By Sue Boland
The furore over the government's intention to impose the GST on tampons — which are presently sales-tax free — is symptomatic of the anger that is building against the GST as its impact and the complexities involved in implementing it become better known.
Many people are beginning to realise that the GST will be a blank cheque for business to profiteer and that price rises will be much higher than the government claimed.
In mid-January, the Australian Competition and Consumer Commission (ACCC) gave the nod to companies to round prices up, even if that meant increasing prices above the 10% rate of the GST. Federal financial services minister Joe Hockey endorsed the decision, which contradicted a promises by PM John Howard and treasurer Peter Costello during the 1998 federal election campaign that no price would rise by more than 10%.
An example of what will be involved in "rounding up" is the announcement by companies which own coin-operated vending machines, tollways and laundromats that they are planning price increases of up to 20%.
When public anger threatened to explode, Costello and Howard instructed Hockey to announce that prices would not increase beyond 10%. Big business was furious; they thought they had a deal with the government to allow them to increase prices beyond 10%.
The executive director of the Business Council of Australia, David Buckingham, told the January 22-23 Weekend Australian: "What has been explicitly agreed to by the government at the highest levels is that there should be no de facto price control, and no margins control ... We know that both the prime minister and the treasurer were abreast of those guidelines."
To placate business, the government has left plenty of room for businesses to profiteer. Companies can still increase prices well above the amount required to cover the GST. This is because wholesale sales taxes — some of which are levied at rates much higher than 10% — will be withdrawn with the introduction of the GST. All the government has promised is that prices will not increase by more than 10% of the price before the withdrawal of the sales taxes.
Despite announcements by Costello and Hockey, the issue of rounding up prices above the 10% increase has not been finalised. The guidelines are subject to further discussions between government and business.
Even if the government does issue guidelines restricting price increases to 10%, they will not apply to businesses that are not registered with the Australian Tax Office as collectors of the GST.
On top of that, the guidelines will be difficult to enforce. The ACCC, which is responsible for stopping companies ripping off customers, cannot impose penalties. It has to take each case to court and prove that the particular company is using the GST to profiteer. The court will decide whether or not to impose a penalty.
A former ACCC representative Bob Baxt told the Australian on January 18 that ACCC guidelines on price exploitation are not legally binding and a court may only take them into account. The cases would be complex and expensive to mount. It is unlikely that the ACCC would take all cases of profiteering to court and it is utopian to think that the ACCC can prevent every business from increasing their prices above 10%.
A number of other ways that GST will hit harder than the government has claimed have also come to light, including:
companies will be able to increase prices to offset costs associated with preparing for a GST. This means prices will increase by the amount of the GST plus the cost of GST preparation;
despite being GST-exempt, the finance industry is to increase charges, such as bank fees. It claims that it needs to offset the increased costs that the GST because it cannot claim credit for GST paid on business purchases;
prices will rise by more than the government has claimed when selling the GST. For example, a cost of a glass of beer is likely to increase by 9%, rather than the 3.3% predicted by the government;
the ACCC has given companies permission to charge the GST on products and services that can be used before the GST comes into effect on July 1, such as books of movie tickets and prepaid funerals;
while health and education are supposedly GST-free, school excursions, goods bought in tuckshops, ambulance charges, vaccinations for travel purposes and medical certificates for third parties such as workers' compensation claims, drivers licences and employment requirements all attract the tax.
local government services subject to the GST include cemetery, burial and cremation fees, marriage celebrant fees, the hire of public halls and sporting grounds, library services, parking permits and swimming pool charges.
businesses with an annual turnover of less than $250,000 will be able to average the GST they charge across all of the products they sell. This means that consumers won't have the choice of buying non-GST food; and
if someone still has money owing on a lay-by item after July 1, the GST will be charged on the original price rather than the outstanding amount owing.
When Howard and Costello arrived back from holidays, they blitzed the media with statements about how the wonders of the GST and the income tax cuts. However, the benefits of the income tax cuts (which are tiny unless you are in the top two income tax brackets) have been wiped out by the interest rate hike and the Timor tax levy on people who earn $50,000 or more.
In lifting interest rates, the Reserve Bank is anticipating a higher level of inflation after the GST is introduced than the government forecast. Costello finally admitted in November that the GST would cause inflation to jump to 5.25%, far higher than the 1.9% figure he quoted when selling the GST.
The Australian Bureau of Statistics is rumoured to be working out a new method for calculating the Consumer Price Index that excludes tax-related price increases. Presumably, this is because the government is fearful that unions will lodge wage claims to compensate workers for the GST.
Reflecting the anger that is building against the GST, anti-GST petitions have started circulating again. While an anti-GST campaign would seem to be 12 months too late, it is still possible to overturn the tax, but only if substantial public opposition is built.
However, anti-GST campaigners need to learn from the Canadian experience. In 1991, the Conservative government of Brian Mulroney introduced a GST. In 1993, he lost government to the present prime minister, Jean Chretien, who had promised to abolish the GST. He reneged on the promise as soon as his government was elected.
In Australia, the alternative capitalist party, the ALP, has not even pledged to abolish the GST, only to exempt a few items. But a GST with a few extra exemptions will still be an unjust and regressive tax.
Anti-GST campaigners need to call for the total abolition of the GST. This is the limitation of the campaign to remove the tax on tampons. There should not be a GST on tampons, and neither should there be a GST on anything else.