The Guardian June 14, 2000


GST lies and damned lies

by Anna Pha

The "simpler", "fairer" tax that we were promised is turning into a 
nightmare as the realities dawn and the complexities overwhelm those who 
are required to register and attempt to administer the tax. And all this, 
even before the tax officially comes into operation on July 1. Government 
pre-election promises are in tatters and public concern is at such a level 
that the Government has gone into damage control with $410-billion 
advertising campaign to sell the tax changes.

The full page advertisements in the dailies and the endless TV commercials 
do nothing to sort out the confusion or help people prepare for the tax 
changes.

That is not their purpose. They are nothing more than political propaganda, 
trying to convince people that all will be well and that the tax is "good 
for you" and for the country. The Government is apparently above the law 
when it comes to dishonest and misleading advertising or blatant misuse of 
taxpayer's money for its own political purposes.

"We're in for a tax cut", says one ad. "Every taxpayer gets an income tax 
cut". "... this immediately puts extra money into the pay packet of every 
Australian worker", the ad continues.

Not true. Workers who earn less than the present tax threshold of $5,400 
per annum will not get one cent out of the tax cuts.

"More money for families." Which families?

Many families will see their incomes rise with tax cuts and some will 
receive higher family allowances but, at the same time, they will be paying 
higher prices on almost everything they buy including services which have 
never been taxed before.

Eroded by mortgage hikes

The far from adequate compensation offered through tax cuts and increased 
allowances has for many already been eroded by mortgage hikes and higher 
credit card repayments following recent increases in interest rates.

Insurance premiums have already risen. And price rises of around 20 percent 
for supermarket goods were not uncommon towards the end of last year  
before the Australian Competition and Consumer Commission (ACCC) began its 
monitoring of GST "price exploitation".

We were assured that the cost of a beer was to rise 1.9 percent. Now, 
according to the ACCC guide, it will be closer to eight percent.

The Reserve Bank claims the higher interest rates had nothing to do with 
the GST  they were necessary to curb inflation. But with a recession due 
and consumption likely to decline when the GST comes in, the only potential 
source of inflation is the GST itself.

The Howard/Costello Government's pre-election promises of a GST-induced 1.9 
percent rise in inflation have already been officially adjusted to double 
that.

Pensioner hoax

"Pensions increased and kept above the cost of living", claims the 
Government's big sell and all allowances will increase. Not quite true!

Not all allowances will be indexed by the four percent promised. Half of 
the four percent pension increase is an advance on future CPI-based 
increases and will be absorbed as the CPI increases take place.

The Government also intends that the other half will also be absorbed 
overtime meaning that the basic pension rate will be no more than it would 
have been had the present assessments continued, without the four per cent.

Pensioners will be hit by the GST on many pharmaceutical products. They are 
already paying extra for products removed from the Pharmaceutical Benefits 
Scheme, and now will pay another 10 percent on top of that.

Tax avoidance encouraged

The ads claim that there will be a "Crack down on people avoiding tax." 
What nonsense. At best the ACCC and tax snoopers may turn up a few small-
time cash in hand operators.

In fact, the GST will drive more people into the black economy, and on a 
much larger scale than before.

The really big tax cheats, the big time multi-millionaires and billionaires 
who pay little or no tax on their wealth will pay even less as capital 
gains tax is halved, wholesale sales tax is abolished, corporate tax 
reduced from 36 cents to 30 cents in the dollar, and exports exempted from 
the GST.

The Government has already ensured that the rich will be generously 
compensated for the GST!

The Government is doing nothing to end dividend imputation, negative 
gearing, trust schemes, offshore accounts, and other tax methods of 
avoidance.

Not true

"Basic items remain GST free", claim the ads. They are not. A quick look at 
the ACCC's price guide shows that public transport, gas, electricity, rent, 
clothing, take-away food, soap, shampoo, nappies, and haircuts all carry 
the GST and will cost more.

Some basic food items, luxury goods and tools may fall in price by a few 
percent.

The Government also claims that education and health are GST-free. Well 
private school fees, prescription drugs, and private doctors' bills are 
GST-free and bulkbilling is still possible under Medicare.

But school uniforms, books, non-prescription drugs and many medical 
products carry the GST.

A trip to the physiotherapist will be GST-free unless it is under workers' 
compensation or third party insurance, when it is then considered to be a 
service supplied to the insurance company, not the patient!

This means the physiotherapist, not only has to keep track of all GST paid 
on goods and services purchased, but on whether GST was paid for each 
treatment and any products sold.

Tax on education

Almost one million past and present university students will pay on average 
an extra $500 on their HECS repayments because their debt is indexed in 
line with CPI increases. The Government is refusing to discount the impact 
of GST-induced inflation.

"Lower farming and business costs." This is one of the biggest lies of all, 
particularly where small family farms and small businesses and self-
employed tradespeople and professionals are concerned.

The complexities and expense of the additional paper work, making price 
adjustments and all the monthly or quarterly tax returns are more likely to 
send many small enterprises to the wall, than reduce costs and make life 
simpler.

Those who have not taken out an Australian Business Number (ABN) will find 
that the purchaser of their services or goods will be obliged to withhold 
48.5 percent of the payment as tax for the Government. (This can be claimed 
back later when the tax return is handed in.)

This applies to any payment over $50. ABNs are needed for rental of 
property used for commercial purposes and by writers, journalists, artists 
and others receiving royalties, even though they may be PAYE employees.

"GST is frozen at 10%." If this were true Australia would be the exception 
to the rule. Almost all industrialised countries with a consumption tax 
(GST, VAT, etc) have increased the rate after the tax has been introduced.

The Coalition's initial proposition was for a 15 percent tax. There is 
nothing to suggest it has not abandoned that aim. Of the 26 leading 
countries with a GST, only Korea has a rate below 10 per cent. Twenty-two 
have a rate of 15 percent or more, and for 12 countries it is 20 percent or 
more.

The legislation requiring State agreement to raise the rate could easily be 
changed by Parliament with the support of the Coalition and Democrats if 
the States were not willing to accept a change.

Ring, ring, ring!

"The ACCC will make sure we get the price benefits we deserve", say the 
"chain breaking" ads.

The ACCC hotline is 1300 302 502.

Ring as often as you can about price hikes of more than 10 percent or price 
hikes where you think the price should have come down because of the 
removal of wholesale sales tax.

Ring if there are breaches outside the ACCC's guidelines which are being 
distributed to households. If you don't get the guidelines, ring and ask 
for them.

Target the big stores, not small businesses.

In the last six months of 1999 many supermarket prices rose by around 20 
percent  getting in before the ACCC began monitoring.

It might be worth reporting them too, especially if a store claims to be 
absorbing the GST and not raising prices on July 1. Keep the ACCC busy.

With a bit of luck the whole GST system will collapse under its own weight, 
but we cannot rely on that. It is more likely to cause considerable 
suffering. The best thing is to get on with building the campaign to repeal 
it as soon as possible.

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