Simple is better

It’s 14 24 years today since a Goods and Services Tax was first introduced in New Zealand.

It was right in the middle of the ag-sag when every cent mattered so I was among the many who bought things in September to avoid the 10% consumption tax.

I don’t remember rushing to buy anything before GST was increased to 12.5% in 1989 and I haven’t done any extra shopping to beat today’s increase to 15%.

Although I did a pre-GST shop in 1986 I don’t remember noticing sharp price increases from October 1 and do recall some goods reduced in price because the plethora of sales taxes on a variety of goods was replaced by a single, simple GST.

Simplicity was and still is one of our GST’s good points.

That Phil Goff and Labour are prepared to tinker with it and end more than a decade of cross-party support for keeping it that way is a sign of desperation.

It could also be a sign they’ve given up trying to win the next election. That’s easier to believe than the idea that they’re really serious about the suggestion zero rating GST on fruit and vegetables would achieve anything worthwhile.

29 Responses to Simple is better

  1. pdm says:

    hp I think you mean 24 years.

  2. homepaddock says:

    You’re right PDM, I do.

  3. Fredinthegrass says:

    In regards to Phil Goff et alia’s ‘tinkering’ –

    Desperate situations require desperate measures.
    Often the result is a more desperate situation!

  4. The only thing I bought more of than normal before the GST rise was my prepaid A4 and DLE envelopes.

  5. robertguyton says:

    Remind me Ele – why did National raise GST to 15%?
    It’s a tax, right? They increased the tax.
    Isn’t that what National promised not to do?
    Raise our taxes?

  6. homepaddock says:

    Robert – only a fool doesn’t change his/her mind when the facts do.

    The GST rise is compensated for by a fall in income tax which is better for individuals and the economy than higher taxes one arning and lower ones on consumption.

    One gorup which gains automatically is pensioners – the pension is based on the after tax average income, when taxes drop it rises so pensions go up.

  7. robertguyton says:

    I’m sorry Ele – though I read your response as closely as I possibly could, I couldn’t find the answer to my simple question: Why did National raise GST to 15%?
    If you would have another shot at it I’ll really concentrate and try to find the answer.

  8. JC says:

    “Why did National raise GST to 15%?”

    1. Because Labour raised it by 2.5% also.
    2. To test you on your 15 times tables.
    3. Depending on your income.. to test whether you can deduct various percentages off it.

    Its very much an exercise in applied education and to see if you need to go back to school.


  9. homepaddock says:

    Robert because it’s better to encourage people to earn and save and discourage spending.

  10. robertguyton says:

    Homepaddock – National increased a tax:

    – to encourage people to earn and save

    – to discourage spending.

    Are you for real?

    Or are you just pulling my leg?

    Key said that if the Government was ‘doing a half-decent job’ there would be no GST increase.
    Are you not concerned about the implications of his statement?
    Does Key think his Government isn’t doing a half-decent job?
    Has he simply gone back on his word?
    What do you think?
    And would you have another go at explaining the reasons National gave for the raise in our taxes?
    Did Key say it was to discourage us from spending?
    That seems mad!

  11. Fredinthegrass says:

    Rg – Are you being funny, or just being pathetic?
    I had you with more ……. than the usual leftie.
    Guess I am wrong.

  12. Tired Farmer says:

    “Only a fool doesn’t change his/her mind when the facts do”and four facts that have changed since the 2008 General Elections could be the catalyst-

    Anti smacking law

    ETS Legislation

    Coastal Coalition proposals

    GST proposals changed

    And we are still aprox. a year away from the next election

  13. robertguyton says:

    I’m sorry Fredinthegrass – I’m not being at all disingenuous here – I’m just want to look at the simple explanation for the need for a GST increase.
    I apologise for my ignorance – I just want to look at the rationale, as a statement (we raised the GST because/in order to etc.)to get a handle on it. I can’t fathom it myself.
    Can you explain it to me?

  14. Fredinthegrass says:

    A considered repost deserves a considered reply, Rg.
    I see it as an attempt to dissuade the degree of consumption and encourage an increase in the level of saving our society as a whole embraces at the moment.
    As with many Govt moves from either side of the political spectrum it is often a case of the ‘shotgun’ approach. This leads to reactive comment – generally with little substantive reasoning other than “my pocket is being adversely affected”.
    As this ‘move’ plays out in the ensuing passage of time we will, IMHO, see the long term benefits.
    Not being blessed/incumbered with the ability of an economist to expand these thoughts, I leave it to your perceptive wit to unravel any further complexities on the vexed subject in question.

  15. homepaddock says:

    NZ was in recession before the rest of the world because we were spending too much. Growth was coming not from exports but borrowing to spend on an expanding bureaucracy and the property bubble.

    It was unsustainable and the the economy needed to be rebalanced. Letting people keep more of the money they earn so they could choose to save or spend; and compensating for that by a small increase in GST is one part of the government’s plan to do that.

