Hi Russell On 7 November 2014 1:06:15 PM AEST, Russell Coker <russell@coker.com.au> wrote:
Tony Abbott wants to increase GST and apply it to more items. The Liberal goal of increasing taxes on poor people is going well.
I reckon that's a bit simplistic. Most affluent countries have a much higher GST rate than we do. Our 10% rate is very low. Indeed, applying it to more items is not good. Unprocessed foods and other primary living needs should have a 0% rate. Did you know that in the Netherlands, books are taxed at a lower 6% rate? (about a third of the normal Dutch GST) Interesting. GST is a tax on consumption rather than earnings, and that is generally regarded a mechanism suited as a broad revenue measure as well as guiding for instance more environmentally aware purchasing. It means people pay tax in line with their consumption choices rather than on their earnings. That can be a very good thing for everybody including those on lower incomes. Abbott may be exploring this for the wrong reasons (political haggling with the states as that's currently where GST revenue goes), but it's not intrinsically a bad policy. As a simple example, a higher GST would make McDonalds relatively much more expensive than fresh (unprocessed) foods. That tweaks consumer behaviour which has positive impact on health, healthcare, local food production, as well as the environment. I mention the local food production because in a longer supply chain the cost component of the transport and intermediaries increases, and because GST taxes that, a shorter supply chain gains a relative advantage. And indeed, as you said, reducing the tax exemption threshold for imports would similarly tweak things in favour of local production. And that's good for employment and our long term economy. I think siding the current $1000 to $300 or $500 would be good. Ironically, countries that have been subject to broad international boycotts have been shown to be excellent innovators and often have a solid domestic economy. This can easily go bad later, of course. It's not a guarantee for long term success. Regards, Arjen.