Hard News: The GST Punt
202 Responses
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Didn't Peter Dunne campaign not too long ago on zero GST on council rates? Mind you, it depends on his target constituency.
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Didn't Peter Dunne campaign not too long ago on zero GST on council rates? Mind you, it depends on his target constituency.
Yes. A tax cut for people who own expensive properties.
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dots joined
I don't think Tom is Sanctuary, but I'm aware of various sneering comments about PAS that he's posted elsewhere under his own name.
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I find it hard to believe that the cost of implementing a GST exemption would be that high. Exemptions already exist which suggests the systems have the ability to define exemptions and all you are doing is changing what fits that definition.
There is however an enforcement cost which is real.
However the fact I find it hard to believe does not mean that Ben isn't right.
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Depending on the exact GST rules, small greengrocers and farmers would have their compliance costs substantially reduced as they'd no longer need to account for GST at all.
I do not recall ever seeing a greengrocer who only sold fresh fruit and veges.
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The thing that has struck me about this debate though is how BRAINWASHED by neo-liberal orthodoxy large parts of the population has become, where the efficiency of the tax system and purity of the economic model is now the dominant consideration in thinking about taxation.
I plead guilty. But then I got better.
(This doesn't just apply to GST, BTW. Look at our response to climate change. Or the way "regulation" is a dirty word when it comes to energy efficiency. The Revolution has colonised our brains, and its not just policymakers who are the victims, but ordinary people as well. And the inability to even entertain that there might be a different way of doing things is a real problem).
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I find it hard to believe that the cost of implementing a GST exemption would be that high. Exemptions already exist which suggests the systems have the ability to define exemptions and all you are doing is changing what fits that definition.
I think the point is that the exemptions as they are at present either affect you or they don't. You're either in the GST business or you're not.
This will change under Labour's proposal to some businesses being partially in the GST business. So they'll have to go through their stock and figure out which to charge GST on and which not to. And when new stock comes in they'll have to decide if they're GST or not GST. Not impossible, but a pain and a cost.
And then I guess theoretically they could be audited and required to account for which things they didn't charge GST on. It would be a big advantage over your competitor if you could get more of your stock put in the 'no GST' pile.
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I find it hard to believe that the cost of implementing a GST exemption would be that high. Exemptions already exist which suggests the systems have the ability to define exemptions and all you are doing is changing what fits that definition.
A few exemptions, on a sectoral basis. Not one thing attracting GST and the thing on the next shelf at the same shop not doing so. I suspect Ben is also thinking about slippery slopes.
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. I think rents are exempt. Is that true?
Residential yes, but if one rents a space to live and run a business from, gst is charged on the rental but then tax can be claimed back for a portion of the rent for the area that one lives in, just as tax can be claimed on a residential rental as a work office etc.
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I don't think Tom is Sanctuary, but I'm aware of various sneering comments about PAS that he's posted elsewhere under his own name.
Oh, on reflection it looks like I was wrong.
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Sue,
the one thing about GST, it's simple and easy, when you get into exemptions you create a world of mess.
and loopholes
the true answer is not to raise it in the first place if you are concerned about those who can't afford things -
The Revolution has colonised our brains, and its not just policymakers who are the victims, but ordinary people as well. And the inability to even entertain that there might be a different way of doing things is a real problem).
Hey hang on...
There was a Revolution. I'm a victim, and I have an inabilities to entertain?oh thank Beelzebub. It's one of those meaningless generalist statements, people utter every now and then, oh yeah me included.
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When building a house the developer claims the gst on any materiels, land & services purchased and in turn will pay gst on the final sale price .This is my understanding. However no gst rated on private house sales.
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why not bring in a flat tax for income tax?
ssshhhhhhh!! they'll hear you!!
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As a friend of mine just put it, if an exemption is good enough for precious metals, surely it's good enough for bananas.
I look forward to the purists, and believers in "universal" GST, extending it to rents, mortgage interest, currency exchanges, transport of imported household goods, bank fees, etc. etc.
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Didn't Peter Dunne campaign not too long ago on zero GST on council rates? Mind you, it depends on his target constituency.
