More GST will improve saving: Bullshit.

I hear everyone saying this. Supposedly, when people have money and are deciding what to do with it, they think "I could spend this money, or save it. If i save it, it will accrue a little bit of interest, less income tax, less inflation so i will have more money later, but if i spend it i'll be penalized with GST".

Well, not quite. People only see GST inclusive prices, and they aren't coming down any time in the near future. Avoid GST now, have more money later, spend more money later, spend more GST later. Increasing GST has no effect on time preference, in other words, won't make people spend any less now.

What WILL make people spend less and save more? reducing the tax paid on interest.

Either:

A) reduce income tax

B) exempt interest and dividends from income tax

C) allow people to count the depreciation of the dollar (inflation) on all their assets and cash holdings as a loss against their income.

P.s. It is true that, as part of a take-neutral reform, more GST will mean income tax is lowered, but the improvement to saving rates this creates should not be attributed to GST, and will only remove a small part of the distortion in the time-preference market that government policy creates. The only real ways to improve productivity are to cut bureaucracy, cut regulation or cut government spending.

What do i think the tax-neutral reform should involve? abolishing 2 or 3 types of tax altogether, and compensate with the remaining taxes (preferably GST or flat income tax). This will at least get rid of some bureaucracy and reduce the cost of hiring accountants. Oh and end the GST exemption for rent, that will go a long way to solve the preference for housing.