The BLAB

Why GSTT?

30 May 2016 by Graham Duncan


Do people realise that businesses have always been given back the GST they pay?


What prompted me to start writing about GST and the tax system? It was 16 years ago, but history repeats itself it seems.


The then Prime Minister, John Howard, introduced the GST on the 1st of July 2000 with these words to the nation -


"This is something the country has needed for more than twenty years and we’re doing it because it is the right thing for the nation.


It will give us a fairer taxation system.


It will cut our income tax.


It will strengthen us in the world.


It will guarantee the revenue we need to support the health, education, police and other services so important for a fair society."



I had been in business for myself for six years at the time and everything was going well.


Problem:


The introduction of GST meant we had to buy new computers with new software to manage the collection and remittance of GST along with


payroll tax and several other taxes that were supposed to become redundant with the introduction of GST.


It certainly created jobs and growth. Unfortunately, the jobs it created were temporary and did not produce anything.


They were mainly accounting roles and contract jobs to amend every agreement document to comply with GST. We had just been through a


period of changing all contracts and checking all computers to insure Y2K compliance due to the threat that the world would end at midnight


on December 31st 1999 if we didn't.


It didn't!


Still, my business benefited in the short-term. I was placing hundreds of contract staff in such jobs. We collected and remitted shiploads of


GST but we, and our clients, were businesses, so we got it all back again when we submitted a complex Business Activity Statement.


It was only the end users that were not registered businesses (the bottom of the food chain) that ended up paying 10% more tax for almost


all goods and services.


That didn't seem fair!


In the following years, we placed most of those temporary contractors in "permanent" roles in the mining industry and the automotive


industry. But Mitsubishi has since closed and soon so will Holden, and many of the mines that made us a force in the world.


So what went wrong? What happened to the billions in extra tax that was collected and not given back?


It went on paying for non-productive services and businesses with off-shore shareholders who have either squandered it or found third world


countries to invest in.


Now our government tells us we don't have the revenue we need to support the health, education, police and other services so important for


a fair society, and we need to be innovative to create jobs and growth.


I agree and I was looking forward to some innovative tax reform from them, but what have we been offered?


A $50bn tax cut for businesses.


Should we rely again on businesses to look after our health and education and create jobs and growth?


Or should we look again at GST to save us? Why not?


Solution:


It would be really innovative to reduce income tax across the board (personal and company) and really simplify GST by reducing it to 5%


which everybody pays for everything.  


JUST DON'T GIVE IT BACK TO BUSINESSES.


Instead, the tax windfall that would result should be invested. This time in Australian owned industry that does produce things.


Oh! After paying off our overseas debt, that is.