Editorial: A GST is not 'reform'
The federal government and big business argue that a goods and services tax is necessary because Australia is suffering a long-term decline in taxation revenue, which needs to be addressed if our health, education and welfare systems are not to be jeopardised.
Does this mean that Australia has less wealth than in previous years? The answer is no. Measured in constant 1989-1990 dollars, Australia's gross domestic product increased from $308 billion in 1984-85 to $415 billion in 1994-95. Per capita, it rose almost 19%, from $19,439 to $23,077.
If Australia is wealthier than it was 15 years ago, why is the government saying it can't afford to provide the same level of services? If the government is taking a smaller share of GDP, who is pocketing the rest?
It certainly isn't workers. While GDP grew by 25% in the period between 1976 and 1991, household income in the poorest neighbourhoods dropped by 23%.
The bulk of Australia's wealth is being pocketed by big business. While the ALP was in federal government, there was a shift of around 10% of GDP — some $40 billion a year — from wages to profits. This shift is being continued by the Coalition government.
That wealth transfer has been achieved by cutting real wages, increasing workers' productivity, cutting government services, cutting the top marginal income tax rate and corporate tax rates, legitimising tax loopholes such as dividend imputation and negative gearing, and direct subsidies to large corporations.
The beneficiaries of this wealth redistribution are now campaigning for more "tax reform". The Business Coalition for Taxation Reform has gone into overdrive with a $5 million advertising campaign to convince workers they should accept a GST. The coalition argues that the current taxation system is unfair (true) and that the solution is a GST (untrue).
The unfairness in taxation would be massively increased by a GST.
Since World War II, the income tax paid by working people has steadily increased. In 1950, people on an average income paid an average tax rate of 8.2%. In 1995-96, the figure was 22.7%. At the same time, income tax paid by the wealthy has been going down.
This theft from working people has been exacerbated by tightening means tests for government benefits, and few wage rises adequate to compensate for cost of living increases.
Even without a GST, a study by the National Centre for Social and Economic Modelling found that the top 20% of income earners pay only 17.3% of their income in indirect tax, while the bottom 20% pay 30.8%.
While the government's personal income tax revenue has nearly doubled in the last 30 years (from 8% of GDP in 1966-67 to 13% in 1996-97), the tax take from companies has remained almost static. (Officially, it increased from 3% to 4%, but the figure is distorted by professionals forming companies to reduce their tax.)
Tax office figures quoted in the January 14 Sydney Morning Herald showed 100 Australian transnational corporations each making more than $300 million a year but paying no tax. Almost 40 transnationals did not pay any tax between 1994 and 1996, while about 10 million wage and salary earners paid around $60 billion.
The official corporate tax rate is now 36% (down from 49% in the 1980s, and the BCTR wants it reduced further). Yet in 1996 the effective tax rate for News Corp, Fosters Brewing, Burns Philp, Brierley Investments, Village Roadshow and Lend Lease ranged from 2% to 7%. If these companies had paid the official corporate rate, the government would have received an extra $526 million.
To properly address the current inequities in the tax system, the burden needs to be shifted from working people to the corporate rich. A GST will do the opposite, no matter what the rate, what items are exempt or what "compensation" is offered.