Goods and Services Tax (Australia)

The Goods and Services Tax (GST) of Australia is a value added tax that was introduced by the Howard government, and went into effect on July 1, 2000, replacing the previous wholesale sales tax system and various minor taxes such as stamp duty and bank account debits tax. All goods and services except those that are considered essential are taxed at a rate of 10%.

The tax was first proposed by the Liberal party in 1991 by then Leader, Hon. Dr. John Hewson. It was a tax that was supposed to improve the economy and won the Liberal Party even more popularity. The 1993 election was subsequently dubbed the "unloseable election" by the Liberals.

However in 1993, in what is now a famous interview, Hewson was asked if the GST would be incurred in the cost on a birthday cake. Hewson stonewalled and was unable to answer a seemingly easy question. He tried to explain that a plain cake would not incur the tax, but one with fancy extras such as candles, icing, etc... would incur the tax. But his stuttering and mumblings ruined his answer and Hewson was instead forced into a series of circumlocutions about whether the cake would be decorated, have ice cream in it and so on.. The interviewer, Mike Willesee, concluded after Hewson struggled for several minutes on the problem presented, that "....if you can't explain if the GST applies to a simple product like a birthday cake, you have to admit that this has a massive problem". This interview is generally regarded as the beginning of the end: Hewson lost the election.

When John Howard was nominated for the Liberal party in 1996, he went into the election indicating that he would not reintroduce the GST. He was elected as Prime Minister in the 1996 elections.

However he apparently had a change of heart and reintroduced the GST into the agenda. While the Lib-Nat coalition held a majority in the lower house, the Australian Labor Party and the Democrats held the majority collectively in the senate. Furthermore the Labor Party had strongly opposed the introduction of the tax.

Howard took the issue to the 1998 election. The Liberal-National coalition was re-elected, however it was with a minority of the two-party preferred vote, and a substantially reduced majority of seats.