Originally Posted by
elZorro
Thanks for that stoploss, I knew about the first and third changes to GST, and presumed the middle one. My mistake.
From Wikipedia:
When GST first came in at 10% on 1 October 1986, there were personal income tax changes designed to balance it out. I did the maths for my own situation at that stage and found I'd be about even. I realised that if I was on a big income, there would be a lot more money in my pocket, ready to spend on GST-levied goods presumably. I actually raised this question remotely with David Lange via a radio station, asking if he'd honour his pledge to pay back any extra personal income from 1 October. He batted the question away, instead referring me to social services (guessing I was unemployed I think). A few months later I was in Wellington and saw David Lange in an upmarket retail store, speedily buying a large, colourful gumball machine complete with gumballs. I presume he kept the income.
Yes, Labour put the GST rate up, not long before they left office after two terms, in 1990. It stayed at that rate for 20 years, left in place by both parties, until National put it up again in 2010. Following so hard after the GFC, it has to be seen as an admission of defeat in getting solid businesses and investment operations to pay their full share of tax, or more likely the intention is for the status quo. There is no doubt that employees pay their share, it's taken off them before they see anything, by pay clerks and at tills throughout the country, and on almost every invoice they pay.
Retailers in 1986 were forced to keep their old margins on the GST exclusive portion, and add on GST at 10%. So they handled 10% more cash, but had the same net profit. This could have been the start of the ruthless discounting that has slashed retailer margins on most goods, and that impacts on wages in the sector, and general profitability. I much prefer B2B sales or exporting, where both sides can ignore the effect of GST, as long as we can remember it's part of our bank balances.