Monday, June 7, 2010

GST lessons from Finland

In the days of Helengrad (or the Helen Clark power centre in Wellington), the Treasury loved Finland and used to produce reports on how NZ could be like Finland. It is not clear how Bill and John now view this, but their decision to increase GST on everything from October is certainly going the opposite way to Finland.

In Finland two reduced GST equivalent rates are in use: 12% (reduced in October 2009 from 17% for non-restaurant food, and from 1 July will encompass restaurant food also), which is applied on food and animal feed, and 8%, which is applied to passenger transport services, cinema shows, physical exercise services, books, pharmaceuticals, and entrance fees to commercial cultural and entertainment events and facilities.

Supplies of some goods and services are exempt Finland: hospital and medical care; social welfare services; educational, financial and insurance services; lotteries and money games; transactions concerning bank notes and coins used as legal tender; real property including building land; certain transactions carried out by disabled persons.

Why do Bill and John want to collect more tax from everything regardless of its relative social value? One thing they could and should do is tax petrol a lot more: in Finland petrol currently costs 1.42 Euros per litre, or about NZD 2.65 a litre, over a third more than in NZ, and use that tax to pay for work on the roads - make those who use roads pay for them, not make everybody pay for them.

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