So how does one judge the success or otherwise of a new tax regime?

This is a valid question now that we are three years into GST. Clearly, there are as many ways to answer that question as there are perspectives. A political assessment might, for example, focus on the absence of articles in the press concerning GST, or alternatively their presence depending upon one's political allegiance. On that basis GST is a success, at least for the Liberals.

GST at its inception was a highly politicised tax; newspaper stories on the subject abounded. Nowadays headline articles on GST are few and far between. The last "page one" GST article I recall was "Surprise GST slug for property developers" (AFR, 29.04.2003) although I'm told there has been one other since. This article, about the margin scheme, only made the front page due to the journalistic coup of obtaining a "leaked" document. That much is evident from the placement of the article reporting resolution of the issue, namely page 74 - "Tax Office ruling lets developers off GST hook" (AFR, 23.05.2003). If the problem itself merited page 1 then surely its resolution merited similar prominence?

Other perspectives, or measures, one might choose include the striking absence of both legislative amendment and litigation. Surely, these are indicative of the GST regime's success?

Taking legislative amendments first. Presently there are only four announced GST measures slated for legislative amendment this calendar year and beyond. And all of these are "so what" amendments. That is, while the measures may be important for those who are directly affected their impact is narrowly focused and they are not of systemic significance. Does this not indicate that the GST Act is a good piece of legislation?

Yes, and no. The GST Act was a hurried piece of legislation. It still contains some fundamental flaws. The special rules concerning the GST treatment of vouchers, namely division 100, do not, by common consent, work. Vouchers are a widely used promotional device. The flawed legislative provisions therefore potentially impacts many hundreds, if not thousands, of retailers.

If so, then why hasn't the GST Act been amended to rectify this and other problems? The answer is because GST remains a highly politicised tax. The Federal government, in the author's view, does not want "page one" GST articles; ergo, no significant legislative amendment. One unfortunate by-product of this "political environment" is that the administrator of GST, the Australian Taxation Office (ATO), is forced into ever more unconvincing interpretations to make the status quo "work". The ATO's recent ruling on the GST treatment of vouchers GSTR 2003/5 is a good example.

The absence of GST litigation is also noteworthy. There has not been an avalanche of GST cases. Moreover, the Australian Taxation Office test case program, under which the ATO funds cases involving contentious issues so that these can be resolved by a court, does not presently list a single GST case (as far as the author knows). Does this not also indicate the regime's success? Not so. Rather this is due to a confluence of factors, the discussion of which is beyond the scope of this article.

The perspective the author takes in the balance of this article is to take a look at "the financials". What does some quick and dirty number crunching tell us?

* Source: Tax Reform - not a new tax, a new tax system, August 1998, figures adjusted for GST-free treatment of food and other changes costed in the Further Supplementary Explanatory Memorandum to the GST Act.
# Source: Final Budget Outcomes 2000-01, 20001-02, and 2003-04 Budget Paper No.3, figures for 02-03 and 03-04 are current estimates.
@ Source: Reserve Bank of Australia, Consumer Price Index - Year end percentage rate and Budget Strategy And Outlook 2003-04, Budget Paper No.1 for estimates of the inflation rate and GDP Growth rates for the 02-03 and 03-04 years.

Certainly, the data used is crude - headline revenue numbers only. The analysis is also unsophisticated - I am a GST specialist, not an economist. Even so, the analysis is revealing.

The first point to be made - and one which is made in the absence of knowing precisely how those figures were "massaged", is that the Treasury forecasting team seem to have got it pretty well right. Yes, there have been some "unders" and "overs" in terms of revenue projection, but they more-or-less balance one another out over the three-year period. The net variation of estimated to actual revenue over the 3 years is approximately +0.57 per cent. Given that revenue forecasting is by definition an imprecise science that ain't a bad result.