It’s taken six months, and there have been some near-misses along the way, but for me, the weekend announcement that the government will be reviewing the collection of GST on the full (excise-inclusive) price of petrol is the Rudd government’s inevitable first big policy failure. I don’t know where to start on this. First, the objection that it’s “a tax on a tax” is just silly. The effective burden of the GST falls, inevitably on inputs of primary factors (labour and natural resources including land). Since both are taxed, the entire GST is “a tax on a tax”. Politically, the government abandons the high ground it occupied on the issue, while not providing serious competition for the Libs on the low ground. It also undercuts Rudd’s correct statement only a few days ago that the government had done all it could on petrol prices. And environmentally, it’s a sign of impending disaster.
About the only consolation is that, like Nelson’s five cent excise cut, it will never happen. The idea is bound to be shot down in the review for the reasons I’ve mentioned. But there are plenty of other opportunities to cave in, and it looks as if this government is going to take them. The only remaining faint hope is that Rudd will pull those who’ve floated this stupid idea into line, at the cost of throwing away the advantages they held over a divided and confused opposition.