15% GST

[avgas]

I'd vote for him and no one else

[MikeL]

Bringing the discussion back to the topic...
There's no doubt that a 2.5% rise in GST will affect different groups in different ways. Vague assurances about fairness and equity conceal the brutal fact that any economic system has winners and losers, and that any changes to taxation and social benefit policies merely alter the variables in a zero-sum equation. Shuffling the deck-chairs on the Titanic doesn't change the total number of chairs - it's just that some now get a little more sun or a little less wind. Politics being the art of the possible, and the possible always equating to what will piss off the smallest number of important voters (the unimportant ones being those who would always vote for the other side anyway), it is not surprising that in the reshuffling of the deck chairs the first-class passengers will always be advantaged.
Now here's a radical thought: how about introducing differential GST rates? Basic foods at 0%, everything else at 15%. And before you all rise up in a chorus of horrified protests, trotting out the usual arguments about complexity and compliance costs, just stop and think about the following:
1. Differential rates are still used in the VAT or GST systems of many overseas countries. Obviously the trade-off between complexity/compliance costs and social equity is acceptable in these countries.
2. The efficiency of a single-rated GST is undeniable; but efficiency is an accounting concept whose connexion with fairness and equity (moral concepts) is at best tenuous. We worship efficiency almost as if it were an end, not a means, and in doing so we lose sight of the end.
3. When GST was introduced much publicity was given to the simplicity of the system - the single rate of 10% was easy to calculate and there would be no exemptions. Of course 10% was soon raised to 12.5% and the only people who complained were those whose calculator batteries were flat. From an accountant's point of view the numerical rate is immaterial. Nobody works it out with pencil and paper. More insidiously, this whole "simple, straightforward, easy" argument was used to sell the tax to the public, with the posssibility of differential rates discarded virtually from the start, effectively stifling debate on the topic. There are sound social reasons why basic food items should be zero-rated, and the difficulties involved in determining which rate to apply for particular products were deliberately exaggerated because the mindset of those involved in the introduction of GST was firmly set on the great goal of efficiency.
4. Raising GST will require substantial tinkering with social welfare policies. There will be complexity/compliance costs here but these will be accepted as necessary - no one will complain about inefficiency here.

[Mully]

Now here's a radical thought: how about introducing differential GST rates? Basic foods at 0%, everything else at 15%.

I agree with this.

I think Australia made it too complicated when they tried differential rates - but the idea has merit.

It's pretty hard for anyone to complain (with a straight face) if fruit and veg are GST exempt and McDonalds is 15%

[Mully]

http://www.stuff.co.nz/sunday-star-times/news/152992

Statistics NZ figures collated for the Sunday Star-Times show the government got just under $51 million in GST revenue on fruit and veges in the year to June

Presumably, that's just fresh F&V - dunno.

[Pascal]

2. The efficiency of a single-rated GST is undeniable; but efficiency is an accounting concept whose connexion with fairness and equity (moral concepts) is at best tenuous. We worship efficiency almost as if it were an end, not a means, and in doing so we lose sight of the end.

We're also dealing with a computerised world. Efficiency is mostly only required at a developer level for that.

[The Stranger:Me]

Basic foods at 0%, everything else at 15%.

Is water basic food? - one would assume so.
So what about bottled water? - surely as not everyone has access to safe town supply.
So how about say evian water? - it is water after all.
What if a product is substantially water, but include gurana (sp), caffeine, sugar and bubbles?
Is milk basic food?
How about soy milk or rice milk (although they contain no milk as such)?
Chocolate or banana milk? after all they are substantially milk.
What about a milkshake?

[p.dath]

Please no differential GST! It is confusing and difficult to administer in Australia.

Just like with company, trust and top income brackets - as soon as you introduce a differential you introduce financial motive for people to find loopholes and exploit it.

When you keep it simple with the same rate you remove that motive. It's simple to work out. It's almost impossible to avoid. It targets everyone evenly.

