Goods and Services Tax

Are you aware of the GST, "Goods and Services Tax" change in either next year or 2 years down the road?

Here's some interesting calculation from an email,

Example 1
In 2006, if after rebates etc and your net taxable income is $60,000, the income tax you need to pay is $2,700 (8.75%). If you spend $800 a month on needed goods and services, the GST paid for 5% will be $480

Total=$3,180 in Tax paid.

In 2007, if after rebates etc and your net taxable income is $60,000, the income tax you need to pay is $2,600 (8.50%). If you spend $800 a month on needed goods and services, the GST paid for 7% will be $672

Total=$3,272 in Tax paid.

From $3,180 to $3,272, the effective increase is 2.89%.


Example 2
In 2006, if after rebates etc and your net taxable income is $400,000, the income tax you need to pay is $61,650 (21%). If you spend $4,000 a month on needed goods and services, the GST paid for 5% will be $2,400

Total=$64,050 in Tax paid.

In 2007, if after rebates etc and your net taxable income is $400,000, the income tax you need to pay is $58,700 (20%). If you spend $4,000 a month on needed goods and services, the GST paid for 7% will be $3,360

Total=$62,060 in Tax paid.

From $64,050 to $62,060, the effective decrease is -3.11%.


Example 3
In 2006, if after rebates etc and your net taxable income is $25,000, the income tax you need to pay is $187.50 (3.75%). If you spend $800 a month on needed goods and services, the GST paid for 5% will be $480

Total=$667.50 in Tax paid.

In 2007, if after rebates etc and your net taxable income is $25,000, the income tax you need to pay is $175 (3.5%). If you spend $800 a month on needed goods and services, the GST paid for 7% will be $672

Total=$847 in Tax paid.

From $667.50 to $847, the effective increase is 26.89%.

The conclusion of the email : "The poorer you are the more the GST is going to make you
poorer "

Hmmm there's the blink spot I discovered. If you take use the same avg spent per month for all the 3 examples, the example two will have a 4.7% increase. BUT I wonder if that someone would just spend $800 per month when he/she like earning $400,000 per annual which break down to about $33k per month.