GST likely to keep rising, says visiting tax expert

A visiting tax expert says goods and services taxes are a kind of privatisation of taxation and meddling governments tend to keep raising such taxes to around 20 percent in many countries.

Chas Roy-Chowdhury, the head of taxation for the Association of Chartered Certified Accountants, also said there are warnings for New Zealand in revelations that nearly six million people in the United Kingdom have paid the wrong amount of tax through the pay as you earn system (PAYE).

New Zealand is increasing its goods and services tax (GST) rate to 15 percent from 12.5 percent on October 1. It was first introduced in 1986 at 10 percent and increased to 12.5 percent on July 1, 1989. Australia's GST rate has stayed at 10 percent.

Mr Roy-Chowdhury said there are pluses and minuses with GST, or value-added taxes.

"The issue in Europe and elsewhere is that once GST is introduced it is great, but it tends to start clocking up in terms of rate," he said.

The UK value-added tax started at 10 percent. It rose to 12.5 percent, then to 15 percent, then to 17.5 percent, and on January 4 it rises to 20 percent. In Europe many value-added taxes have risen to 20 percent.

"It seems like a similar trend is happening in New Zealand. It is a concern that these taxes creep up," he said.

However, GST taxes are a "light touch in terms of administration".

"The real issue is that the government is trying to privatise the administration of the taxation system."

The move to indirect taxes from direct taxes shifts the administration of tax to the private sector.

"Direct tax tends to be collected by government administrations. GST is more self-assessing. Companies do most of the work," he said.

It was revealed at the weekend that nearly six million people in the UK have paid the wrong amount of tax through the PAYE system.

The errors were made during the past two tax years and emerged because the HM Revenue and Customs is implementing a new computer system to automate the process of updating PAYE records. PAYE was introduced in the 1940s. The frequency with which workers switch jobs today has overwhelmed the system, the Independent newspaper reported.

Mr Roy-Chowdhury said New Zealand could well have a similar problem.

"One of the issues in New Zealand is that the information technology systems for tax are coming to the end of their useful life," he said.

People needed to ask how accurate the PAYE system was.

In the UK when self assessment came in a decade ago about eight million people filed returns out of tax paying population of 27 million.

The UK may now have to move to a simple form of tax return for more tax payers because of the number of people changing jobs and other issues.

"It may be something like that may need to be considered here," Mr Roy-Chowdhury said.