Consumption Tax



In Australia we have one of the lowest consumption taxes in the world: 10%. It’s a value-added tax (VAT) but, like New Zealand, we call it a goods and services tax (GST)

In principle such taxes are supposed to be levied on everything, at as low a rate as possible, so as to be non-distorting. But when it was introduced in 2000 it had been mauled in Parliament and many goods and services were exempted. I blame the Greens for the mauling, but that may not be wholly fair.

One consequence has been that special interest groups have been able to characterise it as a ‘luxury tax’ because it’s not applied to things like fresh and minimally processed food (eg milk and cheese). I have posted before about the absurd campaign to exempt feminine hygiene products: the phrase ‘tampon tax’ is unfortunately alliterative, lending itself to sloganeering.

Out of interest, I have kept all my receipts over the past 5 weeks, to see how much GST I’m actually paying. Excluding household utilities, I have spent $598.74, of which $19.65 was GST. This means an average rate of 3.4%. If I hadn’t bought a case of wine it would have been 2.0%.

Tampon Tax


Two years ago someone in Australia went public with the idea of exempting tampons – known in the trade as ‘feminine protection products’ I believe – from GST (Goods and Services Tax, the Australian equivalent of VAT).

This was presented as a gender equity issue, which was clearly nonsense. But politicians were fearful of opposing a noisy interest group which had potential support from half the electorate. So Joe Hockey, the then-Treasurer who had attracted howls of outrage for announcing the end of the Age of Entitlement, said that he’d consider it; and the Labour Party embraced it, saying that GST on tampons was ‘an anomaly’.

The photo below (by Alex Ellinghausen) shows demonstrators dressed as tampons dancing in front of Parliament House in Canberra.


Now Bill Shorten, Leader of the opposition Labour Party, has publicly and unambiguously rejected that policy. During an election campaign, with the polls the two major parties neck-and-neck, that shows a degree of courage and leadership and rationality that Australians have been longing for. Click here to see the clip of Bill Shorten (pictured below) giving this straight answer to a straight question.


Good on you, Bill!