Abolish *all* GST

We produce the goods and services – let’s take ownership of them all!

GST was first introduced in NZ by the fourth Labour government in 1986 at the rate of 10%. While a similar tax in Britain excluded basic family items, the only things Labour excluded from GST here were financial services, real estate transactions and the operations of very small firms.

GST significantly raised the level of indirect taxation. The proportion of government income derived from indirect tax rose from 22.5% to 33.2% within just the first two years of the new tax.

In 1988, the fourth Labour government slashed the top personal tax rate from 66% to 33% and, the following year, 1989, GST was increased to 12.5% and imposed on all goods and services.

Hitting the poorest hardest

Victoria University economist Bob Stephens has pointed out the overall effect in the 1980s of the partial replacement of income tax by indirect tax. Between 1982 and 1988, “effective average tax rates including GST for couples on average earnings with two dependents increased from 18.7% to 24.1%. Average tax rates for similar couples on three times the average income declined from 40.3% to 34.9%.” So we can see that indirect tax means less tax on the wealthy and more tax on workers, especially the poorest.

What’s behind the shift in taxation?

Under capitalism, workers’ labour-power becomes a commodity and, like all other commodities, its value is determined by the socially necessary labour that goes into creating it. Basically, this means that the value of workers’ labour-power is the value that is required to house, clothe, feed and otherwise maintain the worker in a sufficient state to turn up to work each day to produce profits for the employers. If that value translates into $500 a week, this is what the worker needs to be paid. The worker, however, can create a value much greater than this – say a thousand dollars worth of goods or services. The extra $500 is surplus-value, and in the hands of the boss. In good times, and with strong organisation, the tax on workers’ wages has to come out of surplus-value and therefore lessens the amount of surplus-value that the boss can convert into profit. In other words, the worker takes home the value of their labour-power ($500) and the amount paid in PAYE is actually a deduction from the additional $500 – that is, from the surplus-value.

During boom periods, the bosses are OK about this because they have so much surplus-value and they are prepared to buy peace with the working class. However, when capitalism goes into slump, the capitalists want to cut down on anything which reduces the amount of surplus-value they can convert into profit. Indirect tax is a useful weapon for doing this.

That way, instead of the worker getting the $500 value of their labour-power per week and, say $150 tax coming out of the $500 surplus-value, there may be only $100 direct tax coming out of surplus-value and $50 tax coming out of the worker’s $500 wage. Or, with personal tax cuts and increases in indirect taxation, like GST, it may be that $100 direct tax is coming out of surplus-value and $50, in the form of indirect tax, is coming out of the worker’s $500 wage. In either of these cases, the employing capitalist gets hold of an extra $50 in surplus-value per worker.

What has happened is that the worker’s share of the $1,000 has fallen from $500 to $450, while the bosses’ share has risen from $350 to $400, and the government continues to get $150.

Passing on costs

Moreover, GST allows the bosses to immediately pass on costs. In this sense, it doesn’t really cost the bosses anything. If they pay GST on some item they need for their factory or office, that cost is factored into the cost of their finished product.

Workers, on the other hand, cannot simply “factor in” GST to their incomes, because they don’t set the price of their labour-power. There is no GST added to workers’ wages!

Further reductions in tax, even if the reductions are on the wages of the low-paid, mean less money is coming out of the surplus-value that is in the hands of the capitalist class. In other words, the capitalists get to hold onto more surplus-value. This is also why capitalists prefer reductions in the tax rate over wage rises. Tax deductions leave more profit in the hands of the bosses, whereas wage rises can cut into profits. The fact that tax deductions also leave less money for the state to spend on public services is fine by the bosses. After all, they want more and more public services to be privatised and turned into businesses to make profits anyway.

From a pro-worker and anti-capitalist perspective there are some key considerations:

1. As the creators of surplus-value, the basis for profits, workers are already the people who create the wealth of society, a chunk of which is expropriated from them by the capitalist class which exploits their labour-power. Workers therefore should pay no indirect and/or regressive tax – no GST, no petrol tax, no road tax, no rates, nada, nothing.

2. While we call for for the total abolition of GST and all forms of regressive and/or indirect tax, we are more in favour of workers’ struggles for wage and benefit rises and for a living income with no worker having to work more than a 40-hour week. In fact, in the 21st century we should really have much shorter work weeks than were achieved last century.

3. Both indirect and regressive forms of taxation fit into the overall capitalist economy and are not going to be changed by parties committed to managing capitalism.

Even if GST were to be abolished in the context of the existing economy and power relations between the social classes, capitalists would try to increase their prices to take advantage of this. So a product that is $112.50 – $12.50 being GST – might be reduced to $110, with the capitalists being the prime beneficiary.

The only way to escape the inherent problems of a capitalist economy is to abolish that economy – that is, through workers taking control of the means of production, distribution and exchange and organising a new kind of society, one based on planned production for human need rather than anarchic production for profit.

Or, as our Wellington Central candidate, Don Franks, has put it:
All things bright and beautiful

In every shopping mall,
All the goods and services,

The workers made them all.
We sell our labour power

For a bare subsistence wage,
While bosses loll in luxury-

It’s time to turn the page.
Workers of all countries,

In lands both great and small,
This earth and all we’ve made of it –

Let us reclaim it all

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