Prime Minister John Howard is suffering from the same difficulty faced by an earlier reforming Prime Minister, Gough Whitlam. Mr Whitlam bemoans that change was always difficult because those who supported change were at best luke warm, whereas those who were against a change were usually vehemently against it.
It is probably because it is more difficult to see benefits than it is to see the detriment of change. Opponents of change will seize on any point and make the most of it. And so it is with the GST on tampons. Women see an immediate detriment. At present there is no wholesale sales tax on tampons. After July 1, there will be a GST on them and their price will rise accordingly. In theory, the Government’s tax reforms should offset this because of cuts to income tax and other efficiencies gained by a more streamlined tax system. Women could pay the 10 per cent GST on tampons out of their tax cuts. The amount is trivial. But the symbolism of it is not.
So how could the Government have made such a political hash of it? — In a word insensitivity.
The issue could have been handled so much better. Instead, Health Minister Michael Wooldridge made inappropriate comparisons with shaving cream and condoms. The former has a wholesale sales tax on it now, so will come down in price with the GST. If the latter can be classified as a health item, surely tampons can be, too. Besides, tampons are a necessity. Dr Wooldridge made matters worse by accusing the Women’s Electoral Lobby of being funded by tampon manufacturers, as if women were incapable of running their own campaign.
Prime Minister John Howard became intransigent and failed to see the symbolism of the issue. He rightly pointed to the need not to permit exceptions to the GST because once you give in to one exception there will be a queue of other pleaders and the whole reform process goes out the window.
It is unfortunate that the Government had to compromise with the Democrats in the first place to exempt most foods and essential health items. This first exemption laid the groundwork for later pleas such as the plea to exempt tampons.
There was a way through the difficulty. When questioned Dr Wooldridge should have pointed out that, just like the existing wholesale sales tax, there will be many borderline cases. Under present tax law, is a Superman outfit a toy (attracting tax) or children’s clothing (exempt from it). Dr Wooldridge should have said tampons might fit the medical exemption he would get advice. There is an argument that tampons do fit the exemption given even though they do not strict treat an illness. If so, then there is no addition to the existing exemptions.
The tampon furore follows the furore over rounding. Financial Services Minister Joe Hockey made a hash of that, too. Retailers wanted to move prices after the GST to the nearest psychologically appealing price, usually something ending in 95. Some prices would go up, some would go down. Complainers seized only on the possibility that some prices might go up. The upshot has been that the Government is on the back foot over very trivial sums of money that the tax cuts will easily cover.
Mr Howard will have to make sure his Ministers are silenced or that they understand the GST and are capable of selling its benefits. It will be a battle, especially after the GST is imposed, because hitherto retailers have been happy to hide the wholesale sales tax (imposed before profit is added) because if they revealed it, it would also reveal their own high mark-ups. The GST, however, is imposed after profit and so retailers will be only too happy to highlight it and blame the Government for price rises.