Bad Arguments on GST

If you make an exemption of GST then you benefit the richer rather than the poorer - that was Deputy John Le Fondre's argument according to BBC Radio Jersey. It is also the only cited by Peter Body and loads of other pundits writing to the JEP.

And it seems sensible, until you realise that the proposed exemption is on food.

As the late Benny Hill used to say, you can only eat so many meals in a day.

How are the richer people going to benefit more? There is not a huge margin between different foods, and who wants a permanent diet of caviar and lobster anyway? A Herald Tribune article on expensive foods mentioned "Beluga caviar and hippopotamus steaks" as the world's most expensive foods - who is going on a diet of those? I think Benny Hill had a very good point.

If the GST is coming off food and drink, the drink element is easily rectified for alcoholic beverages by increasing the duty - which after all is still a tax. That will offset any loss on champagne or fine wines etc.

Regarding restaurants, they are providing a service - so they will still be charging GST if their turnover is high enough, which the fits the most expensive ones. Are the rich people going to slum it down at the chip shop every night?

John Le Fondre's scheme benefits those getting income support or paying taxes. But what about people not paying taxes, because they are perhaps home owners on a small pension? Because they are home owners, they will probably not be eligible for much income support, yet they still have to eat. So these poorer people will not be better off.

Moreover, as food prices rise, so does the amount of tax gained by GST on food. Will the exemptions and income support be index linked to take account of cost of living rises on foodstuffs, or will it go up below that, so that more people end up paying GST on food in the long run.

This is an old government trick - the UK did it with inheritance tax, moving the thresholds up so slowly that now thousands of ordinary people are paying crippling taxes because house prices have increased - what decimated the landed gentry is now decimating ordinary families.

So I suspect that no firm index linking would be made, only political promises, which are often as ephemeral as the politicians who make them.

Links:
http://www.iht.com/articles/2008/07/17/business/17Forbes-expensivefoods.php