The Guardian February 9, 2000


GST: buckets of money for some

by Anna Pha

Any lawyer or accountant who can't make a "bucket of money" out of the 
Government's GST and business tax reforms "should go back to their hobby 
farms", according to Financial Services Minister Joe Hockey. And that is 
the whole aim of the exercise: to make buckets of money. The only catch is 
that only a very few will be making buckets of money. Most will be filling 
the buckets from their pockets.

As the Australian Financial Review reports, the "GST is proving a 
boon for accounting and legal firms. It is a bonanza that should continue 
well beyond its July implementation" (FR 25-1-00).

Australia is heading down the same path as the UK where "the consumption 
tax supports thousands of specialist tax advisers", and in Canada where 
"there are as many tax advisory services for the GST as there are for 
income tax", according to the FR.

"It's a blue sky out there", according to PricewaterhouseCoopers.

The big accounting companies see large dollar signs for years to come and 
are taking on GST specialist staff.

The big legal firms are just as joyous, as they anticipate endless 
litigation over the classification of goods and services as GST exempt or 
not, over export issues, tax evading company restructurings and all sorts 
of other issues that will arise.

Preparatory costs to set up for the GST are running into hundreds of 
millions of dollars: Commonwealth Bank $35 million, Westpac $30 million, 
retailer Coles Myer $54 million, Woolworths $40 million, Australia Post $50 
million. 

Come July 1, the official commencement of the GST, the profit bonanza will 
continue  for some.

There are massive compliance costs for small businesses, tradespersons, 
professionals, farmers, charities and non-profit organisations, schools, 
community groups, sports clubs, lobby groups, political parties, trade 
unions, and any other organisation which buys or sells goods or services.

Some small businesses are faced with $30,000 computer package costs, 
burdensome accounting procedures as they grapple with GST credits and 
debits, and making quarterly returns to the Tax Office. These costs could 
put many small businesses out of business.

Taxpayers are funding the bill for the $500 million the government has 
allocated for set-up costs for small businesses and selected non-profit 
organisations. It is only a drop in the ocean.

Big outfits such as the Commonwealth Bank, Coles Myer and the insurance 
companies will pass on the millions of dollars in GST costs to their 
customers.

Anyone who has been shopping lately knows that prices are rising by many 
times more than the two per cent inflation that the Reserve Bank and 
Australian Bureau of Statistics talk about.

And all of these price rises are taking place before the 10 percent 
is applied.

Transfer of wealth

The GST is a tax at the point of consumption, when people spend their 
money.

It is a flat, regressive tax, being at the same rate in the dollar 
regardless of a person's income. The rich, however, will pay it on a much 
smaller percentage of their income, than those on lower incomes.

The GST is part of a comprehensive overhaul of the whole tax system. It is 
one of a number of tax "reforms" which all have the deliberate effect of 
benefiting big business and the wealthy. Other changes include:

* reduction in corporate taxation from 36 cents in the dollar to 30 cents;
* reduction of the capital gains tax by 50 per cent;
* restructuring of PAYE income tax to be of maximum benefit to those who 
earn more than $50,000; 
* removal of wholesale sales tax paid by companies.

These tax cuts which benefit business and the wealthy are being funded by 
the GST which workers, pensioners, students, and the unemployed pay and by 
the cuts to public health, education, housing and welfare services.

The tax package is a transfer of wealth, what amounts to a massive grab by 
capital from the pockets of workers and their families.

The Reserve Bank's latest rise in interest rates will compound the 
situation by adding further to the cost of everything.

Workers face higher interest rates on housing and other loans and on the 
$13.26 billion owed on credit cards.

Businesses will pass on the higher interest rates on their loans through 
higher prices and further attacks on workers' wages and working conditions.

The Government's promise of a 10 percent ceiling on price increases and 
compensation for these price increases through tax cuts is nonsense.

Workers on less than $50,000 will be worse off. Much worse off.

According to the National Tax & Accountants' Association "over 4 million 
taxpayers earning between $20,000 and $40,000 have now been placed in a 
desperate financial position".

There is still time to stop the GST and the rest of the package. Opposition 
is growing as people discover how it will affect them. 

There is no doubt that Queensland voters sent a message to the Liberal 
Party last weekend.

The labour movement has a particular responsibility to take up the fight to 
defeat the GST and work together with other organisations, including small 
businesses and farmers who will all be victims of the new tax regime.

The Labor Party opposed the GST, now it is time for it to give a commitment 
to repeal it.

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