Scrapping GST is a classic, populist issue that sounds delicious in times of high food prices but at closer inspection – it doesn’t taste good at all and isn’t the best way to help those struggling to buy food.
The cost of food and fuel has dominated the media over the long weekend and there will be many of you, like me, that just wanted this idea of removing GST to be the silver bullet. But sadly it won’t.
Here are the 7 reasons why:
1. We are global citizens and we are all facing a global food shortage. Drought (climate change), armed conflict and a surge in demand from China and India mean are the causes. Cutting GST on food is not going to do a thing about our food prices which are set internationally. Another wave of increases would take us back to square one.
2. Having two different sets of rules for GST is complicated and costly for food retailers to administer – and you can guess whom they are likely to pass their new cost onto.
3. And new costs are created for Government as well – money that could be spent on public services.
4. It will create a new, energy-sapping and probably never ending debate about what should have GST attached and what shouldn’t. Australia has this problem – cooked chickens have GST attached but cooked cold chickens do not. You have probably heard the stories. And what about taking GST off other healthy/desirable goods and services? Nicotine patches? Pilates DVDs? Doctors visits?
5. This one I just know will happen: in the initial confusion about the new prices of food, retailers will take a slice of the cut for themselves, meaning prices may not decrease by the full 12.5%. This is exactly what happened immediately after the changeover to the Euro.
6. It’s regressive – wealthy people spend more on food and will receive a bigger benefit.
7. It slashes probably 100’s of millions off our tax revenue as a country. This is money we need (especially during these times of higher economic stress) to spend on teachers, roads, doctors, Working for Families, nurses… So we either need to sack some of these people, halt some of these policies or increase taxes.
Those on no or low incomes do need more support at this time – so thank god for Working for Families, which is real financial assistance in the hand to those who need it.