Modern Australian
Men's Weekly

.

Is Australia’s GST a tax or a tariff? And why has it become a target in the trade wars?

  • Written by Felicity Deane, Professor, Queensland University of Technology
Is Australia’s GST a tax or a tariff? And why has it become a target in the trade wars?

The latest round of proposed tariffs from US President Donald Trump includes a response to what the White House describes as “unfair” taxes – specifically, value-added taxes such as Australia’s Goods and Services Tax (GST).

Most economically advanced countries have a value-added tax (VAT) or sales tax on consumption. This applies to domestic goods and services as well as to imports. The United States is one of the few countries that does not impose a sales tax, though many of the states impose their own sales tax.

So the argument, according to the White House, is these taxes apply to imported goods, but not to exports.

Is the GST a tax or a tariff?

The GST is a broad-based consumption tax of 10%. It applies to most goods and services that are consumed in Australia, regardless of their origin.

An import tariff – sometimes called an import duty – is imposed exclusively on imported goods as a condition of market access.

Tariffs are not imposed on domestically produced goods at all. This is the main point of difference with a domestic consumption tax. The GST applies equally to imported and domestically produced goods, adhering to long-agreed international trade rules.

It remains unclear how the Trump administration intends to implement a tariff that is equivalent to the 10% GST. In effect, this becomes a tax on US consumers if they buy Australian goods.

Read more: What's a trade war?

Such an indirect tax would be regressive, which means it falls more heavily on lower-income consumers. The expansion of tariffs to include other nations’ VAT systems also represents a significant overreach into national sovereignty. It has long been accepted that sovereign nations have the right to tax their citizens and businesses as they see fit.

Indeed, Australia’s GST is among the lowest among economically advanced nations, for which the average is 19%, so the wider impact on US consumers will be even greater.

Image of clothing in a store
Goods that are exported to the US face a new round of tariffs. Shutterstock

Trump is clearly (and unapologetically) seeking to reinvigorate US manufacturing. But the reality is that US labour costs are high. It is also inefficient for any country to produce all the goods and services its population requires. This is particularly the case in such a high-consumption nation as the US.

The US has been described as a consumer of last resort because strong consumer demand has been filled by ever rising imports from other countries. The mutually beneficial relationship between the US and China has enabled the rise of the middle class in China. Trump’s tariffs may shift this, causing geopolitical tensions and economic instability.

Australia’s response: pausing the digital services tax

While these tariffs primarily harm US consumers, Australian businesses will also feel the effects. However, it is unclear to what extent. Notably, one main export to the US, unprocessed agricultural products such as beef, are GST-free and should not be subject to any retaliatory tariff.

However, many other Australian exports could be disadvantaged. Trump’s policies will raise the cost of Australian imported goods in the US market, potentially making them less appealing to US consumers.

The threat of these tariffs is clearly a problem for a federal government facing an impending election, and Prime Minister Anthony Albanese has so far responded cautiously. While a diplomatic approach may secure a minor concession, it’s in stark contrast to Canada’s firm stance, which included immediate threats of retaliatory measures.

Read more: Whether we carve out an exemption or not, Trump's latest tariffs will still hit Australia

Trump’s use of tariff threats as a negotiating tactic does appear to be having the desired effect, with a potential suspension of Australia’s proposed big tech levy. This proposal would have imposed a tax on major tech firms such as Meta and Google if they did not reach a direct agreement with local media companies.

image of Meta logo
Thibault Camus/AP Reports indicate the government has put this proposal on hold due to the risk of retaliatory tariffs from the US. Such a tax would likely have invoked the wrath of the US administration, with the digital services levies of Canada and France specifically referenced in the most recent White House tariff announcement. It is fair to say the White House statement deliberately misleads any reader into thinking that tariff percentages directly impact on trade volumes. This statement ignores a fundamental principle that has made international trade so appealing since World War II – and why economists have argued in support of it for hundreds of years. Countries produce and trade the goods and services at which they are efficient. Efficiency leads to lower costs which, all else being equal, means consumers are better off. The statement from the White House, together with Trump’s past pronouncements, demonstrate that all rules to do with international taxation and fairness have been thrown out. This does not appear to be the main concern, however, with Australian negotiators potentially willing to put on hold a crucial policy to ensure the long-term viability of local journalism. This is just the beginning. Anyone who felt some comfort and safety in the strength of our own democracy should carefully consider the overreach that is occurring through these threats.

