By April of next year, you'll no longer be pay sales tax, you'll be paying the goods and services tax, or as its known, the GST. Tomorrow, Cabinet will meet in a special session where ministers will finalize deliberations on the new tax, mainly discussing at what percentage it will be fixed.
But before Cabinet makes its decision, 7NEWS has obtained the confidential Cabinet white paper, a 17-page document that outlines how the tax will work. Most important for you is that under the GST, there will be fewer exempt items, or as they are known zero-rated-items. In the white paper we count only 20. The basic food items that will be exempt are: rice, flour, bread, corn, fresh meat, eggs, beans, sugar, tortilla and fresh milk. In education, textbooks, school workbooks, coloring books and exercise books will not pay the GST. Furniture used for education and education services will also be excluded from the GST net. That's it, the entire list, fewer than 20 items. That compares very poorly with the VAT tax, which exempted over 700 items and even sales tax which exempted close to 100.
Most notably, the white paper does not recommend that either water or light bills be exempted from the tax which leads us to conclude that those services will pay the GST, which would amount to a sharp increase in your light and water bills and cause a spike in the cost of living. So while there are far fewer exempt items, the GST does mimic the VAT tax in other ways. A draft GST Act has been prepared and the white paper says plainly, "this act is based on the vat act of 1996 with changes to take into account the broadening of the base." That "broadening of the base" refers the reduction of those 700-plus exempt to just 20.
And dutifully, the white paper warns, "the GST....could have a negative impact on lower income persons." But that's what it is....government has to collect at least the $116 million in tax revenue that the sales tax currently collects. How will they get it and at what percentage? Well that's the question that Cabinet will consider tomorrow.
Even though implementation is still 5 months off, the technicians who came up with the white paper warn that the legislation must be approved five months before to educate the public on the new tax. Those technicians explain that the GST will reduce what's called the cascading effect of the sales tax, where the 9% charge had a compounded or multiplier effect, where tax is paid on top of tax that has already been paid. Under the GST, like VAT, the tax would be single stage and credited to registered businesses.
