Tag Archives: GST

Be kind, rewind, rollback, dissemble….

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In the years immediately after the 1998 Federal Election, at which John Howard’s Coalition successfully won a mandate for introducing the GST, Federal Labor got stuck in a real policy communication rut. Sure, there was quite a bit of popular opposition to the new tax, and there were some very good reasons for Labor to continue to fight against it. Unfortunately for Labor supporters and indeed Kim Beazley’s political aspirations, as the years ticked by and Australia headed towards the 2001 election, the catch-cry of “rollback” started sounding regressive, tired, and somewhat unappealing to the average punter. One started to get the sense that the core premise of Labor’s economic platform was to take the country back in time three years, chronologically if not literally. Not really a good look, unless you’re Marty McFly.

And so it seems to be with Tony Abbott and the NBN. His mumblings are starting to sound like his policy on our telecommunications future is “rollback”; to regress, to move backwards. His latest hysterical suggestion to drop the NBN like a hot potato because of the floods seems patronising and misguided; a cry and a gasp for a headline. What right-minded government, having secured a mandate for an infrastructure project at two separate federal elections, and having already signed numerous contracts binding the nation to agreements to the tune of billions of dollars, would dump the project at the first sign of unexpected external financial issues, or at the suggestion of their political opponents?

One wonders what Shadow Communications Minister Malcolm Turnbull really thinks about the National Broadband Network, and his leader’s cock-eyed approach to opposing it. What one doesn’t wonder is what Julia Gillard thinks about the Coalition’s “duh….rollBACK!?!!” broadband policy for the years heading toward 2013. Two thumbs up?

Crossposted at Larvatus Prodeo.

Injecting some nutrition into the GST

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Like many of us, I suspect, I have a strong disposition towards eating significant quantities of chocolate on a regular basis, so I do have some vested interest in the so-called “fatty food tax” that is being bandied about as an option in the war on obesity. The Obesity Policy Coalition, which consists of Cancer Council Victoria, the Victorian branch of Diabetes Australia, VicHealth, and the World Health Organization Collaborating Centre for Obesity Prevention at Deakin University, proposes that an annual nutritional survey be introduced, and that the data gathered from this survey be used to drive the particular foods that the tax would target.

While conservatives are sure to baulk in quick time at the prospect of another tax being introduced and the government sticking its grubby nose into our shopping trolleys, I really do think that a tax-neutral scheme could work, work well, and better yet for the poll junkies in the Rudd Government, be sold effectively to a sceptical public. Tax-neutral, you ask? As Jane Martin suggests in the article linked above, what I believe would work best is for healthy foods (e.g. particularly fruit and vegetables, wholegrain-based foods, lean meats, etc.) to be subsidised by the government through a reduction in the rate of GST for those items, with tax reductions funded through corresponding increases in the rate of taxation on unhealthy foods (e.g. alcohol, sweets, high-fat snacks, soft drinks, energy drinks, etc.). Such a scheme would inject two powerful incentives into the market for people to think more carefully about the choices they make at the supermarket, and the sorts of food that they should be eating a lot of.

Making the scheme tax neutral cuts through a lot of the “tax rubbishing” that is sure to be done by the sorts of one-eyed ideologues who would be happy to drive their expensive cars through the undergrowth before they will contribute to a public roads system, or are happy to see the less well-off attend substandard schools and be treated as substandard hospitals because they don’t believe in public education or health systems. In short, such people are selfish mugs, and normally shouldn’t be given the time of day. However, they also shouldn’t be allowed to let their prejudices taint the perspective of everyday folk who just want the best for their families. Presumably there will also be costs to the economy involved in instantiating such a scheme, but I’m fairly certain that modelling of the scheme would produce long-term health benefits for the nation that dwarf the initial costs of its introduction.

This issue could be a quick win for public health; all that is needed is some analysis as suggested, what is likely to be some fairly gentle tuning of an existing tax measure, and the job is practically done. Mr. Rudd? Ms. Roxon?

Should Federal Labor consider cutting GST?

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In the current global economic environment, governments across the world are looking for ways to stimulate spending in their domestic economies. Consequently, the beleaguered British Government is set to temporarily cut the rate of their VAT (value-added tax) for a one to two year period, in the hope that it will stimulate spending in the immediate term. Toby Helm and Heather Stewart have the details that are at hand for the moment in The Guardian:

Alistair Darling will make a high-risk bid to lead Britain out of recession tomorrow, when he is expected to cut VAT and entice the British people to go on a pre-Christmas spending spree.

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Last night, as Darling put the finishing touches to the most important financial statement of Labour’s 11 years in government, there was speculation that he might slash the rate to 15 per cent [from 17.5 per cent], a move that would cost the government about £12.5bn a year.

This is an interesting development because it raises a few questions about the Australian Labor Party’s stance on the local GST. Historically, of course, Labor opposed the introduction of the GST at the 1998 election and fought a second unsuccessful election campaign in 2001 on a policy of GST “rollback”. Now that the GST has been in place for practically a decade and is firmly part of the architecture of federal-state funding, it would appear unlikely that the Rudd Government would seek to manipulate it at this juncture. Cutting the rate of GST in Australia would have considerable implications for state funding, given that all revenue generated by the tax flows through to the state governments. In short, for the rate of GST to be reduced, one would have to think that the existing federal-state funding framework would need to in the least be padded by some non-GST contingency funding from the Federal Government – or perhaps reframed altogether.

The other part of the puzzle worth considering is whether lowering the rate of GST would realistically have any effect on consumer spending at all. Let’s say that the rate of GST was cut by the Federal Government tomorrow from 10% to 5% – an astronomical 50% cut. Consumers presumably would have more money in their pockets every week as a result of their reduced weekly spending – money that may or may not then be reinvested in more goods and services, stimulating the economy. Given present consumer confidence and the vast uncertainty that still exists with respect to the global economic situation, it is questionable as to whether cutting GST would actually result in a positive outcome, a fact that Peter Mandelson points out in the Guardian article with respect to the proposed British VAT cut.

In any case, it would appear that the Rudd Labor Government could not realistically afford a rate cut of anything like that magnitude without going into deficit. The revenue generated for the states from the GST in 2008-09 was projected at $45.5 billion, meaning effectively that funding such a 50% GST rate cut would cost in the ballpark of $22.75 billion; a figure already exceeding the now optimistic total budget surplus of $21.7 billion projected back in the May Budget. Without some credible evidence suggesting that cutting the rate of GST even by a small amount is definitely going to deliver results, it would be a highly risky endeavour for the government to pursue it.