere else, to be guaranteeing absolutely that there is no capacity for the Commonwealth promise to be a promise that has some unexpected sharp edges.

I will give you a small illustration of that point. The Commonwealth has told us that we will be no worse off and that we have a guaranteed minimum amount to ensure that we are no worse off, at least during the first three years of the GST's operation. That guaranteed minimum amount is calculated on a number of assumptions. One of them is that we will continue to levy stamp duty in the same way that we do at the moment, even though that has the effect of including in the price of things that are subject to stamp duty the GST itself. Say if someone takes out an insurance policy on the motor vehicle that they have just bought. They insure it for the value of the vehicle, the price they pay. Therefore it includes GST. You are paying stamp duty on the GST.

Some have argued to us that that is a tax on a tax and is not very fair. My own view about that is that, because those sorts of things have been previously subject to wholesale sales tax, in effect we are not changing the basis on which those taxes or charges are levied. Nonetheless, if we were to move away from that arrangement to address what some people see as an unfair arrangement, we would certainly be less well off as a result of that factor. If we decide not to impose stamp duty on the part of the price that included GST, as an argument for fairness, we certainly would not be able to receive the same amount of money from the Commonwealth under its guaranteed minimum amount. We do not propose to do that in the ACT, so in that particular instance it is not going to be an issue.

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