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Tag Archives: Goods and Services Tax (Australia)

Savings, savings, savings

Image from abc.net.au

Image from abc.net.au

“Human beings cannot comprehend very large or very small numbers. It would be useful for us to acknowledge that fact.”    Daniel Kahneman, Nobel prize-winning psychologist.

Numbers have always fascinated me. Or rather, I’ve always been fascinated by people’s inability to understand them. If that sounds arrogant and as though I seem to think I’m better than everyone else, so be it. That seems to be a way of making oneself popular these days. For the past few years, the Liberal Party have been saying that they’re just so awesome and that the current government is just a pack of losers, and that they should be government and that they were robbed. Strangely, if they were the team that lost a Grand Final nobody would be impressed by  their behaviour, but in politics, it seems to be a way to win people’s hearts and minds.

But I digress. Numbers. Really big ones. Like the budget deficit. It’s really, really big. It’s scarily big. Until you break it down. Then it just becomes mildly scary. Or as one News Limited paper told us last week, the total interest on the Government’s deficit with cost every working Australian about $5 a week. Or $250 a year. Mm, that’s about a day’s wage for some people, an hour’s wage for others, and if Gina gets her way, a year’s wage for anyone in her employ.

Of course, the figure that fascinates me today is the $75,000,000,000 dollars of savings the Liberals have identified over the next five years. That’s a lot. But the first thing that they’ll do, of course, is add to the bureaucracy. From the Liberal Website:


Commission of Audit 
For the 1st time in 16 years, we’ll immediately establish a Commission of Audit – to identify savings and efficiencies in all areas of government so we can start delivering real and sustainable budget surpluses into the future.

Mm! So they’ll spend money working out how to save money. Or to look at it another way, they’ll create a new bureaucracy that’ll work out how to get rid of the other bureaucracies.

Perhaps, the Liberal slogan could be: We guarantee that we’ll take more off you in tax than we’ll give back in services, because that’s what a surplus means!

Or

Over the past forty years, Labor have given you Medicare (bank), Superannuation, the NBN, the NDIS, and next they’re trying to implement Gonski. Compare that to our proudest achievement: the GST! And we promise we won’t put that up in our FIRST term of Government.

Or (to break down a really big number).

Over the next five years, we promise to take $15,000 off every Australian! Sorry, we promise to save $75 billion.

Rupert Murdoch, where’s the outrage?

You may recall that one of the fabricated fears planted in people’s’ minds before the last election was that a Labor Government would raise the GST. Those of us who remember the perceived threat may also remember the public outcry expressed by readers who left comments on popular sites like Rupert Murdoch’s news.com.

Someone, somewhere, dreamt up that Gillard would raise the GST, the papers ran with it, and public outrage followed. Now who would have raised such an idea? Given the negative aspects and the timing of the alleged threat I’m sure the Liberal camp might have had a small bit to play in it. I’m sure they might have been a little bit bemused that there were genuine calls to have it raised, with many of the callers being the end of town that party with the Liberals party.

The calls became more vociferous leading up to the Tax Summit.

But you may ask: “Why should we raise such a repressive tax?”  Well, there were a number of reasons mooted at the time.  Independent MP Tony Windsor started off with the most simplest of these.

Tony Windsor has suggested the GST should rise by 1 percentage point to allow 115 “inefficient” taxes to be eradicated.

Mr Windsor and fellow crossbencher Tony Crook . . . called for the GST to be examined . . . following Treasury warnings that the tax has become increasingly inefficient.

Mr Windsor’s suggestion was in the wake Treasury’s executive director of revenue Rob Heferen’s statement that the GST was costing more to collect than other taxes and was “less than robust” because of increased spending on tax-free items.

The OECD Centre for Tax Policy and Administration highlighted the “practical reality” of an increase, being that it was essential to achieve many of the reforms recommended by the government’s tax review (The Henry Review) of 2009.

“There would seem to be a fairly compelling logic to GST base broadening and a slightly higher rate (eg 12.5 per cent) as a means of rationalising the major state taxes and compensating low-income citizens who would otherwise be unfairly impacted by GST expansion,” said the centre’s senior adviser Richard Highfield.

Viewing the current tax system as unfair and inefficient, accounting bodies also put their weight behind the call.  Among them, CPA Australia suggest that:

. . . increasing the GST to 15 or 20 per cent, accompanied by cuts to business and personal tax rates, would improve the economy and raise the standard of living. “Our research helps demystify concerns that an increase in GST would hurt Australians,” CPA Australia chief executive Alex Malley said.

But the sharpest call and strongest argument comes from the big end of town; the business groups with the Australian Industry Group leading the call.

The Australian Industry Group is urging an increase in the rate of the GST – or  a broadening of its application to more goods and services – as a way to pay for  the removal of inefficient state taxes.

The Ai Group – whose chief executive Heather Ridout was involved in  the  Henry tax review – says the states and territories have among the most  inefficient and poorly designed of all Australia’s taxes.

Ideally, the group says, insurance taxes and conveyancing duties would be  removed and payroll tax remodelled or removed. Land tax could be improved  substantially.

Compliance costs could be reduced by harmonising remaining state taxes, and  economies of scale exploited by using the Australian Taxation Office to collect  state revenue.

A more broadly based or higher  GST should finance the removal of as many  existing state taxes as possible, it says.

I found it rather interesting, that during the scare campaign the Murdoch media, in particular, were wheeling out all sorts of experts calling for the increase. In the minds of the readers raising the GST would be a good thing and Labor would fall prey to this meme.

In numerous media releases leading up to the tax summit the Government clearly ruled out the increase, or that it will be tabled for discussion. To do so would have been political suicide. It may have also been seen as an easy solution to return to surplus, even though it clearly would not have been for that purpose. It was a mute point that the Government had been widely criticized for not heeding many of the recommendations of the Henry Review, namely from those critics who sit on the opposition benches.

I was opposed to the introduction of the GST and the manner in which the Howard Government hoisted it upon us, as many people were. But it is with us, and despite its obvious flaws it nonetheless could unwittingly be the vehicle that will be used to overhaul the inequalities of the current tax system. However, this was unlikely to happen because of the negativity around the GST during the last election campaign and the Government’s reluctance to pursue the matter, particularly as it is in the minds of the electorate that the Labor Government has been painted as the party most likely to raise the GST if it ever were to be raised.

Fast forward to 2013 and Tony Abbott’s budget reply speech and this widely unpublicised comment:

We will finish the job that the Henry review started and this government squibbed.

Now, didn’t the Henry Review recommend an increase in the GST? Rupert, your papers were in a frenzy the last time an increase was put in the public sphere and the outrage against the Gillard Government was carefully nurtured.

Where is the outrage now?

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