Goods & Services Tax (GST) – we don’t want an increase, Julia

A New Zealand customer told me the other day that the NZ GST has just been raised from 12% to 15%; up from the original figure of 10%.

Here’s hoping Julia Gillard can keep her hand out of our till and resist doing likewise.  Our 10% goods & services tax was a great improvement on the iniquitous wholesale sales tax that was applied fairly randomly and at a rate of over 30% to some goods.   Small businesses with a turnover of less than $50,000 p.a. (the majority of start-up businesses and many part-time small businesses) could not receive a wholesale sales tax exemption, so they were competing with those that could be granted a wholesale sales tax exemption, which was a ridiculously inequitable situation.

The only glitch was not applying the GST across the board, to absolutely everything – including food – for simplicity’s sake.  The increased grocery bills for the lowest income earners, pensioners and families could simply have been offset by increasing social security amounts (paid for with the GST raised on food).  But no, the Greens just had to be seen to be doing something so would not allow the legislation to go through without the food exemption.  In the misguided belief that they were helping keep food affordable, they imposed a very much more complicated system on a number of businesses, in particular corner shops (fresh food – no GST, takeaway food – GST), thus hurting large numbers of small business people with much larger GST administration setup costs.  That last straw in the competition against grocery retail giants, which sent them over the edge.

The cash economy is still alive and well in Australia but a reduced shadow of it’s former self; with mandatory reporting of high value cash sales for big ticket items such as boats and cars, etc.

There are two downsides.  One has been the reneging of state governments on the promise that in return for GST revenue they’d ditch the outrageous stamp duty tax charged at random on items such as property purchases and insurance.  What government in their right mind would impose a tax on citizens who make every effort to be responsible and self sufficient by insuring their home and house contents – i.e. ensure they are not dependent on taxpayers if their house burns down?  Ours.

The second downside is that people in remote areas are paying more GST for basic goods and services than people in urban areas, because the goods and services are more expensive to start with.  People in rural and remote areas have not been compensated for this increase in their cost of living which is already way above the average – when the increase could easily have been offset by raising the remote area zone tax rebate.

10% GST is easy to calculate in your head and simple to administer.  If any change to the GST is to be made, let’s hope it is just applying it across the board (including food) and an offset via social security payments and increase in remote area zone tax rebates – and a ditching of all stamp duty – a nasty hangover from previous tax regimes.

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