Well, yes... just as I'm sure it takes precisely zero imagination to figure out why Goff isn't announcing sin taxes on butter and sugar (or banning tobacco) any time soon. Guess that wouldn't fly with this Waitakare Man I hear so much about...
And then I guess theoretically they could be audited and required to account for which things they didn't charge GST on.
And prosecuted for tax evasion, one presumes. But, of course, I'm sure Labour has done the sums and would make sure all relevant departments are properly resourced to ensure compliance.
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Gold is GST exempt because it is considered near enough to money. That would be like having GST on cash.
One of the reasons Residential Rent is exempt is because if you taxed Renters, to be fair you'd have to impute a *rent* component into mortgage payments for Home Owners and charge GST on that and I think that's just in the too hard basket.
Banks pay GST on goods and services they purchase but cannot offset that against GST on their fees so in many way their costs are higher than other businesses.
The subtle diff between Exempt and Zero Rated is that for Exempt you cannot offset the input GST against the outputs. For Fruit and Veg Nash is talking about making it Zero Rated not Exempt BUT only at the Retailer which is where the complication comes in I think.
I believe Zero Rating is normally used for exporters so that the non-NZ consumer does not have to pay GST in NZ.
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I look forward to the purists, and believers in "universal" GST, extending it to rents, mortgage interest, currency exchanges, transport of imported household goods, bank fees, etc. etc.
Purists like Dr Cullen ?
http://www.nzherald.co.nz/personal-taxation/news/article.cfm?c_id=690&objectid=230461
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@Rich
Ben, bollox. You could replace all the relevant IT systems in the NZ grocery industry for a few tens of millions, which is a fraction of the saving to the public.
If it was only the grocery industry that paid GST on food that might make sense. Unfortunately every business in this country that even buys food as a cost needs to now take it into account, because they can't claim GST back on the food any more.
Furthermore there is NO saving to the public. Just redistribution, which I already said could be done in better ways.
If the systems had been built to support change in the first place, which granted they probably haven't been, the cost would be negligible.
But they weren't, and it isn't. It's huge. When GST was first brought in there weren't nearly so many computer systems in place, to start with.
Depending on the exact GST rules, small greengrocers and farmers would have their compliance costs substantially reduced as they'd no longer need to account for GST at all.
No, they also need to fork out to change their systems.
@steve black
When Howard brought in GST he promised that many of the other taxes would be dropped. They weren't. Or do you remember a few which were dropped?
Yup. Income tax dropped heaps. But I'm no defender of Howard or the way the ozzies did GST. It was a bloody nightmare, and even the accountants on the development team of 20-odd did not really understand it, or have a plan for how it could be done efficiently.
@andrea
why not bring in a flat tax for income tax? The "fresh produce" test is a relatively simple one.
That would be in most cases very simple, because systems are already set up to apply an arbitrary tax to each bracket, this number having changed regularly, and could just have that changed to the same tax, or the bracket widened. But quite aside from that, a flat tax would be an enormous change to the entire fabric of our taxation system and encompasses a great many issues of equity etc. Just charging less for fresh is something that could be easily done through subsidization, if it was a good idea (something I'm still not convinced about).
@Bart
However the fact I find it hard to believe does not mean that Ben isn't right.
Well, the Australian experience was different. They had numerous exemptions. But it all started (as Russell may be suggesting that I'm arguing) with the thin end of the stupidity wedge, and that was fresh food IIRC. Once that seemed like a good idea, it wasn't long before practically every product invented needed to be tagged in a database, or the calculation involved 30-odd questions to the poor programmers, and everything that poor people have to buy was on the table for exemptions.
I guess I simply don't see the business of the IRD as being about Social Welfare. We have other departments for that. -
do you really expect to see many businesses becoming exempt from GST?
Depends on the rules and if they make vegies zero rated or exempt, and whether the turnover limit is applied on total or taxable turnover.
The GST exemption limit is $60k. While that's a couple of hours business for a big Countdown, you could certainly see a market trader or greengrocer not selling that much in exempt items. It should also be possible to set a higher limit for businesses primarily selling fresh fruit and veg without much tax being lost. (They'd still be paying GST on their chocolate bars and milk, just not on the margin).
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poor programmers
Less poor as all the changeover work sends rates up. (rubs hands, gleefully).
