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

By Paul Keating - posted Thursday, 15 March 2001


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.

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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.

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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?

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This article was first published in The Australian Financial Review on February 28, 2001.



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About the Author

The Hon. Dr Paul Keating was Labor Prime Minister of Australia from 1993 to 1996. He is Visiting Professor of Public Policy at the University of New South Wales.

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