Significant tax reform requires leadership, courage and determination on the part of politicians. It requires sufficient concession by significant vested interests for such reform to proceed. The introduction of a broad-based consumption tax in the form of a value added tax (VAT) in the United Kingdom (UK) and goods and services tax (GST) in New Zealand and Australia was no exception. Not only have these taxes not suffered reversal, but they have now survived successfully for many years. However, there are some important differences in the way each of these countries adopted VAT/GST which might indicate that the most appropriate structure of the tax and the route for further reform may also vary significantly between countries.
This paper examines the introduction of a goods and services tax (GST) in New Zealand and Australia and a value added tax (VAT) in the United Kingdom. Part 1 first provides a general political rationale for introducing new taxes such as a consumption tax. In doing so, it identifies the principles that should underlie any reform. Second, it examines the rationale for introducing a consumption tax in each country and how that rationale was shaped by the politics.
Part 2 describes the politics and process of implementing consumption tax reform in each jurisdiction. It highlights the political issues that shaped that implementation, leading to significantly different outcomes.
Part 3 provides a comparative analysis of the importance of the politics in introducing a consumption tax in each jurisdiction. It takes into account subsequent events and draws conclusions about lessons that can be drawn as to the political indicators that may need to be present to implement significant tax reform of this kind.
Part 4 concludes the paper by examining the Australian context and discussing how reforming the GST is possible using lessons from the three jurisdictions.
The scope of this paper is broad. It does not provide a comprehensive history and analysis. Rather it draws on the themes under each heading, and is designed to act as a catalyst for further research and debate. Increasingly and necessarily the academic research needs to cross disciplines to account fully for the nuances of tax reform.