By Sue Boland
Any indirect tax, like the Coalition's planned goods and services tax, is inherently inequitable because it taxes every individual at the same rate on their purchases, regardless of capacity to pay.
Moreover, low income earners have to spend 100% of their income, while those on higher incomes do not. So in terms of income, a GST taxes poorer people at a higher rate than richer people.
Once a GST is introduced, it is easier to increase than income taxes because it is hidden, incorporated into the price of goods and services.
Countries with a GST have increased it by an average of 42.41% within 10-15 years of its introduction. Denmark increased it by 150%.
A GST places a special burden on groups such as the ill, the frail, people on special diets and people living in areas with climate extremes — anyone, in fact, who has extra expenses.
If you have to pay inflated prices because you live in a rural area or can't travel to shops where prices are cheaper, you'll be paying more GST because it is calculated as a percentage of the purchase price.
Disabled people need special equipment and household appliances, often have specialised transport requirements and need services to come to their home. These will all be more expensive.
Aborigines would be especially hard hit because they are the lowest income group in Australia, and many live in remote areas where the cost of living is higher. Many have health problems that necessitate extra expenses, all of which will increase with a GST.
New migrants would also be hit hard because they are more likely to be working in jobs on low wages.
Growing families would pay more because each additional child brings increased spending on goods and services.
Retired workers living on their savings and superannuation would have the value of their savings reduced overnight. These people would be taxed twice — first, because they have already paid income tax, and second, with the introduction of a GST.
It's simply not possible to "compensate" for a GST. Income tax cuts don't help people who don't pay income tax because their incomes are too low, or retired workers living on their superannuation.
In any case, it's unrealistic to think that a government which is cutting wages and welfare entitlements, restricting injured workers' compensation, abolishing free government services and forcing low-income earners onto the private rental market is going to compensate people adequately for the introduction of a GST.
Ordinary workers would also be losers. If a worker on $35,000 a year spends $32,000, then a wage increase of $3200 would be needed to compensate for a 10% GST (or a bit less than that if the workers' purchases include things now covered by the existing wholesale tax). When the government talks about compensation packages, it refers only to people on government benefits, not workers.
Even if the government initially provided some compensation for some groups, there is no guarantee that it wouldn't be removed in the next round of budget cuts, and there's no likelihood that the compensation would be increased each time the GST rate was increased.
In New Zealand, the government cut social security benefits by up to 25% in 1991, although benefits had been increased only a few years earlier when the GST was introduced.
With governments privatising services or converting them to user-pays, people on low incomes are being forced to pay an increasing amount on essentials. They'll be further excluded from the possibility of enjoying any sport or recreational activities because the cost of all of these activities will increase.
Even exemptions of basic living requirements such as food and health services won't protect people from a GST.
Classifying a good or service as "exempt" simply means that the retailer cannot claim a rebate on the GST paid on business inputs, and no GST is collected on the eventual retail sale. But the retailer selling an exempt item would increase the price in order to recoup the increased input and administrative costs. The consumer would face a price increase, even though this good or service was "exempt".
And once a GST has been introduced, it is easy for governments subsequently to remove the "exempt" status on essential items.
Non-profit community groups, in order to claim a rebate on the GST they pay, would need to keep detailed records of all GST paid on supplies, and they would need to submit regular returns to the tax office.
While some people recognise that a GST impacts unfairly on workers and anyone on a low income, they justify a GST on the basis that it will force tax evaders to pay some tax and will draw the cash economy into the tax system. However, a GST does not achieve those objectives.
First, a GST does nothing about the various methods adopted by corporations to avoid taxes. Secondly, experience in countries which have introduced a GST shows that the cash economy can easily coexist with a GST.
Current estimates are that in European countries where a GST-type tax has been in existence for some time, the cash economy amounts to between 11% and 24% of the total economy. In Canada, it's estimated that the cash economy has doubled in the seven years since the introduction of the GST.
The GST is a gigantic scam being carried out by big business. It is intended as legalised robbery — stealing from the poor and giving to the rich.
No amount of "compensation" or exemptions can convert a GST from an unfair tax into a fair one.
Given the power and influence of the supporters of the GST (the 101 members of the Business Council of Australia account for almost 25% of Australia's GDP and 12% of employment, and they own the media), it won't be enough just to vote in the federal elections, or give our opinion to pollsters. Workers will need to organise politically and industrially to prevent the GST theft from being carried out.
There has been no instance of any country where a GST has been introduced and subsequently rescinded, even in Canada, where opposition to the GST was so strong that the government was thrown out of office.