How much prices would go up under a GST rise
A hike in GST from 12.5% to 15% would drive up most prices by 2.2% and the CPI by 2%, according to Statistics New Zealand.
This would mean the following price increases:
* Filling up a medium sized car with petrol – $95.15 to $97.24;
* Movie ticket – $18.50 to $18.90;
* 2 litres milk – $4.80 to $4.91;
* Loaf of bread – $3.79 to $3.87;
* 2.5kg potatoes – $2.99 to $3.05;
* 15-pack beer – $23.99 to $24.51;
* Hamburger – $5.00 to $5.11; and
* 46" widescreen TV – $2491 to $2546.
Statistics NZ Prices manager Chris Pike said lifting GST to 15% could increase retail prices of goods and services that are subject to GST by 2.2%.
"A product priced at $100 excluding GST currently sells for $112.50. If GST were increased to 15%, that product would retail for $115, an increase of 2.22%, not 2.5%," Mr Pike said.
Also, not all goods and services are subject to GST. Housing rentals, school donations and credit services are all exempt.
Since they make up about 9% of the Consumer Price Index – a measure of inflation – about 91% of the cost of the CPI basket would be affected by a change in GST.
This means an increase in GST to 15% would lead to a CPI increase of about 2.0%, Mr Pike said.
This assumes no change in price for goods and services that are not subject to GST.
However, all food items in the CPI are subject to GST, so the increase in food prices would be about 2.2%, all other factors remaining equal.
"This is the situation if all other factors remain as they are, if retailers pass on all the GST increase to consumers, and setting aside the possible indirect impact of other tax changes that might be implemented at the same time," Mr Pike said.
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Comments
congratulations on being able to do take aways
Now, for a bonus point, can you please tell me what the increase in compliance costs will be for this introduction...
and for those eager beavers who finish first, is it worth the effort?
NBR you are wrong. The rises
NBR you are wrong. The rises will equate to 2.8 to 2.92%.
You've forgotten the governments persistence of the emissions trading scam on cost of goods.
The government have factored this theft into their 'modest' tax grab machinations. Helen Clark is delighted.
NBR: The net effective rate
NBR: The net effective rate of GST will be 16.8%. This is GST inclusive of the ETS.
For a short time, 1 or 2 quarters, this will drive 0.15% increase to GDP creating the illusion "things are ok". However, come Q3 a rapid decline will occur as consumers/businesses realise they've been brutalised and robbed. Purchase and investment behaviours will sour abruptly. GDP will then steep decline by 0.4%. From there a progressive deterioration will occur.
Hi Simon M I hope that you
Hi Simon M
I hope that you are one of the few economists that predicted the collapse of the Finance Companies during the Clark / Cullen governance and also predicted the world wide recession. If not what value could we attach to your current predictions?
Um... What?
Hi Simon. As I have to assume you missed it, I'll remind you the title of the article. "How much prices would go up under a GST rise". Not "How much prices would go up under a GST rise + Emissions Trading scheme". So the NBR is right, not wrong as you assert to try to make a political point.
Not to mention that the math was actually done by Statistics New Zealand, as the article again clearly states, and so if anyone was wrong - which they are not - it would be Statistics New Zealand.
So to address your point - no, the NBR is not wrong. They just don't feel the need to go on a rant about the ETS unlike, apparently, yourself.
Daniel. You appear someone
Daniel. You appear someone keen on social conditioning. That's fine. But, not a political rant. Pure fact. Go do your number crunching. Do some analysis. Indeed, make some phone calls. You may then arrive at the same outcome. GST is inclusive of the ETS and any point that argues otherwise is an argument of ignorance or tolerance.
"Rounding up" means retail prices will go up more than that
Remember when the Euro was introduced at the beginning of 2002 and people throughout the Eurozone complained of price rises because many retailers decided to "round up"?
But there are major risks with increasing sales taxes in the middle of a recession too. Margaret Thatcher increased VAT in the UK in 1979 as soon as she was elected in 1979 from 8% to 15% - that and a soaring value of the Pound saw a big increase in unemployment the next year.
