Cabinet archives: Telstra in hot water on GST ahead of sell-off

The competition watchdog was raising issues with Telstra’s planned application of the GST less than a month before the tax was due to start.

Then communications minister Richard Alston in March 2000. Picture: John Feder

The competition watchdog was raising issues with Telstra’s planned application of the GST less than a month before the tax was due to start, newly released national archives documents show.

In 2000, the introduction of the goods and services tax was a pressing concern of the Howard government, and the issues around its implementation extended to the national telco.

With the GST launch date of July 1 looming, a cabinet minute dated June 5 noted the Australian Competition & Consumer Commission was still not satisfied with Telstra’s “methodology for calculating its GST-related price rises”, and that the national telco’s “public commitment of compliance” had “yet to satisfy the ACCC”.

The minute noted that finance minister John Fahey would “discuss the issue”.

Minutes from the March 21 cabinet meeting showed it had been agreed that Telstra would be permitted to pass on the cost of the GST to customers in relation to its 15 cent “neighbourhood” untimed local call rate, but that it would “absorb the costs in relation to its standard 22 cent untimed local call rate”.

Issues around the implementation of the GST came as the Howard government in 2000 continued to pursue the full ­privatisation of Telstra — a quest that would only be technically completed more than a decade later under Labor rule.

The government had made an election commitment in 1998 to conduct an independent inquiry into Telstra’s service levels to customers in metropolitan, rural and remote areas prior to the sale of the remaining 51 per cent stake in the national telco.

In February 2000, the government had to decide on the terms of reference for the inquiry, who would conduct it and the time frame for its delivery.

The stakes were high. A cabinet submission from communications minister Richard Alston, dated February 10, 2000, noted that the government had promised that “unless and until the independent inquiry certifies that service levels are adequate, there will be no sale beyond 49 per cent”.