A rise in the rate of GST? It's ON!
by Anna Pha In a speech to the right-wing Sydney Institute last week, Treasurer Peter Costello as good as admitted that the GST would be increased. In answering a question about the balance of direct and indirect taxation he said, "if you think there is global competition in tax — and there is — and you think that Australia has to be competitive, what you will be doing is re- weighting ... from direct to indirect tax. The last thing you would be doing, because you would be alone in the world, would be going in the other direction." He said, "obviously, if a country wants a competitive taxation regime and a decent level of social services, then it needs a taxation base to sustain it. To stay competitive the weight must be kept off direct tax — income tax and company tax — and the indirect tax base must carry the burden of funding social services. A narrow-base indirect tax cannot do it." The Coalition Government has already taken a number of steps to increase reliance on indirect taxation. It has introduced the GST and, at the same time, cut corporate tax rates, halved capital gains tax and substantially reduced the marginal tax rates on higher personal incomes and companies. These "reforms" result in a transfer of the tax burden to the ordinary working people and a reduction of taxes paid by high income earners and the big corporations. The GST is a particularly regressive flat tax. People pay the same rate in the dollar, regardless of ability to pay. Those on lower incomes pay this tax on a higher proportion of their income, most of which (if not all) is spent on goods and services. The taxing of incomes on a sliding scale related to a person's income is a far more progressive tax system. In addition, the capital gains tax and a higher rate of tax on company profits are essential if the objective of the wealthy paying a greater rate of tax than those on low incomes is to be achieved. By the introduction of the GST and other measures, the Howard Government has turned the previous progressive tax system on its head. It is now a totally regressive and unfair system. This policy approach comes from the OECD and is being carried out by most industrialised countries. It is being done at the behest of the transnational corporations who benefit from it. The statement by Costello is a de facto admission that the Government does not intend leaving the GST at 10 per cent. It will continue to wind down direct taxes (PAYG and corporate) and we will be sold the need to increase and extend the GST to sustain a "decent level of social services". Costello claims that the Howard Government is a low taxing government. This is a lie! He fails to mention how the GST is substantially increasing the taxes paid by low income earners. However, the Government, during the election campaign, is likely to offer the promise of more tax cuts as a vote-catcher while hiding its intention to subsequently increase the GST rate. It was always certain that the GST would be increased. This has happened in every other country where a GST was introduced. Furthermore, the legislation guaranteeing that it cannot be raised without the support of all States can easily be changed or agreement reached with the States who stand to benefit from a higher GST? All State Governments agreed to the GST despite it being against ALP policy! The media has already started a softening up campaign. The Business Review Weekly featured an article (29/6/01) which wrote of the GST being "rolled forward". By that the author, Michael Laurence, meant broadening the base, removing the exemptions and lifting the rate to 12.5 per cent. Labor leader Kim Beazley remains silent on the question. Does it mean Labor's promised roll-back on certain items would be used as an excuse to also support an increase in the general rate of the GST? The only uncertainty is the amount of the increase — to 12.5 per cent or 15 per cent. A rate of 15 per cent was proposed by the Liberals in their "Fightback" policy document during the 1993 election campaign.