Goods and Services Tax (Australia) - Political Impact

Political Impact

John Howard had said that the "GST would never become part of Liberal Party policy", but his change of heart would become apparent in the lead-up to the 1998 campaign. It was passed by the Senate in June 1999 in a heavily amended form. The Leader of the Democrats, Meg Lees, viewed the dilution of the GST legislation as a success, but the issue split the Democrats, with Senators Natasha Stott Despoja and Andrew Bartlett voting against the GST. The move triggered infighting amongst the Democrats, and while the Democrats performed reasonably well in the 2001 federal election when Stott Despoja was party leader, the infighting worsened, resulting in Stott Despoja being forced out of the leadership and the loss, at the 2004 federal election, of the balance of power they once held in the Senate. The annihilation of the Democrats was completed at the following election in 2007 when they lost all their remaining seats, with the Australian Greens becoming the major third party.

Australian Labor Party leader Kim Beazley continued to oppose it during the Howard government's second term. During the 2001 election campaign, Labor made a 'GST rollback' a centrepiece of its election platform. Labor attempted to reprise the effects of the birthday cake interview by deriding the application of GST to cooked and uncooked chickens, but failed to ignite public response to the limited scope of the rollbacks applying only to gas and electricity bills. Labor lost the election, and though the 11 September attacks and the so-called Tampa affair dominated the campaign, the loss would effectively end all serious opposition to the GST.

In early 2006, the New South Wales State Government and the Federal Treasurer Peter Costello launched adversarial advertising campaigns concerning distribution of the GST to the states. New South Wales Treasurer Michael Costa argued in full-page newspaper advertisements and on televised commercials that New South Wales consumers paid A$13 billion in GST but received only A$10 billion back from the Commonwealth Grants Commission, and therefore New South Wales was subsidising resource rich states like Queensland and Western Australia. A Bill was introduced that gave the federal government no obligation to hand back revenue earned by that state to be divided to other non-performing states. Unlike sales tax, sales tax revenue went back to the State that generated the sales tax.

The federal government counteracted with its own advertising campaign which claimed that New South Wales had breached its contractual obligations under the 1999 GST Agreement by continuing to charge unfair stamp duties and land taxes, which were supposed to have been abolished. After weeks of intense media and public pressure, the New South Wales State Government announced in its budget that it would reduce stamp duty and land tax, but critics argued that the State Government did not go far enough with much broader tax reform in New South Wales required to help encourage investment and business that had been forced elsewhere due to an unfavourable New South Wales business environment. This was in response to the Commonwealth allowing another A$72 million in grants to New South Wales, in addition to existing annual increases.