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  • rmacculloch

Its Exam Time: let's give National a "C" on Economics

Stuff has just reported that "National leader Judith Collins is open to taking GST off the sale of new build homes to encourage developers to build extra housing ... Collins noted that developers said that it makes it harder for them to sell new builds because they’re competing with existing homes that don't have to pay the 15 per cent tax .... I’m not saying we’re going to do it or anything but I'm aware there is an inequity there,” Collins said.

When GST was introduced an important part of its design was that it applied to final sales of all goods and services. The Kiwi architects of our GST knew that should one start allowing exemptions, it would open the door to lobby groups wanting their products excluded to help them make more money. From the report above, it seems that is exactly what property developers are trying to do, namely persuade politicians to take GST off their industry!

It's also unclear why there is an "inequity" in the tax, as the Leader of the Opposition argues ... since value added taxes like GST are simply levied on the sale of all goods and services that have had - yes - "value added" to them. Existing homes have not been newly constructed or produced - its a second hand market - so they don't attract GST when sold. Isn't that the whole point of the tax?


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