No More Tampon Tax!
After an 18-year campaign, the Coalition Government on 28 November 2018 signed a determination that will remove the Goods and Services Tax (GST) on feminine hygiene products (Products) from 1 January 2019. On the same day, the Treasurer, Josh Frydenberg, directed the Australian Competition and Consumer Commission (ACCC) to monitor the market of these Products.
The road so far
Following the 1998 election campaign, the A New Tax System (Goods and Services Tax) Act 1999 (Cth) was passed in 1999, and came into operation on 1 July 2000. At the time, a proposal to exempt the Products from the GST was vehemently dismissed by Prime Minister John Howard:
“Now, you can always mount an argument not to tax an individual item. I understand that. And taken in isolation, that argument can be compelling. But you can’t take things in isolation. You’ve got to look at it, every little part as a section of the whole. And that is what I’m doing in relation to this. And if you take the GST off, say, tampons, within a few days, I promise you, there will be a group of people mounting quite a respective argument in isolation to take it off children’s clothing. Everybody needs clothing. And that argument can be mounted. … [I]t’s just that the fewer exemptions you have the better the system. The more exemptions you have the more pressure there is to have still more exemptions, and the still more exemptions you have you then start to threaten the existence of the whole system. … We’ve got it through the parliament. It is now the law, and I’m opposed to any further exemptions.”
The then Treasurer, Peter Costello, was similarly adamant that the Government had “got it right” and that it would “not be changing the legislation”.
After years of intermittent “tampon tax” talk, the Greens introduced a bill to remove the GST levied on sanitary products in the Senate on 9 May 2018, and it was passed on 18 June 2018. The Coalition Government then put this issue on the agenda of the Council on Federal Financial Relations meeting on 3 October 2018. There, Treasurers of the Commonwealth and States and Territories unanimously agreed to remove the GST from the Products from 1 January 2019.
The Government subsequently conducted a two-week public consultation regarding the definition of the Products to be exempt from the GST. Submissions were received from product manufacturers, retailers, taxation experts and members of the public. On 28 November 2018, the Coalition Government signed a determination to remove the 10% GST that currently applies to the Products, commencing 1 January 2019.
The ACCC’s role
On 28 November 2018, the Treasurer gave the ACCC a written direction to monitor the prices, costs and profits relating to the supply of menstrual products in the feminine hygiene products industry pursuant to s 95ZE of the Competition and Consumer Act 2010 (Cth) (Act). The ACCC will monitor prices from 1 December 2018 to 28 February 2019, and consider the impact of the removal of the GST from 1 January 2019 on the price of the Products.
Under s 95ZK of the Act, the ACCC has compulsory information gathering powers. Specifically, the Chairperson of the ACCC has the power to issue notices to persons capable of giving information or producing documents relevant to the supply of the Products to provide specified information and/or documents.
The ACCC will provide a report to the Treasurer by 31 March 2019.
ACCC Deputy Chair, Delia Rickard, has indicated that the ACCC will “carefully consider any allegations that price changes are being misrepresented in breach of the Australian Consumer Law”, and “will be looking at the market to ensure that consumers see immediate price decreases”. While this is reminiscent of the surveillance that the ACCC was tasked with at the time the GST was introduced, it is important to remember that there is no general prohibition against suppliers or retailers increasing their prices. There are also no current proposals to introduce a specific prohibition against suppliers or retailers increasing prices following the removal of the GST on the Products.
The reputational consequences of failing to reduce prices might therefore be the most significant deterrent: “if retailers do not reduce the price of menstrual products by nearly 10 per cent, Australian consumers will expect them to explain why”.