Crikey Says

Nov 21, 2012

Crikey says: circuit-breaking in GST debate

We've got Aunty in the gun. She's dumping Clarke and Dawe at 7.30, and axing TV production in Tassie (though Bernard Keane thinks it's a good idea). Rebekah Brooks disappoints her mentor again. Mark Latham v Andrew Bolt (round 3). And Guy Rundle on Hillary Clinton's 2016 hopes.

Rob Oakeshott is quite correct in complaining we have a problem in our politics if we can't have a serious debate about the GST. Indeed, the letters "GST" appear to cause a profound terror in any party politician confronted by them. The GST, the best economic reform of the Howard government after the independence of the Reserve Bank, was damaged right from the outset by the stupidity of the exemptions imposed by Meg Lees as part of the deal for her support -- a deal that, as if to demonstrate there is indeed some justice in politics, destroyed Lees's leadership, not to mention the rest of her party. The case for restoring fresh food to the GST is now stronger than ever. The once-high growth tax has fallen back to earth and is now cramping the capacity of the states simply to maintain their levels of basic services. That is partly because Australian consumers have not merely stopped spending as much, but they are spending more on food compared to other goods and services. The result is strong consumer spending growth in an area substantially exempt from the GST. Treasury's most recent estimate is that restoring fresh food would recoup nearly $6 billion in additional revenue, which would flow directly to the states, or be split between offsetting state taxes and topping up state coffers. But no political party will touch it: Labor and the Coalition both prefer to suggest their opponents have a secret agenda to raise the GST. Even the Greens won't go near it. What we need is an independent initiative to break this deadlock. A Productivity Commission reference would require government support, which is problematic. The Parliamentary Budget Office could examine the matter, but only confirm or dispute Treasury's costing; the PBO is not equipped to offer full-scale economic advice. But a bipartisan proposal from the states to remove the food exemption (which should be the first reform proposed, certainly ahead of lifting the rate) could initiate some rational debate.

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16 comments

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16 thoughts on “Crikey says: circuit-breaking in GST debate

  1. AR

    spending more on food compared to other goods and services and that is a problem… WHY?
    I was furious at this piece of nonsense and was glad to see that I wasn’t the only one with more than two functioning neurons.
    The Democrats were destroyed because of Lee’s acquiescence to the indefensible.
    A GST/VAT/MOMS is applicable in Europe because of their historical failure (esp the Latins – italy, France, Spain et al) to have an enforceable INCOME TAX so, rather that fart arse about they simply said “if ya got it, ya tend to spend it so we’ll tax it” – simple.
    The idiocy of our GST was that it not only did it not obviate income tax but did not include a super tier, for highly enriched product and(mostly)services.
    Increase the GST by all means on such upper echelon items but leave basic food alone. Tax the bejasus out of fast/junk food, to extinction if possible.

  2. Gavin Moodie

    I support jmendelssohn’s proposals to join the rest of the OECD in restoring probate duty and to remove the favourable tax treatment of trusts. However, I don’t know the cost of these tax expenditures.

  3. Carbonbasedlife

    Crikey, you guys are crazy … come out from behind your little notebook computers and blind internet research and venture into the real world. If it was 1 April I could overlook the stupidity of today’s editorial. But sadly it’s not 1 April. We, the working class, already pay a substantial portion of each dollar we earn in tax. And we already hand over 10% on almost everything other than fresh food … we spend. We will not accept an increase in the 10%. And did anyone stop to think that maybe if the percentage of spending allocated to fresh food has increased, that might be because it’s a damned necessity. On the scale of needs … need air to breath, water to drink, and then .. food. Get into the real world. Or become irrelevant.

  4. klewso

    “Make (fresh) food dearer”?
    There’s a limit to the number of “luxury goods” we can consume, but we all need to eat, even the poorest of us.

    [Revisit those “Fend for Yourself Peasants! Tax Cuts” (with their affect on subsidised/affordable necessary infrastructure funding – education/health/care/dental) Howard used to buy votes.]

  5. Jim Moore

    I’m giving up reading the editorial as it seems to now be written by a member of the Young Libs.

  6. Gavin Moodie

    I second zut’s motion for negative gearing homicide.

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