    As a Green you should understand that too much spending isn’t good – the first r in the reduce, re-use, recycle mantra is the best for the environment.

  16. robertguyton says:

    Thank you Fredinthegrass and Ele for your explanations.
    Ele -you say that taking more of the money people earn (increasing GST) has been done to compensate for letting more people keep more of the money they earn (reduction in personal tax).
    Are you Alice? Is this Wonderland?
    Our Government wants us to spend less on necessities such as food, clothing, books, health care and other necessities?
    I can see your point – the tax decrease is being balanced by the GST increase, but that doesn’t explain the reason for the GST increase at all.Nor does ‘it’ll encourage us to spend less (because things are more expensive).
    Does it.

  17. robertguyton says:

    Fred – you said’
    “I see it as an attempt to dissuade the degree of consumption and encourage an increase in the level of saving our society as a whole embraces at the moment”

    So increasing GST on all goods and services will encourage people to spend only on necessities – that’s the reasoning?
    Won’t the much lauded tax-cuts nullify that?
    Nobody will be worse off, we are told and most will havemore disposable income.
    What’s to stop most of us spending even more freely than we do now?

  18. peterlepaysan says:

    Ahem! To return to the subject.

    Labour proposes to to have zero gst on “fresh fruit and vegetables”?

    This is not an act of desperation, it is an act of insanity.

    What will it achieve? Not much, it may mollify some in the Maori Party.

    Will it attract voters to the Labour Party? No.
    So why do it?

    The definition of “fresh fruit and vegetables” is going to provide lawyers with a whole new income stream.
    So why do it?

    Leaving aside any fresh v frozen debates, how do we deal with imported products that take weeks or months to get here?
    So why do it?

    How fresh is a NZ apple after spending months in a cool store?
    So why do it?

    OBTW fruit and vegetables (“fresh” or not) provide the body with heaps of water and sugar and very little else. Why not exempt the soda pops and fruit juices as well?
    So why do it?

    INSANITY, that is why.

  19. robertguyton says:

    Still struggling I’m sorry to say…
    we’ll all be better off, will have more money in our pockets, yet it’s expected that we will spend less?
    How will that happen?

  20. Fredinthegrass says:

    Restrainr, Dear Fellow, restraint – aided my a modicum of thought, and a tad of discipline.
    Were you not taught as a youngster that it was “wise to look after the pennies, for the ponds would look after themselves ‘, or are you a victim of the accursed ‘retailer’ and his even more dastardly ‘advertising cronies’?

    Just because you have money in your pocket, you are not required to spend it.
    I do caution though, be careful where, should you decide to, lend it!!??

  21. Fredinthegrass says:

    Rg. My apologies for the rather slapdash spelling.

  22. robertguyton says:

    Fred said: “Just because you have money in your pocket, you are not required to spend it.”

    English and Key both claim most people will have more money to spend.
    Where does the ‘discipline’ come from in this GST/tax cut mix?
    This is the aspect I cannot grasp.
    I would be very grateful if you could explain that to me.
    Why would ordinary people, with more money in their pockets, spend less?

  23. homepaddock says:

    “Why would ordinary people, with more money in their pockets, spend less?”

    I don’t know how you define “ordinary people” but if we have more money in our pockets why wouldn’t we save some?

    The very poor may have nothing left when they’ve bought what they need. But the rest of us will have something over and we can choose how much of that we spend or save.

  24. robertguyton says:

    “if we have more money in our pockets why wouldn’t we save some?”

    Maybe you would, maybe you wouldn’t but how does a GST rise improve on what has been happening up til now?
    Has Key said, “I’ve raised GST to encourage saving?”
    I’m simply trying to find out what the stated reason for raising GST was.

  25. homepaddock says:

    I’m not going to trawl through all the media releases and speeches to find an exact quote.

    But I’ve heard and read speeches and media releases from several MPs including John Key and Bill English, in which they talk about the importance of increasing incomes and savings and how the tax changes are designed to reduce taxes on things we want more of (earning and saving) and increase them on things we want less of (spending).

  26. robertguyton says:

    ” designed to reduce taxes on things we want more of”

    But Ele. I want food, fuel, electricity and other essentials. An increase in GST makes those things more expensive.

  27. homepaddock says:

    The decrease in income tax means you still have more left when you’ve paid for those things.

    But I worded that badly – the “we” is the country.

    NZ needs higher earnings and more savings and less spending – and specifically less spending with borrowed money.

  28. robertguyton says:

    Ah! There it is!
    “We” is the country.
    “We” need more tax on goods and services.
    Those New Zealanders who don’t do as well from these tax-switches as people like and including Bill English will be heartened to hear the “we”, the country, need the Goods and Services Tax to increase.
    It’s for our won good.

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