GST rise only acceptable if personal tax reduced

GST rise only acceptable if personal tax rates reduced

Lifting GST as recommended by the Government's Tax Working Group would only be acceptable to the country's retailers if it was offset by a reduction in personal tax rates, says Cameron Brewer, chief executive of the Newmarket Business Association.

"If Kiwis pay-packets were not equally compensated by a personal tax cut, then an increase in GST would see people's spending power eroded. I appreciate the view that there should be a slight shift from income taxes to other taxes such consumption tax. However any move needs to be revenue neutral for the consumer. Otherwise a GST increase would be damaging to the retail sector.

"Lifting GST to 15% would boost the Government’s coffers by $2 billion per year. That would be very easy and attractive to the Finance Minister given his current borrowings. However it comes with risks - the main one being scaring off consumers just as we're seeing their confidence return.

"Even if personal tax rates are reduced to offset an increase to GST, it would still be still negative to New Zealand tourism. Tourism-related businesses and retailers warn that an increase in GST would make New Zealand less competitive in the international tourism market.

"Across-the-board price increases without some reduction in income tax would be a negative for retailers. Let’s not forget that the New Zealand consumer has become very used to the ongoing nationwide sales and price reductions - not price hikes.

“In this climate, state-sanctioned price increases would go down like a lead balloon unless the public got some tax back in their other hand," Cameron Brewer.

ENDS

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