How the proposed GST will impact ALIA members - Arthur Andersen report

GST and public library services

• public libraries, whether corporatised or not, are established by local councils as part of their normal community services;
• these libraries are funded almost exclusively by local and state government; and
• non-corporatised public libraries are run by local councils and are constituted under the relevant Local Government Act. As such, they are likely to be defined as a 'local government' body.

Non-corporatised libraries
The key issue is whether non-corporatised library services are 'non-commercial' activities of government. In the case of these libraries operated and funded by a local council, it is clear that such library services will be part of the non-commercial activities of the local council. Thus, these libraries will effectively enjoy the GST-free status of local government.

GST-free
The Government has indicated that local government bodies (for which its uses as an example, a public library run by a local council) will be GST-free. That is, they can claim input credits for business costs such as new books, and rent, and do not need to charge GST on any 'non-commercial' services. We have attached to the report the Government's information brief for your information.

There remains, however, the likely outcome that some of the charged services of such public libraries will be subject to GST. For example, photocopying services, internet access charges, book reservation and late return charges, CD-ROM searching fees, and rental of video or audio tapes all will attract a GST. However, we would expect that this output liability will always be more than offset by input tax credits. Administration of the GST collection on the commercial, taxable activities, will clearly be an issue to all libraries.

An example calculation has been provided using 1997/98 financial information from the Yarra Plenty Regional Library Service. This example appears in this report.

Corporatised libraries
The analysis in the previous section in respect of non-corporatised libraries is complicated in the case of a corporatised library service. A corporatised library service is a separate entity to the local council, and provides the council with library services for which it is compensated. As such, the libraries may be considered as undertaking commercial activities of the government, and may therefore not be GST-free.

While this would be a ludicrous result, it may not actually create any additional GST cost.

If the corporatised library is providing a taxable service to the local council, it will effectively charge the local council GST on the 'grant' it receives in return for the provision of these services. That GST will, in turn, be claimed as a credit (effectively a refund) by the local council which will enjoy GST-free status in respect of most (if not all) of its other services and activities. Thus, the GST will not represent a significant cost to either the library entity or the council.

This is explained further by way of a worked example provided as an attachment to this report.

Public libraries in the education sector
Most educational services will be GST-free. However, there is some uncertainty as to the scope of this GST-free status in respect of a library's ordinary business. At this stage it appears that goods such as computers and books, and services such as internet access and photocopying, which are sold or leased to students, will be taxed in the normal way. However, goods loaned to students free-of-charge will not be taxed.

There is an expectation that libraries run by educational institutions such as schools and universities, and other recognised institutions that provide courses leading to a recognised degree, diploma or certificate, and which lend books free-of-charge, will effectively be GST-free. That is, they can claim their business input credits, and no GST liability arises in respect of the books loaned free-of-charge.

However, we note that library fees and book fees charged in addition to tuition fees (e.g. at universities) are likely to attract a GST. It is the clear intention of the Government to limit the GST-free status only to tuition and the provision of accommodation at boarding schools.

Clearly, some libraries will have taxable activities and GST-free activities. However, we have little information currently available to assist in determining which services will fall into each category.