"Those who fail to learn from the lessons of history are doomed to repeat them" - proverb
GST & Tax changes
Complain complain complain... look it's a start - not a major but a start in moving the tax base away from personal income tax which is a major brake on our economy. Stop being so bloody negative.
Think - next year is the biggest sporting event ever in this country - an all those visitors will be paying a little more GST .. and hopefully we'll be paying a little less income tax... better than a poke in the eye....
Hi Simon
Thanks for your reply. That doesn't address the fact that whether your figures are right or wrong is irrelevant - this article deals with the impact of an increase in GST, ceteris parabus. The fact prices will increase under an ETS is 100% outside of the scope of this article. You may as well argue that inflationary pressures from income tax cuts would increase prices, so we should include that in this article - of course it shouldn't be included, and for exactly the same reason that we shouldn't include ETS price pressures.
Yep. But, I draw you to the
Yep. But, I draw you to the point of the article. It talks of CPI as it's central point. If you are talking of taxation changes, "Goods and Services" tax and drawing conclusions on any possible CPI or financial outcomes - any notion of this - without ETS - would be a partial misrepresentation of the truth. Completely wrong, misleading and as economically flakey as the tax reform itself.
To conclude, the impact of the tax reform, on GST, on CPI, is wholly inclusive of ETS. The costs of goods are, put simply, determined by the cost of creating them and any tax imposed on them.
Bottom line: So, in not being rude, if articles are being put out there,
it is NOT irrelevant to be right about the figures. It is this sort of partiality that implicates economies with poor quality decisions. These decisions are often based on poor advice and such conditioning or partial reporting of the systemic consequences of the entire picture.
The BIG picture - time for a new Political Brief
All this debate over the likely impact of the proposed new GST rate while the BIG picture is being missed. In 1984 Roger Douglas promised a 20% Flat Income Tax would follow the introduction of the new 12.5% GST. Now 16 years on and John Key proposes a flat 30% FIT with a 15% GST. Are we heading toward a 2026 tax combo of 40% FIT plus 20% GST? Kiwi Politicians only seem to know how to increase the combined tax take and enforce a continuous trend of compliance costs onto an increasingly less prosperous nation. It is time for a new nationally shared vision where elected Politicians are given a new brief - to get out of our homes, schools and businesses. Remove all taxes on income and profits and apply one expenditure based tax system. If you spend you pay tax. If you save and invest you do not! Then watch the economic growth and shared willingness of all to work hard. We should also be able to get by with far less politicians and their civil service empire.
Decreasinghing the government is the only option
Russ F You are absolutely correct.
In order for us to survive financially the power of governments must be drastically reduced!
Lifting GST will I believe
Lifting GST will I believe just increase tax evasion as most business in NZ is small business who struggle as it is. Market supply and demand reflect the true prices so bussiness will suffer leading to less employment and more cash jobs. I doubt the Govt will get what they expect
Lifting GST
Governments problem is that they need income now to pay for promises made over the last 9 years and the unsustainable growth in the Gov sector when compare to the private.
1) get income (taxes) closer to expenses
2) ensure most investment decisions are treated equally
3) encorage productive investment, lower company tax
4) ensure structures of convenience (company, trust, personal) are taxed the same at the margin
5) ensure payments from Govt welfare are to the deserving only
6) and finally cut back on the "managers" and the back office costs in Govt.
Those who loose jobs in step 6) are going to need work, and companies will only setup and expand if steps 2 and 3 are completed.
Those bleating about increased cost of spending because of a GST rise have to come to terms with the fact that if the problems are not addressed, eventually they will have a lot more to worry about. The number seeking welfare will exceed the number working.
You only need to be the sole breadwinner in a family of 5 kids to know that they have to leave home and work, not because its good for them but because you can't afford to keep them at home forever.
Get on with the changes JK, and be quick about it.
Retailers remember the last time
From the experiences of last time they mucked about with GST, retailers who price point below $100 will have to wear the increase in GST from their already slimming margins. So the inpact on CPI will be less than the pointy heads suggest. Put all the tax rates back to 33% and leave GST alone!
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