The Democrats position on food is as regressive for lower income earners as it is a nightmare for small business, a point Senator Murray made as recently as 17 March (See attached).
Senator Lees’ assertion that their narrow definition of food "demolishes the definitional arguments about donuts, cold pies and gingerbread men" is a ridiculous and wilfully misleading statement.
All the Democrats have done is shunted the definitional problem up the food chain.
The Democrats claim that tea, coffees, cocoa, and milk will be GST-free. What about iced tea drinks, iced coffee drinks, and flavoured milk? What about soy milk?
Baking products, but not bread or fruit bread, will be taxed. What about if, as the Baking Industry Association says, the baker runs cheese or other products over the bread? What is bread? Is a cheese and bacon roll bread? Is a bagel bread? Is a fruit bun bread? The Democrats have drawn the food line right down the middle of every baker shop in every town throughout Australia – and they will all pay through higher unnecessary compliance costs.
Snack foods – packaged salted nuts are taxed, but what about fresh nuts bought in the fruit and vegetable section of the supermarket? Are they in or out?
Tinned spaghetti meals won’t be taxed, but the same spaghetti meal served in a plastic ready to eat container will!
Tinned caviar is GST-free but fish fingers are taxed!
The problems with exempting food have been discussed at length - the Democrats proposal would deliver a huge GST-free kick to the rich because they spend more in absolute terms on food.
The "Irish" option flies in the face of the purported equity concerns of the Democrats and others who advocated exempting food because lower income earners spend more on food as a proportion of their income than the rich.
The following information from the 1993-94 HES data makes it clear that lower income earners spend a much greater proportion of their income than the rich on items the Democrats want to tax .
Iced and other confectionery
The bottom quintile of income earners spend four times as much of their income on these items as the top quintile and more than twice the average.
Soft drinks and aerated waters
The bottom quintile of income earners spend nearly two and a half times as much of their income on these items as the top quintile and twice the average.
Meals in restaurants, hotels and clubs etc
The bottom quintile of income earners spend nearly twice as much of their income on these items as the top quintile and nearly twice the average.
Snacks, take-away food (not frozen)
The bottom quintile of income earners spend more than twice as much of their income on these items as the top quintile and just below twice the average.
Apart from the rich, there are only two groups of winners out of the Democrats proposal – lawyers and accountants.
20 April 1999
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David Alexander 02 62776390 |