On January 26, 1972, four men set up the Aboriginal Tent Embassy in Canberra by planting a beach umbrella on the lawn of Parliament House. They did this to represent the political rights of Australian Aborigines. On March 13, 2014, Ken Henry, the former Treasury Secretary, said that GST will have to be raised to shore up the future of Commonwealth budgets and State budgets. What is the connection? GST rates vary throughout the world, and Australia is by no means the highest, but looking
at GST or VAT in isolation is a big mistake. One has to look at the overall tax system, which is not that easy. In Sweden, Norway, and Croatia, the GST rate is 25 per cent. There are tiers in many of these systems so that some goods attract a lower GST or none at all, which complicates matters.
GST has this annoying habit of increasing. Take New Zealand. It was introduced on October 1, 1986 at a rate of 10 per cent. On July 1, 1989 it increased to 12.5 per cent, and on October 1, 2010 it increased again to 15 per cent.
Apart from GST having this habit of increasing, it does it by stealth. As in the case of New Zealand, in Australia it will probably increase to 12.5 per cent before hitting 15 per cent, and from there, who knows.
As I stated in an article in September 2013, the GST has a greater effect on lower income earners and is a retrogressive tax.
At that time, Colin Barnett, Premier of Western Australia, was calling for an increase to 12.5 per cent because he couldn’t balance his books.
When the GST was introduced in Australia on July 1, 2000, the sweetener was to abolish other taxes, such as the sales tax and state taxes including banking taxes and stamp duty.
What sweeteners will be offered if or when the GST increases, and what will happen next time around and the time after that? More lollies?
And what is the end game? Is it 15 per cent or 25 per cent, or something in between?
If the states cannot balance their books now and require a higher GST, what will change in the future once the GST hits its highest level? Surely the states must then run out of options and start cutting back. If so, increases in GST are simply putting off the evil day.
And since the GST is mainly a state tax, why not give the states the power to set their own GST? If the Northern Territory wants to set theirs at five per cent and WA, South Australia, and Queensland want to set theirs at 20 per cent, let’s see what happens. My guess is that shopping centres would spring up on the borders within NT and business would boom. The other states may even decide to reduce their GST levels!
But what astounds me in this debate is that I have not heard a murmur from our retail leaders (unless I have missed it). Any increase in GST hurts retailers. Why are we as members of the retail industry not up in arms?
Why have we not set up a Retail Tent Embassy in Canberra?
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.