18 June, 2008

Fuel tax cuts

There have been yet more calls for the government to cut GST on fuel.

The standard answer to that idea has been a simple no.

I agree.

Why? Not just for the reason that it won't make much difference in the medium or long term. Or because people spending more on fuel are spending less on other things therefore the total tax take is pretty much the same.

My rational is this: GST in New Zealand is a very simple tax to administer and comply with basically because it is applied to pretty much everything (with the exception of some secondhand goods) that isn't exported at the same flat percentage.
Compliance costs are low.
Remove it from some items and the compliance costs will sky rocket.

Take a guess who will ultimately end up paying for that.

Leave it alone and take the promised income tax cut or increased government funding on health care, law enforcement, education etc instead.

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