By Jennifer Thompson and James Vassilopoulos
What do Graeme Samuel, president of the Australian Chamber of Commerce and Industry (ACCI), the Young Liberals and Jeff Kennett all have in common? Well, if you believe the establishment press, they are all part of a "groundswell" of public opinion supporting introduction of a goods and services tax (GST).
The first stage of the Liberals' attacks on our rights and living standards have now been implemented. These include savage budget cuts, the Workplace Relations Act and legislation for the partial privatisation of Telstra. Business is now pushing the government to go further by implementing some form of GST.
In fact, the "groundswell" is a very limited one. The ACCI, the Sydney Morning Herald, the Australian Financial Review, the Young Liberals and Liberal premiers Kennett and Court are the main forces pushing the "reform" of the taxation system and a GST.
Having been burned by the GST issue in the 1993 election, Howard and Costello have a public stance of refusing to introduce one in the government's first term. Costello has said: "I've stood in ... RSLs ... and tried to explain it to the punters. The punters, when they were asked, in an open and fair election, said no. We said we wouldn't revisit that area. We won't."
Of course, this government is well known for having two kinds of promises. There are ordinary promises, which it has already broken. Then there are "core promises", which are the ones it hasn't broken yet.
And even if fears of the political consequences force the government to resist the pressure for a GST from business, Howard could call an election well before 1999, hoping to gain a "mandate" for a GST without breaking the first-term promise.
Businesses are already factoring the GST into forward plans and contracts. For example, some outsourcing contracts have GST clauses to stipulate how the price of the good or service will change under a GST regime.
'Debate'
The Democrats, following their January 18-19 national conference, have supported a "debate" on tax reform, including discussion of a GST. Democrat leader Cheryl Kernot stated:
"I welcome the number of community groups who are now saying that tax reform is important. But the answer doesn't have to be a GST. Let's talk about it: let's talk about tax reform options as a nation. But let's not prescribe an answer."
But there is no "open debate" on tax reform, and there is not going to be one. There is a discussion between business, which wants a GST, and the major parties, which want to deliver what business wants but are fearful of the likely political backlash.
These forces are now seeking a "groundswell" or other cover, such as a "debate" with anyone besides themselves, which can be presented as evidence of an "objective" need for a GST. Does anyone seriously imagine that business or the major parties are going to participate in a debate which includes serious presentation of demands such as "No GST; tax the rich!".
Tax base
The demands for a GST are usually presented as "tax reform". The Financial Review, for example, regularly carries phrases such as "mounting calls for tax reform", by which it means its own campaign for a GST.
This language is a deliberate lie. Like labour market "reform", tax "reform" is the exact opposite of what is implied. It is a reactionary scheme, not the improvement suggested by "reform".
The arguments being used to introduce the GST were summed up in the Bulletin of July 2, 1996: "that the Australian tax system is unfair, too complex and too easy to avoid, that it distorts investment decisions, discourages savings, and is losing its capacity to fund the programs the community wants".
The recently announced budget blowout of $3 billion is now being used as another pretext for a GST.
The argument is that the tax base should be "broadened" to arrest a $10 billion decline in taxation. The decline itself is real enough; it is caused by reduced taxation of those most able to pay during 13 years of the federal Labor government.
The Hawke and Keating governments dramatically reduced the rate of company tax — from 49% to 33%. They also cut the top marginal personal income tax rate from 60% to 47% — a gift of about $4 billion a year to a wealthy 5.6% of taxpayers.
Any consumption tax is unfair and unjust. It increases the selling price of goods and services. The average consumers of these goods and services are those depending on social security or wage earners, who spend a much higher proportion of their income on consumer goods and services than do the rich. In terms of living standards, low and middle income people will be much more severely hit by a GST.
High income consumers might even end up paying less consumption tax, since many luxury items are already subject to luxury taxes which could be reduced by a uniform across the board consumption tax.
While some basic goods might be made exempt, the overall impact of a GST would still disproportionately affect those least able to afford it. That would especially be the case if "compensation" to those on low incomes was paid for by further cuts to social spending, as is likely, reducing the social wage — education, health, public transport — for everyone.
As Dick Nichols, industrial spokesperson for the Democratic Socialist Party, explains: "For working people, the GST debate is heads you lose, tails you lose. That's because carrying on without a GST means continuing tax evasion (witness the recent shortfall in company tax receipts) and unremitting pressure for budget cuts; imposing a GST means even more inequality and pain for the working (and unemployed) majority."
Summit
Unfortunately, the Australian Council of Social Service (ACOSS) has allowed this dilemma to push it into a public willingness to "consider" a GST, in the hope that this will allow some measure of social welfare to survive further federal government budget cuts. Such a position only makes it easier for the government to proceed with its agenda.
The real nature of the tax "debate" was evident at the "national tax reform summit" which ACOSS co-hosted with the ACCI last October.
Many of the submissions by business lobby groups focused on shifting taxation from income to consumption, by further lowering personal income tax and company tax in combination with increasing consumption tax.
Accounting firm Price Waterhouse took the summit a reactionary step further by recommending abolition of the income tax-free threshold. The attraction of this is squeezing another $8 billion of revenue from the poor.
Peter Walsh, writing in the Financial Review in November, pointed out that this sort of squeeze on the poorest — accompanied by the vastly reduced tax burden on the richest individuals and corporations — is one long-term "cause of poverty among low-income people and their kids".
In 1977-78, low income earners (defined by Walsh as receiving one-third of average weekly earnings [AWE], or around $12,500 in today's dollars) paid no income tax. In 1995-96, that income level is taxed at 11.5%. Over the 1977-78 to 1995-96 period, the tax-free threshold fell from 33% of AWE to 14%.
A regressive tax such as the GST would continue this process of making the taxation system less equitable.
The only way to a fairer tax system — and this is the reason it hasn't been canvassed by the government or its media mouthpieces — is to increase taxes on the rich (see box).
Currently companies, despite an official tax rate of 36%, pay on average around 21 cents in the dollar in taxes — for which investors can receive tax-free income. Some companies pay far less; for example, Rupert Murdoch's News Limited enjoys a rate, in effect, of just two cents in the dollar. Billions of dollars would be recouped if the government raised the corporate and top marginal personal rates back to 49% and 60% respectively.
[Lessons of New Zealand experience: next page.]