For smaller business, the accounting isn't hard, I've done it (as do all UK firms). All you do is when posting an invoice, you enter the GST amount charged by the supplier. That works for everything including complicated split rates (e.g mobile roaming).
Stores will typically assign each PLU to a department and the till does the rest.
It's only the large scale firms with bespoke backends that'll need to spend money and really, they've asked for it by nickel and diming all this time. Maybe this'll make them consider a more strategic approach.
Another option which might be better than a GST change would be to have a standard list of foods for which a nationally agreed price was set, and supplies at that price subsidised. That would also be relatively easy to implement in software.
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Nash is talking about a world where a Farmer who sells his Carrots to Countdown would charge Countdown 15% GST but Countdown would not add 15% when they sell them to you.
But if the same Farmer takes the same Carrots to the Farmers Market and sells them direct to you he cannot charge the 15% GST.
There will be all sorts of arguments about who's retailing and who's wholesaling.
I don't think we have a scenario at the moment where the rate of GST on a purchase depends on who/what the purchaser is ?
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No, what would probably happen is that the farmer would claim GST on taxable inputs (fuel, fertiliser and the like) and not charge GST because the carrots are zero rated. Countdown would neither charge or reclaim GST, and hence the end-user price should drop by 15%.
The alternative is that carrots are "exempt" and input tax cannot be reclaimed. In that case, the farmer would need to factor GST on inputs into the sale price and the end-user price would drop by less than 15%. (Although interest charges and labour aren't taxed, and they're a major portion of a typical farmers costs).
The whole point of GST, whether with single or multiple rates, is that it doesn't differentiate by class of purchaser (unlike neolithic US sales taxes).
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The thing that has struck me about this debate though is how BRAINWASHED by neo-liberal orthodoxy large parts of the population has become, where the efficiency of the tax system and purity of the economic model is now the dominant consideration in thinking about taxation.
Coming late on this but I think Tom has a valid point on this
On his other point on a communial or cooperative companies selling fresh fruit etc.
Having been involvedas a sharing holder wth 3 or 4 of these and being presently in France where they are quite common
Can I say when set up they are great but what seems to happen with time is they get captured often by the workers but sometimes by the money men and then the they just work for them and not the consumers
I am going to do battle with the french railways in a moment, great system but there is a feeling that it is really just for the benifit of the boys wearing grey suits, stand in line, move to the correct line, wait ages,open at hours that just suit the workers not the customers
All the stuff we used to have to put up with in NZ before the 80s
not sure if we want to go back to that -
To those who haven't thought about the enforcement costs or think that they're being over-egged by the likes of Ben, consider this: GST is already the most-disputed part of our tax system and it's incredibly simple. The exceptions are, as others have said, applied to entire business sectors not just to particular items on particular shelves in particular retailers.
Who pays for appeals to the Taxation Review Authority? To the Courts? For the accounting and/or legal advice on classification of goods? The IRD? From whose money? The taxpayer? From whose money? No matter how this goes down, the complexity means increased enforcement costs and those costs will be passed on to the taxpayer and the consumer. No two ways about it. For the curious I suggest going to Google and asking it about the "jaffa tea cake case", to see just how utterly fucking ridiculous some of these enforcement situations can get.
Right now, if you run pretty much any retail operation you have to return GST on everything you sell. There's no room for "judgement" on what is and isn't subject to GST. Change the rules, and suddenly there's a room for operators to under-report their GST. Right now it's pretty easy for a computer to look at input vs output and spot a fraud. That won't remain the case if this change happens, at great cost to IRD for extra audit and enforcement activity, and at great cost to the taxpayer. It'll also be bad for honest operators who don't get to chisel a few extra cents on marginal items.
This is nothing to do with, as Tom sneered, brainwashing, or to do with how easy or hard it is to do the books now that things are computerised ( where they're computerised. I've seen many shops that still use old-fashioned tills with heavy-duty push buttons), and everything to do with recognising that any such change will be taken advantage of and carries costs associated with catching such advantage-taking that will consume a significant amount of whatever notional savings existed in the first place. And with a supermarket duopoly, I don't like the odds of much of it being passed on in the biggest outlets.
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