A GST Holiday for Electricity?

A new blog to me,

http://clameurdeharo.blogspot.com/

has mentioned me!

Over at Tony's Musings, Tony has (as usual) a thoughtful critique of Sean Power's position (basically - it's here, so let's leave it settle for a while), and suggests that to exempt foodstuffs, heating and lighting, and children's clothes really can't be difficult or bureaucracy-creating to any significant degree.

In fact, it just goes to show how people don't read what you actually say, or rather what you do not say. In fact, I concentrated on heating and lighting and children's school clothing because the exemptions to GST could be easily applied, with no complications.

Sharp eyes will notice that I purposely did not mention food because I do agree with Sean Power that there may be complications there! So I stuck to the easy cases. And the clothing I mentioned was not "expensive designer tops" as Clameur mentions but school uniform - the word "uniform" gives the game away that it is not "expensive designer tops".

Clameur goes on to ask:

On heating and lighting, say, should we really make no distinction between heating for the pensioner's apartment, and heating for the multi-millionaire's swimming pool? Or between lighting for the pensioner's apartment kitchen and lighting for the multi-millionaire's driveway? Both cases involve use of the same materials from the same supply sources. But that doesn't seem equitable.

I would like to know how those who fall out of the income support bracket, but are still on low incomes, but whose outgoings are going up, are going to be helped. The JEC is still set for price rises of 25% or so next year. Removing GST from heating and lighting would help many more people who fall through the net. 

Regarding the multi-millionaire's property, yes, he will not have to pay GST if it is exempt, but if he has a large property, he is already paying high rates, and he is paying GST on everything else that it applies to. Is it a case of resentment, that he will be getting a larger exemption than me, so we should not have exemptions? That is what the argument seems like, not about equity (none of us pay), but about resentment (he will be getting off more than me).

It is interesting that The Irish Consumerist argued against global removal of VAT but did think there was a special case on hardship grounds for electricty.

Electricity prices have been soaring, rising by 18% just last August. This is going to affect many households over the coming months, people will have to forgo other essential items or cut back on lighting and heating. The Government did move to increase benefits for those in receipt of the Electricity Allowance which is good, but this only benefits those in receipt of this social welfare payment or about 358,000 households or 25% of the total. What about the many households who won't qualify but will really feel the strain of the higher cost of electricity? Those in employment don't qualify for this payment, so households where the main wage earner is on a low income get no support to meet these increased costs.

He goes on to make what is in many ways I think a very sensible compromise:

I think it would be worth exploring the possibility of a VAT tax holiday on electricity costs, basically a decision to reduce or abolish VAT for perhaps a year in the hope that electricity costs come down. This is akin to the gas tax holiday proposed in the US. The benefits of a VAT holiday is that it is a short term measure designed to ease the pain now, leaving the option open to Government to reintroduce VAT when hopefully the price of electricity comes down as global oil prices come down. This measure could save the average household about €100 annually. This is not as complicated as a general VAT reduction in that there is only one supplier (ESB) which is state owned and as I outlined the consumer would definitely see the benefit as the price of electricity is set and outlined clearly on every bill.

We know that the issue is not one of complications, and perhaps we could not exclude it completely but on a temporary basis from electrictity. The precedent is certainly there, because "transitional provisions" were put in place to iron out problems with income support, so a measure that is time limited is possible for the States to pass.

Perhaps as gas and oil are now falling, but electricty is not, it is time for a GST holiday on electricty? As I've noted, this involves no extra bureaucrats, no extra manpower for the States, and would be relatively easy to implement.

Links:
http://clameurdeharo.blogspot.com/
http://irishconsumerist.blogspot.com/2008/09/would-vat-tax-holiday-on-electricity.html