Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 2 - Changing the GST rate and base
Overview
1.10 Part 2 specifies that the GST rate and base cannot generally be altered unless each State and Territory agrees to the changes. Provisions are made to allow the Commonwealth to make some unilateral changes to the GST base during the first year of operations and to allow changes in the base of an administrative nature to be approved by a majority of the Commonwealth and the States.
Summary of the legislation
1.11 Consistent with the approach set out in the Governments tax reform package and endorsed in the Agreement on Principles for the Reform of Commonwealth-State Financial Relations negotiated at the 13 November 1998 Special Premiers Conference, the Bill provides that the rate of the GST and, in most cases, the GST base are not to be changed unless all States, Territories and the Commonwealth agree to the change.
1.12 Clause 2 of the Bill provides that this Act commences when it has received Royal Assent or after the A New Tax System (Goods and Services Tax) Act 1999 ; the GST imposition Acts; and the A New Tax System (Goods and Services Tax Administration) Act 1999 have commenced, whichever is later.
Background to the legislation
1.13 These arrangements are designed to lock-in the GST rate and base thereby addressing community concerns that the Commonwealth could increase the GST revenues in the future by unilaterally increasing the GST rate or expanding the tax base. These provisions specify the Commonwealths intention not to alter the GST rate or, in most cases, the GST base without the unanimous support of all State and Territory Governments.
Explanation of the legislation
1.14 Sub-clause 10(1) requires that each State and Territory supports a modification to the GST rate or GST base. It provides that any changes to the base should be consistent with:
- (a)
- maintaining of the integrity of the GST base; and
- (b)
- simplicity of administration; and
- (c)
- minimising compliance costs for taxpayers.
1.15 There are two exceptions to this general principle which are designed to facilitate the efficient administration of the GST:
- (a)
- sub-clause 10(2) provides that, prior to 1 July 2001 (the first year of operation of the GST), the Commonwealth can make unilateral changes to the GST base where these changes are of an administrative nature, are necessary to facilitate minor adjustments to the GST and have regard to the need to protect the revenue of the States; and
- (b)
- sub-clause 10(3) provides that, after 1 July 2001, changes of an administrative nature to the GST base only need to be approved by a majority of the Commonwealth and the States.
1.16 These arrangements for changing the GST rate and base will also be included in the proposed Intergovernmental Agreement to be signed by the Commonwealth and all State and Territory Governments.
Regulation Impact Statement
1.17 No Regulation Impact Statement is required.