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http://www.tvhe.co.nz/2012/01/25/automatic-smoothing-with-vatgst/ The Visible Hand in Economics Tue, 24 Jan 2012 20:22:55 +0000 hourly 1 https://wordpress.org/?v=6.9.4 http://www.tvhe.co.nz/2012/01/25/automatic-smoothing-with-vatgst/#comment-36477 Tue, 24 Jan 2012 20:22:55 +0000 http://www.tvhe.co.nz/?p=6636#comment-36477 Wouldn’t there be like a ton of implementation issues that would keep this off the table? Even the shift from 12.5 to 15% wasn’t exactly simple as best I understand things – issues with differences in the GST rate you’re charging your customers and the one you were charged by your suppliers (and get to claim back from the govt). 

]]> http://www.tvhe.co.nz/2012/01/25/automatic-smoothing-with-vatgst/#comment-36476 Tue, 24 Jan 2012 20:21:07 +0000 http://www.tvhe.co.nz/?p=6636#comment-36476 It’s always an interesting one about expectation formation – do you view a potential interest rate cut/GST decrease as a signal not to invest/buy because the economy is going to poo, or do you see it as an opportunity to buy goods you otherwise wouldn’t have after the fact?
Anyway, my main point is that the cool thing about smoothing the cycle through changing short term interest rates is that the transmission mechanism affects future interest rate tracks which also affect agents’ decisions. E.g. the 5 year NZGB yield usually changes when the OCR is cut, affecting borrowing costs for corporates/consumers along the curve. And these rates are “reasonably” liquid/tradable. But would there be tradable future GST rates?

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