The GST implementation has duped everyone - and it's here to stay

Mike Nahan of the Institute of Public Affairs writing in the Australian Financial Review on February 26 says of the Howard Government: "As a result {of the GST}, the tax take measured as a share of GDP is the highest in history. It is sucking up more money than ever expected."

The dopey right has finally woken up.

A Labor government gives Australia a Revenue to GDP share equal to the United States, the lowest or second-lowest in the industrial world, and a Liberal Government comes along and blows it into the stratosphere. Aided and abetted of course by those grand strategists, The Business Council of Australia.

Remember all that rhetorical nonsense about how unworkable the Wholesale Sales Tax was? How inefficient it was?. How a Tim Tam was taxed at X and a chocolate biscuit taxed at Y. All that twaddle from Costello.

Well, we can all see now how ‘inefficient’ the Wholesale Sales Tax was; it was collected over a relative handful of taxing points. The GST has upwards of a million. Virtually everyone in business.

Remember the Labor rhetoric about every small business and single proprietor becoming a branch of the Tax Office? And how true it was?

Remember also the derision for these views from people like John Ralph and other BCA luminaries?

Every small business in the country is now a Tax Office and Howard, that supposed supporter of small business, deserves a caning for it.

The Treasury got what it wanted; another major tax base, more Revenue to GDP. Small business and the poor copped it in the neck.

Graham Samuels, we are told, is proud of ‘recruiting’ Robert Fitzgerald, the then President of ACOSS, to the cause of the GST, paving the way politically for its introduction by Howard.

Not only was small business conned but the poor were conned too. ACOSS needs to be marginalised for its treachery to a dependent constituency which trusted it. I only hope Fitzgerald in his new incarnation as a NSW public servant and a member of Samuels’s Competition Council is saying his ‘Hail Marys’ with the other do-gooders, because you can bet the BCA and the Treasury aren't.

But it is the naivety of Nahan which is so breathtaking.

Doesn't he know that the big business luminaries were in the GST push largely because they thought the high marginal tax rates on their incomes would come down? And what happened? They were conned too.

The top marginal tax rate hasn't changed.

The lower cut-in point for the top rate wouldn’t save them enough to buy a cashmere jumper.

The suckers are now paying both ways. On their income and on all else they consume. But that is tax reform for you. The pity is, so too is everyone else, those on ordinary incomes and those struggling to run a business.

But compounding the opportunism of this elite little group is the long-term damage they have done.

They have let the tax genie out of the bottle – forever.

If the tax take rises, over time the political system will spend the money. The States are already getting it. Defence is lining up and the baby boomers are watching on.

Howard's conservative government and his Treasurer, Costello, have effectively underwritten a huge future increase in Outlays to GDP. That is why, after Labor cut recurrent Outlays by six percentage points of GDP the hard way over the five years between 1985 and 1990, I decided we did not need a GST or a retail-level tax any more. That a tax like this, rather than improving the financial structure of the Commonwealth, as the Treasury would have you believe, would instead degrade it, providing the where-with-all to explode Outlays, turning a torrent of national income to the public economy.

Even John Stone, with whom I had little in common, understood this and said so often in IPA circles. It was so self-evident.

The BCA lucked out in the political counting house with Labor; then with their Liberal Party tickets burning hotly in their pockets, raced back in with the new operators and did their shirts.

Tax is off and running and nothing will stop it.

How these guys find their way to work, much less run a business, is beyond me. Lick your wounds, Mr Nahan. The small business people and the sole proprietors will be coming after John Howard and your lot with cricket bats. And why shouldn’t they?

In 1996 John Howard promised small business everything except a block of flats in Tasmania. When I said the real plan was to give them a GST he ruled it out and the Canberra journos said "Don't try that hoary old one, Prime Minister". Now we all wear it like a rash.

Small business and its lobbies should remember what the Labor Government did for it. Let me recount a few things:

• A more than doubling of economic growth; from 1.8% on average under Treasurer Howard to an average of 4.2% under Labor. It is, after all, economic growth that really matters to small business, indeed all business.
• Enterprise bargaining.
• The lowest inflation rate underwriting the lowest interest rates in thirty years.
• The removal of the double taxation of dividends with full imputation.
• Removal of the Liberals’ crippling Division 7 tax on undistributed profits, a killer for private companies.
• A cut in Treasurer Howard's 60% top marginal tax rate to 47%
• A cut in Treasurer Howard's 46% company tax rate to 36%.
• Accelerated depreciation.

And a host of other things too numerous to mention

I suspect some small and big-business types might turn the bat on themselves for being so gullible, after they have dealt with our tax-loving Prime Minister.

It is going to be shocking to watch. Just shocking.