The government could head off the avalanche of wage claims that will cause significant disruption for the public and drive up inflation, by scrapping GST and replacing it with a transactions tax.
The wage claims, from anaesthetists, teachers, public servants, aircraft engineers, and others while justified, have the potential to wreck the economy by kick starting inflation and pushing up interest rates.
More private sector employers will likewise be under pressure to raise wages, increasing their costs substantially along with the cost of their products and services.
The cumulative effect will be to drive up interest rates, with the potential to cause hundreds of house mortgage and farm mortgage defaults.
Replacing GST with a transactions tax at less than a quarter of one percent (25 cents in every hundred dollars) on all withdrawals from bank accounts would give workers across the board a substantial increase in purchasing power far greater than they would get from wage rises.
It would generate roughly the same in tax revenue as GST, but with the majority coming from the speculative sector, rather than the productive sector, of the economy.
That raft of financial transactions such as credit default swaps, debt securities, convertible and exchangeable bonds, currency trading, derivatives etc, currently avoid the GST net.
The recent introduction of GST to on-line purchases is complicated and messy and will produce minimal tax revenue, but scrapping GST and implementing a simple transactions tax would immediately put Kiwi retailers on an even footing with all overseas sellers.
Additionally businesses would be relieved of the burden of accounting for GST, filing returns, and audits.
It will be very simple for the banking system to implement FTT, and very difficult for anyone to avoid payment.
Banks would deduct the tax automatically in the same way they already withdraw their own account fees and Resident Withholding Tax, and remit it straight to the IRD.
The removal of GST would contribute to a reduction in child poverty by putting more money in the hands of lower paid New Zealanders who currently pay tax far out of proportion to their incomes.
It would be fitting that Labour, the party that first introduced GST and unleashed the neo-liberal economic experiment on the country were the ones that finally scrapped it
Show us the numbers! Then I might believe you ….
Do your own research or remain ignorant.
Put it this way. We want wage inflation and the regional fund on top of the Green Energy fund may deliver it.
A transactions tax would be uneven in it’s incidence. The final price of a product which passes many stages will include more tax in proportion to that price than a product with few stages. Taxpayers at each stage will be paying tax on the tax paid at earlier stages. This is different from GST where each producer can claim a refund of tax paid at earlier stages.
The old trick of shifting the debate on rising costs for waged earners is once again being overlooked.
The cost of living rises causing wage earners to need more pay.
The cost of rising wages needed to reward earners is then blamed for the further rise in the cast of living ( the cost of things you need to live ).
Rates of profit by by businesses or investors does not feature in the discussion. That is a private matter controlled by “the market”. That is bullshit.
Banks make enormous declared profits, stripping wealth from communities without regulatory constraint. Similarly many business can’t hide all their excessive profit nor the dividends paid to shareholders and investors of whom many are off shore.
The real cost of living and inflation is a result of these unnecessary excesses generally harvested by wealthy investors who care little about the cost of living for others.
All the more reason to change the system. Bashing wage earners who are at the bottom of the pile is blind stupidity.
The lowered tax rates for high earners and corporations results in Govt having greater debt which loads the rest of the community.
The idea of a transaction tax is that it is such a small % of normal business transactions, tiny by c/f any other tax, that it would not be felt by day to day businesses or ordinary people. It becomes significant only in the realm of high speed speculative transactions as those by currency traders like John Key when he made his pile. These are typically carried out with huge sums of money at high frequency (seconds) and for usually a very small return %wise on each transaction.
The weakness is not so much that it would materially increase the cost of consumer goods or business in the real economy, but that most of the targeted transactions would cease as the tax would materially effect them, making them unremunerative or of negative net return. So little revenue would be gained , unless the proposed % tax was radically increased so that it did return a revenue and then ordinary business would be effected.
D J S
Purchasing a $500,000 home would cost you $2,500 tax. $1,250 when the bank transfers the money by way of loan (since the bank would not doubt pass on the cost of the transfer), and another $ 1,250 when you pay the vendor. Then you will pay more tax as well when you make mortgage payments.
Selling a $500,000 home presently costs you approximately $3000 in GST on the land agents fee, (assuming their fee is 20,000). Add that to the GST on lawyers fees.
Then consider a property on which GST must be added to the price….
A financial transaction tax rather than GST is looking mighty attractive I believe
I’m not in favour of GST and think it should be abolished. However. GST is more even in it’s application. It was the unevenness of the transaction tax that I was pointing to.
The difference between $3,000 and $2,500 is not that great and three are also the mortgage repayments to consider.
GST is the worst curse bestowed on the poor, it must be scrapped.
Tax the rich and bring back the egalitarian way where no crime existed because we all had a ‘common share in our commonwealth.’
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