[davereid]

It's pretty hard for anyone to complain (with a straight face) if fruit and veg are GST exempt and McDonalds is 15%

Hmm not sure I agree with you there. Why would you tax McDonalds differently to other food items ?

A Big Mac is bread, meat, salad, mayo... why does that justify a higher rate of GST ?

Is your assumption based on fat content ? Then where would you rate an avocado ?

[Tank]

Hmm not sure I agree with you there. Why would you tax McDonalds differently to other food items ?

A Big Mac is bread, meat, salad, mayo... why does that justify a higher rate of GST ?

Is your assumption based on fat content ? Then where would you rate an avocado ?

and whats a potato chip?

Seriously - this has been a huge argument in the UK over Pringles.

They said that because they were only 42% potato that they were not chips - thus not subject to VAT - tax man disagreed.

Outcome a 100 million pound back payment on taxes and then 20 million pound a year moving forward.

http://news.bbc.co.uk/2/hi/8060204.stm

[Virago]

I agree that a differential rate creates too many loopholes and inequities.

When the UK introduced VAT, basic food items were exempt, takeaway foods were all taxed. The chippy shops were avoiding the tax by selling "a dollop of tomato sauce for a quid, with fish and chips thrown in for free".

[MikeL]

Is water basic food? - one would assume so.
So what about bottled water? - surely as not everyone has access to safe town supply.
So how about say evian water? - it is water after all.
Bottled water is an abomination. We got along just fine without it in the past. It is an unnecessary product and should be taxed at 15%.
What if a product is substantially water, but include gurana (sp), caffeine, sugar and bubbles? Not a basic food.
Is milk basic food? Yes.
How about soy milk or rice milk (although they contain no milk as such)? No, but it wouldn't be a big deal if they were included.
Chocolate or banana milk? after all they are substantially milk. Obviously not a basic product.
What about a milkshake? No.

You may well disagree with my interpretation, but that's no reason to put the whole idea into the too hard basket. The fact is that a definition of basic food could be arrived at that would work well enough in practice and not cause too many grumbles. I personally would simply define it as fruit, vegetables, milk, meat, poultry and fish in their raw, unprocessed state, plus plain bread. I know that all the smart arses will trot out their standard questions ("if bread is zero-rated, what about croissants?" "If fish is exempt, what about crayfish?"). I maintain that if the political will is there, solutions can be found, and I suggest that the insistence on simplicity and efficiency in this case is the victory of convenience for the accountant over the needs of the people.

[Skyryder]

Nothing too hard on this. 'If you can eat it or drink it...................exempt it.' Now all I gota do is sell the slogan to Labour and they will shoe in.


Skyryder

[Mully]

Hmm not sure I agree with you there. Why would you tax McDonalds differently to other food items ?

A Big Mac is bread, meat, salad, mayo... why does that justify a higher rate of GST ?

Is your assumption based on fat content ? Then where would you rate an avocado ?

Well, no - a Big Mac (for example, have you noticed how everyone goes McDs?) is processed

My thoughts were:
Fresh fruit
Fresh Veg
Fresh Meat/Fish
Fresh milk
Maybe fresh bread

GST exempt - everything else 15%.

Just as a starting point.

I wonder if it's possible to do a cost/benefit analysis on that....

[MisterD]

Well, no - a Big Mac (for example, have you noticed how everyone goes McDs?) is processed

My thoughts were:
Fresh fruit
Fresh Veg
Fresh Meat/Fish
Fresh milk
Maybe fresh bread

GST exempt - everything else 15%.

Just as a starting point.

I wonder if it's possible to do a cost/benefit analysis on that....

Yeah but "calci-trim" and whatever else...are they fresh milk? Because they can't actually be called milk because they're processed....

[Mully]

Yeah but "calci-trim" and whatever else...are they fresh milk? Because they can't actually be called milk because they're processed....

What is that, fortified?

I'm just saying that Australia made it too complicated - if this ever became a potential option, you'd want to make it as simple as possible.