Authors: Felicity Deane, Professor, Queensland University of Technology

Read more https://theconversation.com/is-australias-gst-a-tax-or-a-tariff-and-why-has-it-become-a-target-in-the-trade-wars-250041

The Importance of Hiring Local Lawyers in Melbourne for Business Protection

When it comes to protecting a business, the legal support you choose matters just as much as the decisions you make day to day. Working with lawyers...

Why Packaging Boxes Are Important for Product Protection and Logistics

Packaging plays a crucial role in modern commerce, ensuring that products are transported safely from manufacturers to consumers. One of the most wide...

Best Practices for Promoting Crypto Payment Options to Your Customers

Promoting crypto payment options is no longer a futuristic concept but a present-day strategy for venues aiming to reduce transaction costs, attract a...

What Is Allocated vs Unallocated Gold?

Gold has been a trusted store of value for thousands of years, prized for its rarity, durability, and universal recognition. Even in the modern financ...

Physiotherapy Strategies for Improving Independence in Daily Living

For many individuals living with permanent and significant disabilities, the concept of "independence" is not about a total absence of support, but ra...

Mobile Patrol Security vs Static Guards: What’s Best for Brisbane Businesses?

Business security is very nuanced; a cookie-cutter approach doesn’t necessarily always work in a city like Brisbane. The bigger the city, the more...

Your Home Needs Regular Maintenance — And More Than Most Think

Why Regular Home Maintenance Is More Important Than Most Homeowners Think For many Australians, the home is more than just a shelter; it is the mos...

Roof Painting Jimboomba: Protect and Transform Your Home

Your roof plays a crucial role in protecting your home from the harsh Australian climate. Over time, exposure to sun, rain, and changing weather con...

Residential Electrical Services: Reliable Solutions for Adelaide Homes

Electrical systems play a vital role in keeping your home safe, comfortable, and functional. From lighting installations to switchboard upgrades and...

Leaking Shower Repair Perth: Fix Hidden Water Damage Before It Gets Worse

A leaking shower might seem like a minor issue at first, but over time it can cause serious structural damage to your bathroom and surrounding areas...

Full Mouth Rehabilitation: A Comprehensive Dental Solution for Patients Seeking Advanced Care Abroad

Dental health plays a vital role in overall well-being, confidence, and quality of life. For individuals experiencing extensive dental issues such a...

Fertility Treatment in Australia | Expert Reproductive Care

One of the most significant journeys in life is the formation or the development of a family. To most couples and individuals, conception, however, ...

Professional Bathroom Builders Sydney: What Defines Professional Standards

Professional bathroom builders in Sydney operate within a regulated construction environment that prioritises safety, compliance, and structural durab...

Retail Cleaning Creating Welcoming and Professional Store Environments

First impressions matter in retail, and cleanliness plays a powerful role in shaping how customers perceive a store. Retail cleaning focuses on mai...

Why Year 12 Tutoring Plays A Crucial Role In Academic Success

The final year of school is one of the most demanding periods in a student’s academic journey, which is why year 12 tutoring has become an essent...

Legal Remedies Available in a Breach of Contract Case

When a contract is broken, the consequences can affect cash flow, reputation and ongoing business relationships. A breach of contract may occur when...

Long Weekend Camping in the Yarra Ranges: Three Weekends of High Country Adventure

Yarra Ranges National Park, Victoria. Image by Mattinbgn (talk · contribs), CC BY 3.0, via Wikimedia CommonsVictoria’s Yarra Ranges offer keen trav...

Why Waste Management Solutions Are Essential For Modern Businesses

Managing waste responsibly has become a critical priority for organisations of all sizes, which is why waste management solutions play such an impo...