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"Fightback" - setting the record straight a 15 per cent GST does not mean the price of all goods and services will go up by 15 per cent. To suggest that they will is wrong, and misleading

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24 November 1991 Bulletin No. 3





Please allow me to draw your attention to this once again.

To say that the prices of all goods and services will rise by 15 per cent, as some weekend newspapers have today, is not true.

To accurately assess the impact of the Coalition's tax reform package on prices, and household finances overall YOU MUST REMEMBER THAT THE COALITION IS COMMITTED TO THE ABOLITION OF SEVEN EXISTING TAXES. Many of these taxes already have a very significant effect on the prices we pay either directly or indirectly for things.

For example, ask yourself how many times petrol prices are built into the final price of any good on any shop shelf.

Yes, the Coalition will introduce a 15 per cent GST on most goods and services in Australia.

But we are also going to abolish Labor's hidden consumption taxes that today add around $44.22 per week to the spending of the average Australian household.

The abolition of the’ wholesale sales tax, the fuel excise, and payroll tax will substantially reduce the costs involved in the way things are produced in Australia under the Hawke Government today.

So, when the GST comes in, the upward pressure the GST has on prices is NOT 15 per cent, as you might expect at first glance, but only 4.4 per cent overall.

To highlight that point, here is what the Executive Director of the Australian Supermarket Institute, Mr Bruce Bevan, said in a press release on November 22:

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"Our initial calculations show that the impact of the Opposition's GST of fifteen percent on the

"supermarket shopping basket" will be an increase in the region of three to five per cent. This may be a

surprisingly low figure, but very few of our customers have realised the impact on food prices of the current wholesale sale tax, which will be abandoned by the Opposition when in government."

For all these reasons, the individual case studies that appeared on pages 18 and 19 of the Sunday Herald-Sun today (November 24, 91) are wrong, and misleading.

In nearly every case the expenditure figures overstate the price affect of the GST.

In the first example, the Herald-Sun says that Gwendolyne Burkin will pay an extra 15 per cent for public transport, for

food/groceries, for her telephone, for school materials, and for electricity.

That is not correct. ,

For example, the abolition of the fuel excise, the wholesale sales tax, and payroll tax will reduce public transport costs.

The abolition of these taxes will also mean that the rise in food bills Gwendolyne Burkin is confronted with will be surprisiSgly smaller than the Sunday Herald-Sun has estimated, a point the Australian Supermarket Institute itself has made.

Again, the abolition of the wholesale sales tax alone will help keep Gwendolyne's telephone bills down because Telecom currently pays hundreds of millions of dollars in wholesale sales tax.

Similarly, in virtually every other case, the price rises will be smaller than the Sunday Herald-Sun has estimated because no account has been made of the fact that the Coalition is going to

abolish Labor's hidden consumption taxes on the introduction of the GST. ,

In the case study for May Langbridge all the same mistakes were made with additional errors on rates (see page 15 of the GST technical manual), and household insurance (which, as a financial service, will be exempt - see page 19 of the technical manual).

The same fundamental errors appear in all of the case studies.

The Coalition has designed the Fightback taxation reform program extremely carefully to ensure that business costs are brought down, and that people are NOT left worse off.

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On the contrary, according to our calculations the vast majority of Australians end up substantially better off, once the

substantial cuts in personal income tax, and increased pensions and benefits are taken into account.

It is a tribute to the sophisticated analysis undertaken by the Coalition that with all the resources of both the Commonwealth Treasury and the Finance Department at his disposal for four full days now Prime Minister Hawke and his Labor colleagues have been unable to provide Australians with a considered, critical response.

At the same time Mr Hawke is prepared to insult Australians by getting taxpayers to foot the bill for all the overtime incurred on his scare campaign in the worst recession for 60 years.

The Coalition welcomes public debate.

Indeed, by spelling out in detail exactly how all our

calculations have been made, we have invited debate.

But it is vital, for the future of this country, that the debate is informed.

For further information

Peter Reith: (059) 777 212