GST Rise Acceptable If Middle NZ Is Not Short-Changed

Lifting GST as mooted by Prime Minister John Key in his opening address to Parliament this afternoon would only be acceptable to the country's retailers if most consumers are quickly compensated by tax relief in other areas, says Cameron Brewer, chief executive of the Newmarket Business Association.

“John Key’s assurance that a GST hike would be off-set by across-the-board personal tax cuts was very encouraging. However they’d need to happen quickly. Tax cuts would need to take effect immediately as a lengthy phase-in would be costly.

"If the overwhelming majority of Kiwis pay-packets are not quickly and adequately compensated, then an increase in GST would hit people's spending power and hurt retail. To avoid this any move needs to be cost neutral for most consumers.

"Lifting GST to 15% would boost the Government’s coffers by a much needed $2 billion per year. However the Government also needs to ensure middle New Zealand does not miss out in the tax reforms.

It’s middle New Zealand who is the bread and butter of retail. Let’s not forget that many Kiwi households will never directly benefit from the likes of more Working For Families tax credits or a cut to the corporate tax rate.

“A rise to GST will probably boost retail in the days before it takes effect. Then the shops would quieten down for a few weeks as people adjusted.

"Despite any tax compensation for Kiwis, an increase in GST would still be a slight 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.

“In this very price-sensitive climate, across the board price increases will affect consumer behaviour unless most get an immediate tax cut in their other hand," says Cameron Brewer.

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