- The article discusses lessons on VAT from New Zealand and Australia for UK tax policy stakeholders.
- Eugen Trombitas, Managing Director at PwC Ireland, shares insights from his experience in New Zealand and Australia regarding their Goods and Services Tax (GST) systems.
- He emphasizes that the success of a VAT system relies on timing and political courage.
- A notable example is the 1993 Australian Federal Election, where John Hewson’s complex GST explanation led to his electoral defeat, but GST was successfully implemented seven years later.
- New Zealand’s GST, introduced in 1986 with a rate of 15%, is often regarded as a best-in-class model for modern VAT systems.
- The International Monetary Fund recently praised New Zealand’s GST for its progressive approach in a working paper.
- Key features of New Zealand’s GST include:
- Broad tax base with minimal carve-outs (only financial services and residential rentals are exempt).
- Lower rates due to the broad base, leading to higher public acceptance and compliance.
- GST is integrated into everyday transactions, making it a familiar part of the economy.
- Consistently contributes about 30% of total tax revenue, with this proportion growing as the economy expands.
Source: icaew.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
