DEAR Chief Minister, Treasurer and cabinet members,The Federal Treasurer and his conservative Federal Government are deliberately pushing you and other State and Territory leaders towards asking for an increase in the Goods and Services Tax.
Two elements of temptation should be resisted. The first is to remove the exemption on whole food and the second is to increase the percentage of the GST.
The pressure put on you by the Federal Government as part of its ideological drive for smaller federal government and less taxes for the ultra-wealthy and big business will make resisting a call for an increase on the GST very difficult.
The biggest impact on the ACT will be the loss of jobs within the public service and the NGO sector, which will have a direct impact on Canberra’s economic growth.
Withdrawing from the National Partnership Agreements on hospital funding and preventive health, the introduction of the GP co-payment and cutting dental health funding by more than $50m per year will add to the pressure on local health services and expenditure. There is a similar story with cuts to education, setting higher thresholds in social services and running yet another efficiency dividend across all portfolios.
It is clear that you have some significant challenges in the ACT to reverse federal support for the wealthy at the cost to the poor.
The GST is a regressive taxation system. People who are earning $200,000+ still pay 10 per cent for the goods they purchase – the same as someone earning $40,000. This means that those on a lower income pay a much higher proportion of their salary. Contrast this to other revenue measures such as rates and payroll taxes where the wealthier “shoulder the burden” of taxation in a more equitable manner.
The ultra-wealthy, who often pay little or no tax in other ways, are at least taxed through the GST, contributing through lavish purchases. However, there are precious few of these people in Canberra.
The other temptation will be to remove the GST exemption for fresh food. Arguments will be put that this removes red tape for small business, fewer public servants will be required for administration, it will be a simpler system and, by removing this exemption, the increase in the GST can be minimised for the same revenue.
Heather Yeatman, professor of public and population health at the University of Wollongong and president of the Public Health Association of Australia, explained: “In Australia since 2000, the cost of basic healthy foods has been increasing at a much faster rate than unhealthy foods and CPI. Over the last three years the cost of fruit and vegetables rose by 8-13 per cent compared to only a 3 per cent increase in price for snacks and confectionery.
“Some States are even worse off: vegetables increased in price by 24 per cent in Canberra, 16 per cent in Brisbane and Sydney, and 11 per cent in Perth. The cost of fruit went up by 19 per cent in Perth, 16 per cent in Canberra and 12 per cent in Brisbane. And this is without a GST on top.
“In contrast, the price of junk food only increased by 1-6 per cent in these cities over the same time period”.
Increasing the price on healthy food will increase the long-term costs of health issues associated with obesity.
The federal government has delivered a major cost shift to the States and Territories even though there is far less capacity to raise revenue or make savings.
Taxpayers will wear the burden one way or the other. In managing your Budget, please do not be driven down Joe Hockey’s path cornering you into calling for increasing the GST. It will impact most heavily on those who can least afford it.
Michael Moore was an independent member of the ACT Legislative Assembly (1989 to 2001) and was minister for health. He is the CEO of the Public Health Association of Australia.