The Guardian June 2, 1999


GST sell-out

The leadership of the Australian Democrats has entered into a covert and 
shabby deal with the arch-conservative Howard Government to implement a 
goods and services tax, despite the clearly expressed wishes of the 
majority of Australian people. In rescuing the GST for the Government and 
big business, the Democrat leadership have ditched their commitments to 
community groups, charities and the environment.

The Democrats have publicly admitted that a GST would penalise low and 
middle income earners.

However, they then apply a twisted logic in claiming that excluding "basic 
food" from the tax will largely eliminate such an effect, stating that "... 
taking out basic food primarily eliminates the regressive effect of a GST".

Exempting a range of food from the GST does not, as the Democrats claim, 
make for a "fair GST", it simply reduces the area of application of the 
tax. The GST is intrinsically unfair. 

The Democrats know the Government can not be trusted. And now the 
pensioners, unemployed and working people of Australia know the Democrats 
can not be trusted.

None of the exemptions, none of the compensation, none of the income tax 
cuts are permanent. The only thing that would be here to stay is the GST.

The far from adequate compensation promised to pensioners, families and 
people on low incomes could in the next Senate be wiped out by the combined 
vote of the Democrats and Coalition parties. They will always find an 
excuse.

The complexity and almost farcical exemption criteria for food from the GST 
is set to fail and also create an excuse for all food to be exempt.

The small business sector faces considerable problems and costs in trying 
to cope with the additional accounting procedures. Takeaway outlets, 
restaurants and food outlets will suffer loss of business as people try to 
avoid the new tax.

Ice-cream, soft drinks, biscuits, cakes, pizzas, meat pies, crisps, nuts, 
muesli bars, cakes, fruit buns, cooked chicken pieces (but not whole cooked 
chickens) and pet food are amongst the items that are commonly purchased by 
families and subject to the 10 per cent GST.

Fresh unprocessed food is exempt.

The National Tax and Accountants Association has warned that the cost of 
fresh food is likely to rise by 10 per cent if the GST legislation is 
passed.

Association President Ray Regan stated recently that mixed businesses which 
sell fresh as well as processed foods will be forced to charge more on all 
goods to cover the cost of additional accounting systems.

He noted that: "... such businesses ... will have no choice whatsoever 
other than to set up accounting systems, with appropriate checks, balances 
and controls to pass regular GST fresh food tax audits."

However, any business person who is forced to incur additional compliance 
costs will "on charge" such costs back to the consumer  possibly by as 
much as 10 per cent.

That means take-away-food and restaurant meals will not only be subject to 
a 10 per cent GST tax slug, but also an additional charge to cover GST 
compliance costs.

Environment

The tax itself is not the only area of injustice involved in the Democrats' 
sellout. The arrangement would see power over the environment, which is 
currently held by the Federal Government, pass to the States.

As the Greens have noted, if the Federal Government had not passed 
legislation to retain ultimate control over major environmental issues, 
various State Governments would have initiated or approved acts of 
environmental destruction.

The Franklin would have been flooded, the Daintree rainforests would have 
been logged, the golden sands of Fraser Island would have been mined, and 
the Wesley Vale pulpmill would now be spewing 13 tonnes of organochlorines 
into Bass Strait every day.

Under the proposed GST deal, it is now possible that these and other 
environmentally destructive ventures may go ahead.

Fifteen major national and state environment organisations have also 
condemned the tax agreement as highly damaging to the environment and an 
international embarrassment.

In a joint statement they note that: "... the Australian taxpayer is being 
asked to provide an additional $2.8 billion per year for air pollution, ill 
health, and greenhouse gas emissions.

"While the package has a range of incremental initiatives, such as rail 
subsidies and a sunset clause on the diesel rebate in 2002, these are 
smothered by the massive price cuts for dirty diesel....

"Over three years the package invests $8 billion into pollution and $3 
billion into cleaning it up."

Clearly the tax reform needed is to restructure the system so that it is 
more equitable. This would mean doing what the Howard Government is 
diametrically opposed to, and what the Democrats have turned their backs 
on: make corporations pay tax relative to their massive profits and ease 
the growing burden on those who create the wealth, the working people.

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