GST rise worries low earners
By Simon Collins
4:00 AM Tuesday May 18, 2010

Low-income earners may come out better off in the short term after the GST increase expected to be confirmed in this week's Budget - but the real pain may come later.

Herald calculations show that expected income tax cuts will more than compensate even in an extreme case of a couple earning only just above the minimum wage and paying GST on almost everything, including rent.

But beneficiary advocates fear the immediate gain will be wiped out quickly if businesses take advantage of the GST rise to pass on other cost increases too.

"I think a lot of businesses have been holding their prices and I think prices will go up not just by 2.22 per cent [the direct effect of raising GST]," said Beneficiary Advocacy Federation spokeswoman Kay Brereton.

"That's going to be a real problem for our clients."

Munish Pathak, who earns $13.26 an hour as a security guard at Auckland City Hospital, expects to be worse off.

More here.