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GST: How a midnight tax grab became lasting reform

Max BlenkinAAP
John Howard and treasurer Peter Costello announce a deal has been done with the Democrats on the GST.
Camera IconJohn Howard and treasurer Peter Costello announce a deal has been done with the Democrats on the GST.

On the stroke of midnight July 1, 2000 Australia gained a brand-new tax, the long-anticipated GST which added a 10 per cent tariff to the cost of almost everything.

While many items became more expensive, some consumables remained the same price and others, where the goods and services tax replaced a higher rate of wholesale sales tax, actually became cheaper.

Cabinet documents for 2000 — released by the National Archives of Australia — reveal the extensive effort conducted in the lead-up to July 1, 2000 to prepare the nation for this far-reaching economic reform.

For example, what about those venues such as nightclubs, hotels and supermarkets which traded through the changeover?

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Cabinet decided they didn’t need to shut their cash registers and reopen to set up for the new GST regime until normal closing time later on July 1.

That first morning, then-prime minister John Howard — who in May 1995 as opposition leader promised there would “never ever” be a GST on his watch — checked out the reception of the new tax with visits to Sydney shopping centres.

He found reaction of shoppers and shopkeepers ranged from positive to indifferent, he recalled in his biography Lazarus Rising.

Democrats leader Meg Lees seems unconvinced after marathon talks with the Prime Minister John Howard over GST changes.
Camera IconDemocrats leader Meg Lees seems unconvinced after marathon talks with the Prime Minister John Howard over GST changes. Credit: Sharon Smith

“A sensible broadening of Australia’s narrow tax base had been achieved after a generation-long public discussion of its merits and demerits,” said archives historian, University of Canberra Associate Professor Dr Christine Wallace.

In the lead-up to July 1, the government conducted an extensive education and information campaign to prepare the community and business sector for the new tax.

It was a big job.

In February, the government committed an extra $20 million to sell the GST to the community.

Despite that considerable effort, its introduction still had to be followed by an extensive bedding-down period.

Cabinet documents disclose a number of decisions relating to adjusting GST processes, for which the main burden fell on businesses.

In November, the Australian Taxation Office raised a number of issues, noting “the large and growing number of requests for assistance from the ATO for advisory visits and through calls to the helplines”.

This was about the time businesses had to submit their first Business Activity Statement, or BAS.

Mr Howard later said the BAS was too complicated, yet Treasury resisted any change, as did Treasurer Peter Costello in the belief that any change signified retreat.

Not until the following year was the form simplified.

Australia had long considered a broad-based consumption tax to apply to goods and services (with a few exemptions) and which was paid by everyone.

That was advocated by the Asprey committee, commissioned by the McMahon government in 1971.

At various times in the 1980s Paul Keating and John Howard favoured a GST.

Opposition leader John Hewson campaigned on a GST at the 1993 election and lost.

The impetus for the coalition government under John Howard was the 1997 High Court decision invalidating State indirect taxes and leaving the Commonwealth to make up the shortfall.

The Federal government could have got by with minimal change but in August 1997, Mr Howard invited Australia on a “great tax adventure”.

After narrowly winning the 1998 election, Mr Howard had a mandate to proceed with the GST.

One government priority was to have the GST in place ahead of the Sydney Olympics to reap the benefit of visitor spending.

Professor Wallace said the government achieved a near-textbook demonstration of how to initiate and implement a controversial public policy.

“It is a signal demonstration that a controversial, politically risky policy, properly handled, can quite quickly become a routine, unremarked upon aspect of daily life,” she said.

AAP

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