Australia’s ongoing debate about reforming the Goods and Services Tax might not be relevant to the overflowing garbage dumps of Lagos, the Pacific Ocean trash patch, or the massive electronic graveyard of Guiyu in China. These three far-flung locations are proof of the incessant global habit of purchasing stuff and then throwing it away later – and Australians are just as guilty as any other.
It’s easy to see why the planet is full of trash. For example, in the United States, more than 80% of goods are not reusable and 90% end up as waste within six weeks. Australians currently create the second highest amount of waste per capita in the world.
The take-make waste economy is based on the belief that there will always be enough resources. This has led to a flood of cheap, mass-produced products flooding the market. These products are only good for a very short time and will end up in landfills or as litter.
This problem can be addressed by encouraging recycling. However, it does not address the problem of household consumption. This has led to an international trade in waste that allows wealthy countries to ship their recyclables to Asia, Africa, and South America. It can be difficult to track where they go.
China’s recent decision to limit recyclable materials that it accepts is a clear indication of the fact that financial incentives are not effective in keeping them out of landfill.
This, combined with the increasing volatility and scarcity in resources needed to make goods, makes it clear that we need a more materialistic and less wasteful method of consuming. This is what we can do to encourage it. One way to encourage this is to tax material goods at higher rates than services.
Change Is Tangible Goods
In most countries, economic growth is to growth in waste generation. Recent moves by the European Union have demonstrated that the two can be separated by investing heavily in a service-oriented economy, rather than one that is based on tangible goods.
Australia currently has a broad-based 10% sales tax that applies to all taxable goods and services. The future of the Goods and Services Tax is currently under discussion. However, accounting firm KPMG submitted to Treasury that there was an opportunity to recognize that not all consumption is the same.
Service-based businesses focus on the sale of tangible goods, while service-based businesses focus on selling products. The bed in a hotel, the lawnmower of a landscaper, and now the Uber cars and other assets in the sharing economy are all examples of goods that have a life cycle beyond one transaction. These goods create recurring income for the service provider. These are just a few examples of how economic growth can be achieved. Without increasing the output and consumption of raw materials.
Australia’s economy is already heavily service-base. 82% of business incomes go to services and only 8% are for goods. This is quite typical for developed economies that have distanced themselves greatly from China’s manufacturing competitiveness.
Despite this, developed economies have the highest levels of goods consumption. International free trade agreements will likely increase the flow of cheap imported goods to Australia.
Make Taxes Count
The revamped GST will encourage future service industries and reflect. The environmental and social costs of using disposable goods (mostly imported). This is not possible by taxing services and goods at the same rates.
We’re comfortable with the idea that higher taxes could be impose on harmful items. The tax on alcohol, cigarettes, and luxury cars has all been successful in showing consumers the external cost to society.