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Legislative Assembly for the ACT: 2000 Week 5 Hansard (11 May) . . Page.. 1419 ..

MR HUMPHRIES (continuing):

This bill is consequential to the provisions outlined in the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, the IGA. Members are aware that the IGA is part of the Commonwealth's new national tax reform package. The next tax system includes, among other things, the introduction of a GST from 1 July 2000 and the elimination of a number of existing taxes, including some state and territory own source taxes. The GST will compensate for the cessation of these taxes as part of the reform measures.

Under the IGA, the temporary arrangements for the collection of taxation of petrol, liquor and tobacco by the Commonwealth on behalf of the states and territories under the Commonwealth's safety net arrangements will cease on 1 July 2000. Section 90 safety net funding will be withdrawn with the abolition of wholesale sales tax and the introduction of the goods and services tax.

Members will recall that in 1997 a High Court decision raised doubts on the constitutional validity of the collection by the states and territories of business franchise fees on tobacco, liquor and petroleum. Under the safety net scheme, the Commonwealth then imposes a surcharge on excise duties on petrol and tobacco and a 15 per cent additional wholesale sales tax on all alcoholic beverages. Revenue from the surcharges is distributed to all states and territories. The ACT pays subsidies to liquor and fuel wholesalers where the surcharges are greater than the business franchise fees they replaced.

The bill abolishes the current subsidy scheme for low-alcohol liquor and for diesel for primary production and home heating usage by pensioners.

The ACT subsidy scheme for low-alcohol products reflected territory policy prevailing at the time of their introduction and was not a commitment made as part of the section 90 payments. Given the large range of new low-alcohol and mixed products on the market, including, for example, wine coolers and alcoholic lemonades, in addition to low-strength beers, the cost of providing subsidies has been steadily increasing, estimated at over $1 million in 2000-01. There is no justification for the government to continue these subsidies, given the abolishment of wholesale sales tax and other priorities in the ACT budget.

There are currently 46 primary producers certified as eligible to receive the ACT subsidy. These businesses would benefit from input tax credits under the GST and many will continue to be eligible to receive a Commonwealth rebate for prescribed off-road diesel usage under the Commonwealth's new diesel fuel rebate scheme.

In addition, 137 eligible pensioners have been identified as benefiting from an ACT subsidy on diesel used for home heating. To ensure that they are not worse off on the removal of the subsidy scheme, a once only act of grace payment of $300 will be made to each eligible pensioner. This is equivalent to 10 years of average subsidies and will cost approximately $41,100. This initiative has been supported by the ACT Council on the Ageing. The ACT Revenue Office will contact the eligible pensioners directly in July to make the act of grace payments.

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