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๐๐ฆ๐๐ ๐ข๐ง๐ ๐ฉ๐๐ฒ๐ข๐ง๐ ๐ญ๐๐ฑ ๐จ๐ง ๐ ๐ญ๐๐ฑ... ๐๐ ๐๐ข๐ง ๐๐ง๐ ๐๐ ๐๐ข๐ง. Before GST, India's tax system was a maze of multiple levies, state border checkposts and endless paperwork that slowed businesses and increased costs for consumers. GST was introduced to replace this fragmented structure with a unified national framework. ๐น One... show more
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![Peter Costello was Treasurer of Australia from 1996 to 2007 - longer than anyone else in the country's history. He architected and led the most complex tax reform in the postwar era (maybe even in the whole of Australian history): the introduction of a value-added consumption tax, the GST, in 2000. I wanted to chat with Peter for three specific reasons. First, to gain a more concrete and visceral appreciation of exactly what a reform of this scale takes. On this, it was interesting to hear his war stories: for example, the Australian government believed there were about 1 million businesses in Australia. But when it began issuing ABNs (Australian Business Numbers) to businesses that registered for the GST, more than 2 million businesses came out of the woodwork! That is, despite Australia's unusually high state capacity, the government thought there were fewer than half as many businesses in the country as actually existed. Another example: the GST prompted the very first use of PowerPoint in the Australian Cabinet. Peter recalls giving an 8-hour (!) PPT presentation about the GST to his cabinet colleagues in 1998. He thinks that he wouldn't have been able to get their agreement without the specific technology of PowerPoint, because it enabled him to easily show the distributional effects of the new tax and accompanying compensation. Second, I wanted hear Peter's theories as to why it's seemingly become so much harder for the Australian government to achieve reforms of the scale of the GST. After 2000, the reform process has looked more and more like wading in molasses. Peter buys the story that we've become victims of our own prosperity - Australia's success has reduced the evolutionary pressure to continue enhancing productivity (a sort of 'good times create soft people' story). I think this is plausible, but not the whole story (see my second chat with Ken Henry for other theories). A specific lesson Peter shares for would-be reformers: you have to go for broke in your first term in government. "[M]y experience in government was that, as you go on in government, you get worn down... you get more tired, your opponents get a fix on you. Youโve expended enormous political capital...". Third, and unrelated to the GST, I wanted to chat with Peter about the baby bonus that he introduced in 2004. This was a lump sum payment of $3,000 (soon increased to $4,000, then $5,000, before it was means-tested, and then, in 2014 abolished and replaced with paid parental leave) to families with newborn children. Strikingly, the baby bonus led to an increase (albeit temporarily) in Australia's total fertility rate: it rose in the mid-2000s, peaking locally at ~1.98 in 2008. Australia is one of the only western countries to have reversed its declining TFR since the demographic transition began. Surprisingly, I learned from Peter that the government did not initially conceive of the baby bonus as a tool for increasing the TFR. Rather, it was simply a consolidation and rationalisation of a bunch of disparate benefits for families with new children. So the uptick in births was a (happy) accident. In picking apart the causes of the uptick, Peter thinks the narrative effect (as he famously said, "have one for mum, one for dad, and one for the country") was much more important than the financial effect. Interestingly, his view is consistent with one of the main explanations for declining fertility coming out of the field of cultural evolution (see, for e.g., my 2024 conversation with Rob Boyd and Pete Richerson). Anyhow, it was a very fun conversation. You can watch it on any of the podcast apps or on YT (link below). Enjoy! Timestamps: (0:00:00) - Introduction. (0:01:21) - Inside Australia's most complex tax system overhaul (the GST). (0:47:05) - Why Costello hid revenue estimates from the PM. (0:49:57) - Lessons for getting big things done in government. (1:10:32) - The 2004 baby bonus, & how Australia achieved the impossible (increasing its total fertility rate).](https://image.24vids.com/tw-1984840417616035984/amplify_video_thumb/1984791698430656512/img/fHqatnMuCMDJAe0p.jpg)
