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Issue #1553      27 June 2012

Watch out for Abbott on the GST

Increasingly demands are being heard to increase the GST or remove the exemptions that currently apply on certain goods and services. The corporate sector and their mates in state and federal politics (in particular Liberal Party circles) are calculating the corporate tax cuts that an increase in the GST would fund.

Leader of the Opposition Tony Abbott.

If an Abbott government is elected, the removal of GST exemptions or an increase of the amount from 10 percent to 15 percent or more will be on the agenda. It should not be forgotten that it was on the Liberal Party’s FightBack agenda (under John Hewson) prior to Howard taking leadership of the party.

The amount of extra money that would come out of people’s pockets is considerable. Treasury’s annual Tax Expenditures Statement (January 2012) provides details of the additional money the government might have received in GST payments if certain goods and services were not exempt.

According to Treasury (Tax Expenditures Statement) the government lost the following amounts in 2011 because these goods and services are exempt from the tax:

  • Childcare services – $580 million
  • Water, sewerage and drainage – $730m
  • Importation threshold imported goods less than $1,000 – $470m
  • Imported services – $950m
  • Education (courses, supplies, student accommodation) – $2.700 billion
  • Health: medicines (PBS, etc) – $410m
  • Health: medical aids and appliances – $45m
  • Health: medical and health services (treatment of patients, including hospital) – $2.8b
  • Health: private health insurance payments to patients/hospitals – $240m
  • Health: residential care, community care and other care services aged car – $110m
  • Religious services – $25m
  • Food; uncooked, not prepared, not for consumption on premises of sale and some beverages – $5.6b

Examples of GST-free food include fresh fruit and vegetables, fish, dairy products, bread and meat. Beverages include milk products, tea, coffee, water and fruit juices.

The total in “lost” revenue of the above exemptions is not inconsiderable at $14.66 billion, which is why some conservative forces are pushing for all exemptions to be lifted.

The extension of the GST to all goods and services would cost the equivalent of around $660 for every man, woman and child in Australia. This extra would have to be paid by pensioners, the unemployed as well as by those in employment.

The total GST paid in 2010-11 was $48 billion, so removing the above exemptions would increase the GST take by just over 30 percent. This would be more than enough to slash the corporate tax rate from 30 percent to 25 percent and make a big cut in the marginal rates paid by those on the highest incomes.

There is also a push to increase the GST from 10 percent to 15 percent or more. The corporate sector is also calculating the corporate tax cuts and the lower marginal rates for the rich that it could fund.

At the current rate of consumption, an increase to 15 percent, would rake in an extra $24 billion in GST – bringing the total to a whopping $72 billion (2011 figures – it has risen since then.

Of course, in reality the increase would not be as large as many people do not have extra the money to spend – they would be forced to cut back on the necessities of life.

The GST should be abolished, not increased or extended. It is a regressive tax which all people regardless of wealth pay the same rate in the dollar. Those on lower incomes pay it on a much higher percentage of their income than the wealthy. They don’t have extra income left over to invest or go GST-free jet setting around the globe.

It is time to put the scrapping of the GST back on the agenda, expose what the Coalition and their big business mates have in mind.  

Next article – First for Australia – a law to stop governments stacking the ABC board

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