Re: Affect of GST on Rail.

[David McLoughlin <davemcl@AXE*THISiprolink.co.nz>]

Maurie Daly wrote:
 
> Here Railways have to pay quite steep track access charges which will
> presumably subject to the GST when its introduced,which means that rails costs
> go up dramatically,but the cost for road users changes very little,(since the
> major cost for road users is fuel,which wont change.)

But roading input costs will all go up by the 10pc GST amount, just as
rail's will, so there will be no relative change in costs between the
modes. Unless you are saying GST in Australia will not apply on diesel,
which I have never heard. That would be absurd.
 
> Theoretically the Railways could try to pass the increased costs onto their
> customers,but one wonders how long they would then have any customers
> given that the customers could switch to road where the costs wont change.

But GST for businesses is neutral, as long as it applies to all
businesses equally. The cost is paid by the retail end user (public
transport users, supermarket shoppers who pay the final GST input from
trucking companies etc in their checkout bill) and so on. Rail and road
freight charges should change by exactly the same amount, while other
charges to business will reduce because of GST.

GST is a neutral tax and has had no deleterious effect on trains, trucks
or anything else in New Zealand since it was introduced in 1986. Canada
and Singapore copied the NZ system long before Australia because it is
the best VAT system around.

I say neutral because in Australia as in NZ it's introduction is
accompanied by removing a raft of other direct and indirect taxes and
reducing income tax. The only difference between the NZ system and
Australia is that Australia has foolishly decided to allow some
exemptions in food and some other areas (which make the UK and European
VATs a nightmare of regulations). Here, everything attracts GST so it is
easy to administer. It is just included in the published retail price of
everything and attracts no critical comment at all. 

David McLoughlin
Auckland New Zealand