Each edition we feature the views of a Local Government Association President. The following is from Councillor Brad Matheson, President of the Municipal Association of Victoria.
A Municipal Association of Victoria investigation into the impacts and implications of a Goods and Services Tax on Local Government paints a complex and costly picture, even though Local Government is notionally exempt from the GST.
Administratively, the GST is a nightmare for Municipalities. Councils face set up costs of around $1 million, a permanently reduced bank balance of between $200,000 and $1 million, caused by the wait for refunds from the Commonwealth, and ongoing administration costs of $100,000 per annum.
For every dollar of GST revenue raised by Local Government, 25 cents will be spent on collection and administration.
To put these figures in context, that $100,000 ongoing cost equates to almost 3,000 days of child care; or 5,000 hours of home help, or 25,000 head lice treatments, or 26,000 meals on wheels per year.
It is an unnecessary cost that Councils should not have to bear.
The GST is also massively complicated in its application. If your grandmother has her meals on wheels delivered at home, it is free of GST. If she decides to have it at the senior citizens centre, she will have to pay GST on the community bus to get there, even though the bus is not a commercial activity.
The same applies if she wants to stay in her own home, using the support services provided by Council that is free. But if she wants to maintain her fitness in order to stay at home, she will have to pay GST for that same community bus ride and again on the exercise program provided at the local Council fitness centre.
The GST is a tax on keeping old people independent, healthy and active.
Similar examples abound in the area of children’s services. Your primary school age child can attend the Council vacation care sessions GST free. However, the moment they take part in the Council activity program, the tax is applied. The GST is a tax on keeping kids safe, active and inquisitive.
The MAV also has grave concerns about the change in the relationship between the Commonwealth and Local Government if the States take over the funding role. There is no guarantee that money will flow to Councils. In Victoria’s experience, the State’s record in fair and equitable distribution of Commonwealth funding leaves a lot to be desired. Of the $50 million provided by the Commonwealth to the State during the recent gas crisis, only $10 million has been passed on to the community and none to Local Government. In terms of competition payments, the Victorian Government kept 91%, Councils are getting just nine percent.
The overwhelming message from the MAV’s analysis of the GST is that there is no community or economic benefit from Local Government being included in the GST loop.
The only winner is the army of bureaucrats whose work it is to collect the GST from Councils and then give almost all of it back.
