States and territories have agreed to remove the 10 percent tax on female sanitary products during the Australian Treasurers’ meeting on Oct. 3.
The complete list of products has not yet been finalised since there are many to take into account. The GST is expected to be removed by January 2019.
The tampon tax brought in about $30 million (US$21.39 million) in total tax revenue from all states combined. Now that it is going to be cut and Labour was concerned earlier this year that the current government won’t be able make up for the loss in tax revenue. The Labour Party wanted to make up the difference by applying GST to 12 natural therapies, according to the Financial Review.
The coalition said that the loss in revenue from the removed tampon tax can be absorbed by GST revenue since it has increased.
Labour governments are worried that they will receive less GST revenue if the forecast for GST revenues over an eight year period don’t make up the difference, The Guardian reported.
To ensure that no other state will be worse off with the GST reform, Victoria and Queensland want Scott Morrison’s government to legislate a tax floor.
A plan was introduced by the federal government in June 2018 that ensures no state will receive less than 70 percent of its own GST revenue from 2022 to 2023. The percentage will rise to 75 percent from 2024 to 2025, The Guardian reported.
Morrison said that GST distribution won’t be determined by any state, territory, or council, but by the “commonwealth parliament.”
“The only person standing between a fairer deal for GST and Western Australia is Bill Shorten,” said Morrison.
A Previous Failed Attempt
In 2015, the failed attempt at removing the tampon tax was due to the states’ and territories’ concerns that the $30 million GST revenue couldn’t be made up.
Joe Hockey, former treasurer, was asked on Q&A whether he believed “sanitary products are an essential health good for half the population?” ABC reported.
“Do I think sanitary products are essential? I think so, I think so,” replied Hockey. “It probably should, yes, the answer’s yes.”
Soon after Hockey said that they were “essential,” former Prime Minister Tony Abbott said, “It’s certainly not something that this government has a plan to do.”
Abbott believed the tampon tax was a decision to be made by the states because, “We cannot change the GST without the states and territories.”
Divisive Issue for the States
State representatives gave their position on the issue when the controversy began.
Jackie Trad, Queensland deputy premier, said her government supports the removal of the tax in 2015, ABC reported.
“This is the first time you’ll hear me agree with Joe Hockey,” she said. “I think it should be lifted.”
Bill Shorten, leader of the Labour Party, suggested that the GST should shift from sanitary products to digital products like “Netflix and downloads.”
ACT chief minister and Treasurer Andrew Barr said that he wouldn’t mind removing the tax as long as the lost revenue can be gained elsewhere. He believed that it would make more sense to tax digital products and products bought from online markets.