Following the ALP’s decision to abandon its opposition to the GST, Sydney accountant, John McAuley, has put forward alternatives to this iniquitous tax.
The Goods and Services Tax (GST) is an utter disaster.
The GST reduces the proportion of tax assessed on the capacity-to-pay principle.
It discourages employment by directly impinging upon job-creating transactions in goods and services, whilst ignoring the more voluminous, virtually tax-free exchanges of financial assets which are less or only partly job-creating.
It encourages more imports, because tax on imports is generally lower under the GST than under the previous wholesale sales tax system, and it imposes draconian billion dollar compliance costs, as against relatively negligible costs previously.
In total, the GST distorts Australia’s resources away from the pattern that would be determined by Australia’s best social and economic interests, and it absorbs an undue proportion of scarce time and resources for senseless purposes.
Whereas the Wholesale Sales Tax was confined to 75,000 businesses collecting the tax, the GST requires up to two million businesses to be constantly inspecting each item of income and outlay for GST liability.
The dispatch and collection of this data on a timely basis burdens both businesses and the Australian Taxation Office, the Commissioner stating that the ATO receives about 2.7 million activity statements monthly or quarterly. (SMH, May 28, 2002)
The defective GST could be terminated; but its equivalent tax revenue preserved by adopting measures such as the following:
1. A modest tax ought to be retained on the consumption of goods and services which can generally be categorised as luxuries, and/or imported. This tax, LIT for short, levied at a margin above the 10 per cent GST and to average say 20 per cent, is warranted on social and economic grounds.
Luxuries and imports tended to be liable for the top 32 per cent and 45 per cent rates under the Wholesale Sales Tax.
The transport industry is an example of the distortive effects of the GST. Public transport provided by private and public operators, now liable for the 10 per cent GST, is finding it impossible to meet target passenger numbers within budgets, and is suffering a cost gridlock.
On the other hand, sales of motor vehicles, many being imported, are buoyed by the cost reductions following upon the GST replacing the Wholesale Sales Tax.
More pollution, road clogging and higher road and vehicle maintenance costs will be a continuing feature, as the Sydney Morning Herald has recently reported in a series of articles.
2. The virtual tax-free status of most financial services under the GST is inexcusable, as the Federal Treasury itself acknowledged in its initial package on the GST: “… there is no reason why private consumption of financial services should be tax free” (August 1998, p.96).
A small Financial Tax (FT) averaging say $2 per $10,000 would enhance equity in the tax system, and would aid in identifying the vast money laundering, proceeds of corruption, and similar activities.
The FT would be imposed on the huge volume of gross flows through financial and similar markets, such as foreign exchange, futures, options, equities, debt, term deposits and similar securities.
3. A small Debits Tax (DT), averaging say $5 per $10,000 ought to be imposed on debits to bank and similar call and loan accounts, along the lines of the abandoned FID (on bank credits) and GDT (bank and other debits) now abandoned in the states.
The advantages of the Debits Tax are the few collectors involved, low compliance cost, high potential revenue and relatively neutral influence over the pattern of expenditure on goods, services and (net) financial assets/liabilities.
Transactions in cash above a specified minimum should also be liable for DT.
The indicated average tax rates, with customary concessions and exemptions, when applied to estimated annual transactions in each category, would return GST-equivalent revenue.
Similar results could be achieved by varying one or more rates if preferred, and making compensating changes elsewhere: the cardinal principle being to eradicate the defecting GST while preserving the tax base by alternatives of a more benign nature.
The GST “roll back” was a political euphemism for “cop-out”, a squabble over omitting a few items, while retaining intact a defective system.