By Sue Boland
The opposition to the GST, 58% against according to opinion polls, is being reflected in the angry letters flooding newspapers condemning the deal between the Australian Democrats and the federal government. Newspaper editors appear to have had difficulty finding letters that support the deal.
Geoff Taylor, a Democrat candidate in the 1998 federal election, wrote: "I stood ... on a platform of no GST on food ... I strongly disagree with the decision the party's elected representatives have taken" (Australian, May 31).
At the May 28 media conference with Prime Minister John Howard and Treasurer Peter Costello to announce the deal to introduce the GST, Democrat leader Meg Lees said that her party's aim was to get a fairer tax package. "We've certainly done that", said Lees triumphantly.
Howard was also triumphant. And why not, when the Democrats had agreed to a GST deal which he said delivered "85-90% of the government's original proposal". He said the deal gave him "sweet political enjoyment of the most exotic kind".
Of the Democrats' 16 proposed amendments to the government's tax package, it won only one — the exemption of "basic" food. The Democrats campaigned publicly last year for all food to be exempt.
While big corporations are disappointed that the GST won't include all food, overwhelmingly they regard the tax deal as a victory because they will have the wholesale sales tax removed and won't have to pay the GST. Big mining companies such as BHP, Rio Tinto, North Ltd and Western Mining anticipate a 4% reduction in costs across the board as a result.
It is already apparent that the government and big business will look for an opportunity to expand the GST's coverage and/or increase its rate at the first opportunity. Business Council of Australia president Campbell Anderson described the deal as "a necessary first step".
The Financial Review editorial on May 31 stated the case more clearly when it said the "announcement of a compromise goods and services tax represents a historic broadening of the country's tax system, which can be improved once there is time to consider the hissing more calmly".
Lees and the Democrats have opened the door for a later expansion of the GST to include all food and increases in its rate. Costello has tried to quieten such speculation by pledging in parliament on June 2 that the government has "no intention whatsoever" of expanding the GST in the future to include basic food. Remember Howard's 1996 pledge to "never ever" introduce a GST?
A likely scenario is that the federal government will further starve state governments of funding, forcing them to rely totally on GST revenue. When state governments complain that they can't afford funding for hospitals or schools, the federal and state governments will campaign for the GST rate to be increased beyond 10%, or for the GST to be extended to include all food.
Although there is opposition to the GST within Democrat ranks, none of the Democrat senators are likely to take a principled position against the GST overall. The two senators that the establishment media has referred to as opposing the GST, Queensland's Andrew Bartlett and South Australia's Natasha Stott Despoja, only oppose some aspects of it.
With the next federal election due in 2001, after the introduction of the GST, the Labor Party is hoping to capitalise on the inevitable disenchantment of people who have experienced the full impact of the GST. However, the ALP continues to oppose calls for a future Labor government to abolish the GST. Labor has offered only to expand the food exemption.
Because of continuing opposition to the GST, the government has already allocated $28 million to sell the deal to the public. This is on top of $19 million it spent to promote the GST before Howard called the federal election.
The Democrats claim they negotiated the tax deal with the government because they wanted to be relevant and influence policy. Relevant to whom?
The Democrats could have been much more relevant and useful to the majority of people if they had blocked the GST completely. Instead, they have decided that they only want to be relevant to the big corporations and the mega-rich who will profit from the GST.