Auckland Council's Economic Lunacy

Thursday 14 March 2013, 1:43PM

By Andersen Accountants Limited


Auckland City’s Deputy Mayor, Penny Hulse, has called for the government to scrap GST on housing development. The cost to the economy would be billions of dollars and such a step would amount to economic lunacy.

We would all like to pay less tax, including less GST. Sadly, the reality is that tax is here to stay. New Zealand’s GST tax is one of the best value added tax systems in the world. This is because it is broad based, simple and efficient. It has few exceptions which means that taxpayers (and the IRD) don’t waste money on trying to find loopholes. Often there are calls to exempt various categories of expenditure from GST. An ongoing example is fresh fruit and vegetables. While nobody would deny that anything that can be done to encourage the consumption of healthy food is a good thing, the reason why there should be no GST exemption is because it would undermine an excellent system, increase the government’s costs to administer that system (leaving less for other worthy economic goals), and increase business compliance costs (new systems would need to be created  to monitor what is in and what is out of the GST net and then on an ongoing basis to ensure that errors don’t creep in). And of course, every dollar less that the government collects from GST (or any tax) means a dollar less for some other part of the economy, or greater borrowing, or both.

We don’t want to pay GST but, given that it is here to stay, let's be grateful for a system that works as it is intended. That the Auckland Council wants to deny the government billions of dollars during a time of financial constraint would be funny if the implications weren’t so potentially serious.

Kristina Andersen
Andersen Accountants Limited
Telephone: 09 3695198