>From The Australian, at: http://www.theaustralian.com.au/index.asp?URL=/national/4352721.htm Tax reform credibility takes a blow By GEORGE MEGALOGENIS 11dec98 THE Howard Government's GST suffered its first significant credibility blow yesterday, with the release of figures showing the tax package will actually reduce the nation's income over time. The independent research, using the Treasury Department's own assumptions on the GST, challenges one of the central planks of the Government's election campaign � that the consumption tax will make the economy stronger. It also took the gloss off the historic passage of the 16 pieces of GST and tax cuts legislation through the House of Representatives yesterday. The findings are expected to add fuel to next week's first formal Senate hearings into the tax package, with Treasury officials expected to be quizzed on forecasts for economic growth and employment that were not released to the public. The Centre of Policy Studies at Monash University found the GST would make consumption and gross domestic product slightly weaker over the medium and long terms compared with the existing tax system. The reason is the GST penalises services exports, such as tourism and education, leading to a reduction in the purchasing power of the economy as a whole. Treasurer Peter Costello brushed off the results, saying the tax package document had included estimates from other groups on how the economy would grow as a result of the GST. But he conceded the Government had not provided its own official forecast on this front. Prime Minister John Howard said when the burdens and the benefits of the tax package were totalled, the economy would be better off. "If you read both sides of the ledger, you will get a glorious future for the Australian economy," he said in response to a question on compliance costs. However, the centre did not model the impact of the $2.2 billion in red-tape costs that the Government has already admitted will be associated with the implementation of the GST. "Nevertheless, even in the absence of administrative costs, we estimate that the overall long-run effect of the package will be slightly negative," the research says. "The main reason for this is the projected decline in the terms of trade (the amount of imports that can be bought for every dollar of exports)." The centre's Peter Dixon told a conference in Sydney yesterday that when the winners and losers of the GST across sectors were added up, the tax package did not make much difference to employment or growth. He said Treasury's assumption that workers would not use the GST to push up their wages was too optimistic. Job losses and higher inflation could be expected in the short term if wages did rise. Leftlink - Australia's Broad Left Mailing List As vilified, slandered and attacked by One Nation mailto:[EMAIL PROTECTED] http://www.alexia.net.au/~www/mhutton/index.html Sponsored by Melbourne's New International Bookshop Subscribe: mailto:[EMAIL PROTECTED]?Body=subscribe%20leftlink Unsubscribe: mailto:[EMAIL PROTECTED]?Body=unsubscribe%20leftlink
