John Howard said that “GST would never become part of Liberal party policy”. Nonetheless the tax was introduced by the Howard Government and commenced on July 1, 2000, supposedly to replace the sales tax and state taxes such as banking taxes and stamp duty. The notion of a broad based consumption tax was first mooted by Paul Keating at the 1985 Tax Summit, but Bob Hawke dropped the idea after pressure from the ACTU. The arguments for and against GST have raged for years and will conti
nue to do so.
Arguably the GST is a retrogressive tax. Arguably it has a greater effect on lower income earners.
Enter Colin Barnett, Premier of Western Australia.
The WA surplus outcome for 2012-13 is $400 million lower than the $649 million surplus recorded in 2011-12. This largely reflects the impact of the state’s rapid decline in GST revenue grants, which were $518 million lower in 2012-13 than in 2011-12.
Barnett says that the GST is not growing as expected.
So the answer is simple, according to Barnett – raise the GST to 12.5 per cent.
State finances are very complex, but one thing is clear. The single largest component of recurrent spending is salaries totaling 40 per cent of operating expenses.
How about having a look at that Mr Barnett?
I have a problem with the suggestion of raising the GST. Firstly an increase to 12.5 per cent is a total nonsense. You and I both know that this is merely a devious step on the way to 15 per cent. Why not just fess up and go the whole hog?
Another issue I have is that the GST is a consumption tax. If you raise it, what effect do you think it will have? Yes, the revenue may go up because people have to consume, but it must have a negative impact on retail sales.
And who does that affect?
Let’s have a quick look at those low income earners. I have witnessed the introduction of GST while living in two countries. While Peter Costello did not agree at the time, there is no getting away from the fact that GST hits lower income earners the hardest.
Imagine that you are living on $750 a week. Each week you spend $749 if you are lucky, and some months you just can’t make out. You have to dip into your meagre savings to tide you over. In other words, of necessity you are spending what you earn. Now increase the GST by 2.5 per cent or five per cent. What will these battlers do Mr Barnett?
Usually what happens when a tax is increased, another is decreased changing the tax base. Merely raising the GST on its own would be disastrous.
Rather, let us scrap the GST altogether and fiddle with other taxes.
We are hopelessly over governed in this country. Abolish not only the GST, but reduce the size of state governments drastically and achieve some economies of scale by increasing the size of Canberra departments somewhat so that they can cope.
If we had a carefully constructed referendum on this tomorrow, I suspect we all know what the people would say.
The GST is an ‘in your face’ tax for everyone who shops. Abolish GST and retail sales ex-GST rise. The retail sector gets a lift and this important sector stimulates a lift for the economy as a whole.
Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702
