By Marina Cameron
"The suddenness with which a goods and services tax has regained respectability is remarkable", wrote Michael James, from the ANU's Faculty of Economic and Commerce, in the August 15 Financial Review.
Only the day before, the president of the Australian Chamber of Commerce and Industry, Graeme Samuel, and the president of the Australian Council of Social Service (ACOSS), Robert Fitzgerald, held a joint press conference to declare that there is growing community demand for a sales tax.
On August 1, the chairman of the National Commission of Audit, Bob Officer, publicly called for a broad-based consumption tax. In fact, support for some form of GST has been surfacing regularly in the establishment media since the federal election.
Those urging the Coalition to break a specific election promise not to introduce a GST have included the Australian Chamber of Commerce, the Business Council of Australia, the chief executive of ANZ Banking, the Victorian Branch of the Chartered Accountants in Australia and Victorian Premier Jeff Kennett.
Massive public opposition to a GST is seen as the main reason for the Coalition's loss of the 1993 election. The Howard government therefore wants to be seen to be "pushed" into a sales tax by "widespread community demand" — and preferably with ALP support. Here it is being assisted by the willingness of ACOSS and sections of the ALP to flirt publicly with the idea of a sales tax.
Fitzgerald was quoted in April as favouring a GST. ACOSS claimed that the media were misrepresenting its position: it has since clarified its position by saying that while it does not "advocate" a GST, it also does not oppose a GST "in principle" and it supports a "thorough and open debate of all aspects of tax reform". At his August 14 press conference with ACCI, Fitzgerald argued that there are good sales taxes and bad sales taxes, so it was a matter of choosing the right sort.
Why does a body such as ACOSS, which seeks to promote the welfare of the poor, favour sales taxes, which are notoriously regressive, taxing the poor at a much higher rate than the rich?
In an article in the July issue of Impact, ACOSS argues: "tax revenue is being eroded and should be restored ... [having] declined by the equivalent of more than $10 billion (as a proportion of GDP) since the 1980s ... As a result, essential benefits and services for low income people are under threat."
However, it is not tax revenue in general that has been eroded, but taxation of the rich. The real drop in tax revenue of $10 billion since the 1980s was caused predominantly through reductions in corporate tax from 49% to 33% and the top marginal personal income tax rate from 60% to 47%. In 1993-94, people with a taxable income over $1 million paid a lower average rate of income tax than people with a taxable income of $40,000-50,000.
Big business wants any additional government revenue to come from measures like the GST, which taxes consumption and not income. ACOSS and Labor present no alternative policy and end up heading in the same direction, albeit with some calls for debate. And it is pure utopia to imagine that business and the Coalition can be persuaded to adopt a "good" sales tax.
It is necessary to increase government revenue and restore social services that have been cut. But doing it through a sales tax would simply further shift wealth from the poor to the rich. Moreover, it is politically dangerous, creating opportunities for right-wing demagogues to turn overtaxed working people against recipients of social welfare.