HE Commonwealth government’s forthcoming proposals to reform Australia’s taxation system could well include the introduction of a goods and services tax (GST). This would be a broad-based consumption tax that may either be hidden in the price of goods or, as in Canada, added on explicitly at the point of sale. Political considerations are likely to play a major role in the choice of modifications to specific taxes. For example, voters may be concerned only with the total tax paid, along with the total amount of government services provided (and, possibly, associated changes in government debt if revenues and expenditures do not balance). In this case, tax reform that increases the efficiency of the tax system and is revenue-neutral, as the government of Canada claimed of its GST when it was introduced in 1991, 1 should not affect the government’s electoral chances. However, if voters do not treat all types of taxes as being indistinguishable, then there are different political costs associated with alternative types of taxes and these may differ substantially from the economic costs of these taxes. To the extent that different forms of taxes affect voters differently, governments may choose those tax instruments which have lower political costs rather than those that have lower economic costs. As noted by Hettich and Winer (1984), the politically optimal tax structure is one in which the marginal political cost, rather than the marginal economic cost, of raising an additional dollar of tax revenue is the same for all types of taxes. Different types of taxes might be expected to have different effects on voting behaviour, and hence on the political success of the incumbent party, for several reasons. For example, some taxes may be difficult to perceive because they are hidden in prices (excise taxes) or deducted at source (corporate taxes, resource rent taxes), so that the voters are unaware of the true size of the tax burden. Other taxes may be relatively small and paid only infrequently (licence fees), while others may