The 1st of October 2016 marked 30 years since Roger Douglas and his Labour government dropped the tax rate for New Zealand’s wealthy from 66% to 48% (and later 33%) and gave the rest of us GST.
GST was a bad idea in 1996 and it is an even worse idea today. It means that everything we pay money for is 15% more expensive than it needs to be – from doctors visits, to prescription charges, to school uniforms, to food.
GST impacts unfairly on people on lower incomes. Not only does it make everything more expensive, low income earners have to spend all of their income on daily living so pay an extra 15% GST on all of it. The more wealthy are able to invest a large proportion of their income instead. And financial services are, for reasons that have never been fully explained, exempt from GST. So the wealthy only pay GST on a portion of their total income.
The GST-exempt financial sector is the very sector that is such a drain on the New Zealand economy. Speculation on our currency drives our dollar up, and the obsession with maximizing profits to keep share prices high enough to satisfy offshore-based shareholders drives down wages for workers and prices for local suppliers. Both take money out of the local economy and send it offshore – untaxed.
And despite the government’s belated efforts, GST is not paid on most items bought online from overseas sources, disadvantaging those producing and selling goods in New Zealand.
Worst of all, GST does not increase the overall tax take. It was never intended to. There has been no benefit to the country as a whole. GST has not provided any extra income for government spending on essential services such as health, education, and social welfare. GST was solely about redistribution of our collective wealth upwards. GST brazenly sought to increase inequality by letting the rich off with paying less money in taxes and making the rest of us pay more.
30 years of GST is 30 years too many. GST needs to be replaced by a financial transactions tax and a return to a decent progressive taxation system. Any political party that purports to care about inequality, that wants to see a more equitable distribution of wealth in New Zealand and the world, can do nothing less.