Lot's Wife Edition 6 2015

12
POLITICS
500 Word Challenge
BY HAREESH MAKAM
For
Essential to
Australia’s
Financial Woes
Increases to income and corporate tax hurt, they can damage
household budgets and they can leave citizens in precarious
financial positions. However, the GST is a regressive tax and
by that token does not nearly harm the spending patterns,
investment and budgets of ordinary people and companies.
Have you ever seen or spoken to someone who does not buy
essential and non-essential goods or services because of a
10% surcharge due to GST? No. It’s farcical to even ponder a
world where anyone (poor or rich) would re-configure their
spending patterns because of a 10% tax on the things they
purchase. If you follow that logic, and most people do, then
by extension a 5% increase in the GST and the broadening
of its base to include all goods and services seems fair and
harmless to any income earner on the street.
First of all our budget predicament is to a large extent
serious. Those who tell you that a AAA credit rating, and
having the lowest debt to GDP ratio in the OECD are signs
that our fiscal position is solid are gravely mistaken. This is
because they have a lack of understanding of the Australian
economy. Our economy is two speed – we rely on banking
and finance industries to stabilize and hold our economy
together while another industry stimulates private economic
growth. However, in recent times we have seen mining dying
out, manufacturing die while agriculture is decomposing in
it’s grave. Furthermore, very few foreign investors want to
confidently support a country in economic transition that
promotes a weakening currency and houses high wages and
taxes. We are becoming as Keating calls it an ‘industrial,
economic graveyard’. As a consequence, government
revenue has sharply fallen, debt has increased and we will be
experiencing a fiscal crisis if we do nothing in the short-term.
The solution in the short term is more government revenue
– but more money for the states in particular.
According to CPA Australia, broadening the base and
increasing the GST to 15% would add $42.5 billion in the first
year to state coffers and an extra $27 billion dollars every
following year. The increase and broadening alone would
offset the government’s $80 billion cut to schools and
hospitals and provide more long-term economic stability
"Have you ever seen or
spoken to someone who does
not buy essential and nonessential
goods or services
because of a 10% surcharge
due to GST? No."
to State budgets, which are also facing a hit. Moreover,
this rise in the GST intake would allow the Commonwealth
to reduce income and corporate taxes as the fall in
government revenue (by this decision) would be offset by
states becoming more fiscally independent. This will allow
the Australian economy to be more competitive, encourage
investment and stimulate job growth into the future because
as has been previously mentioned non-regressive taxes hurt
the finances of people the most and therefore lead to less
confidence and growth in the market.
Overall, the GST and its reform will provide us with $100
billion a year (25% of federal government revenue) whilst
staying regressive and harmless to household budgets and
spending patterns. It is by virtue, a policy which herald’s
great benefit for relatively little pain. That readers, is the
fundamental essence of good public policy. But it is only the
start of the tax debate.