Fears for low-wage earners

BY SHANE COWLISHAW

The Government could increase GST to 15 per cent in a significant shakeup of the tax system, leaving some concerned how the changes will affect lower-income earners in Southland.

In his first statement to Parliament for the year yesterday, Prime Minister John Key said the Government had looked carefully at the Tax Working Group's recommendations to fix a "broken" tax system.

Raising GST was being carefully considered but no decision had been made yet, Mr Key said.

If it was fulfilled the rise would be tempered by across-the-board personal tax cuts and increases to benefit, superannuation and Working for Families payments, he said.

This would encourage people to save and invest more rather than spend, he said.

Measures to close property investment loopholes that allowed individuals to write off taxes would also be introduced in the May Budget, he said.

However, other recommendations by the working party, including introducing a land tax and a capital gains tax would not be adopted, he said.

The possible increase to GST, however, has left some worried about how it will effect those in the lower income bracket.

Invercargill Jubilee Budget Advisory Service manager Simon Tierney said all low-income earners were struggling with the basic necessities of life at the moment and a GST hike would make things "a little tougher".

Expenses had been slowly rising for many years but wages had not matched the increases, he said.

`When things go up slowly it's like putting a frog in hot water ... it's over time that people feel the pinch," he said.

Invercargill Deputy Mayor Neil Boniface said it was important any GST increase was balanced with a personal tax cut.

Invercargill had a high proportion of people on fixed incomes, who spent almost all their money on essentials such as rates, electricity and food, so the GST increase would probably hit them hardest, he said.

The average rates bill was $1500, so an extra two and a half per cent on that would be difficult for some people to pay, Mr Boniface said.

Paying GST on rates was essentially a "tax on tax" and something Local Government New Zealand was concerned about, he said.

Invercargill Mayor Tim Shadbolt did not return calls yesterday.

Venture Southland tourism marketing manager Lisa Buckingham said she did not want overseas visitors to think New Zealand was an expensive place to visit.

The tourism industry would need plenty of warning of any GST increase, because many companies set their prices up to two years in advance, she said.

- © Fairfax NZ News