18 February 2015
Reforming the GST can deliver tax cuts, improve household incomes and boost Australia’s economic growth, a new report from CPA Australia has found.
The CPA Australia-commissioned research looks in detail at four different scenarios of changes to the base and rate of the GST, accompanied by the abolition of a range of inefficient taxes.
CPA Australia chief executive Alex Malley said the report, released today, shows that the fear and misinformation often associated with GST discussions is misplaced.
“Our report paints a comprehensive picture of how changes to the GST will impact households and the broader economy,” Mr Malley said.
“We modelled different scenarios at 10 and 15 per cent, with each generating additional GST revenue ranging from $12.1 billion to $42.9 billion in the first year of introduction.
“What our report shows is that additional GST revenue can be used to abolish a number of inefficient state taxes and also provide for personal income tax cuts and compensation for low income households, while also boosting economic growth.”
“It is the packaging of changes to the GST with the removal of other taxes that is critical, and is so often missing when it comes to the GST debate,” Mr Malley said.
“The additional revenue raised in each of the scenarios can be used to retire or reduce inefficient and unpopular taxes, including stamp duties on insurance, motor vehicles and conveyancing on residential and commercial properties.
“The modelling reveals that there is also sufficient revenue to return to households as income tax cuts or as compensation for low income households who would not benefit from changes in income taxes.
“The net outcome in all the reform scenarios we’ve looked at is that households across the income spectrum can be better off.
“CPA Australia’s report shows clearly that there is considerable upside for both households and broader economy to a calm and rational look at the GST.
“In all four of the scenarios, our GDP is bolstered over the medium to longer term which means more economic activity and growth.”
Mr Malley said even with an increase to 15 per cent, Australia’s rate of GST would remain low by global standards, with the average rate across OECD nations at over 19 per cent.
“We all know that modernising, simplifying and improving the efficiency of our tax system is critical to our future prosperity,” he said.
“We have around 125 taxes and charges of which just ten collect 90 per cent of the revenue. Households and businesses rightly want fewer taxes which are more efficient.
“We also want a more resilient system, one that is less exposed to global shocks and commodity price drops.
“Our report shows that GST reform has the potential to deliver on both fronts, yet in many ways the GST has become the elephant in the room.
“The Henry review of 2010 wasn’t allowed to examine the GST – now is the time to finish the job properly, with GST reform squarely on the table.
“If Australia is to grow and compete globally we need a world-class tax system that incentivises businesses to grow, encourages innovation and attracts investment, enables the delivery of the services we expect of a sophisticated economy and increases our overall standard of living.
“This is a time for real leadership from politicians on both sides of the political fence so we can have the calm and rational discussion we need about the best tax mix for our country,” Mr Malley said.
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