International Aspects of the Australian Goods and Services Tax (GST)

Abstract

Written in June 2000 at the introduction of Australia's Goods and Services Tax (GST) this paper suggests that the Australian GST is an inefficient and inequitable tax which will not meet the expectations of the Howard Liberal Government. This paper seeks to question why the Australian Government was so determined to establish a broad based Goods and Services Tax and what is the likely outcome given the experiences of other nations when they have implemented a GST/VAT system. The growth of e-commerce is a major thrust for world governments to align tax policies and GST/VAT is seen as one of the tools by which this uniformity can be achieved. It is argued that the Australian Government is therefore being pressured by fellow OECD governments to conform to their taxation policies. Pressures of globalisation are intensifying the need to conform to remain internationally competitive. This paper examines the international aspects of Australia’s tax legislation, using the GST/VAT as an example. The GST/VAT provisions proposed in 2000 for Australia in light of foreign government’s experience will also be examined. The need for a GST/VAT and the Australian Government’s drive for its implementation is also analysed. An international comparison of the Australian GST provisions with the Cook Islands VAT system will be undertaken in the paper. The purpose of the comparison will be to demonstrate the international ramifications of consumption-based taxation to the Australian taxpayer when viewed from a global point of view. Also, the comparison will look at the comparative position of an Australian taxpayer compared with other taxpayers in the world and how they interrelate. Given the major political, social and economic differences that tax havens in the South Pacific and the OECD conforming Australian Government, it is submitted that this examination will produce a real distinction between the two international extremes and thereby elucidate likely problems which will be experienced in the Australian context. The comparisons and distinctions will be highlighted to produce the extremes of the international tax continuum as part of the study of international taxing systems. The differences in the two approaches will be placed in context of their respective effectiveness. The comparisons will also provide an insight into international taxing relations and their effectiveness in achieving their purpose i.e. to maximise government revenue with the minimum disruption to taxpayers. As a result of the comparison and likely problems that will be encountered in the Australian context, the paper concludes by putting forward various alternatives and solutions to the identified problems. While the paper appears out of date some 17 years later it makes a very interesting base for the comparisons of what actually happened. It appears those outcomes were very close to the 2000 predictions.