Chris Freeland AM, Chief Executive Officer, CPA Australia.
Twenty-five years on from the introduction of the Goods and Services Tax (GST), Australia’s largest accounting body, CPA Australia, says Treasurer Jim Chalmers’ Economic Reform Roundtable should deliver a plan to broaden the tax base through fundamental reform of the GST.
Introduced by the Howard government, the GST commenced on July 1, 2000. It was a visionary policy but came with many compromises.
CPA Australia proposes a five-step plan over the next two years to implement GST reform:
CPA Australia Chief Executive Officer Chris Freeland AM, who sits on an industry Productivity Working Group convened by the Business Council of Australia, said substantive GST reform can’t happen overnight, but is a necessary step to ultimately alleviate the government’s overreliance on personal income tax.
“It’s time for a grown-up conversation about Australia’s tax system and the GST’s structural weaknesses,” he said. “For the past quarter of a century the GST has remained virtually unchanged, and its inconsistencies and design flaws – such as taxing some foodstuffs and not others – have been ignored.
“GST belongs at the heart of any discussion of tax reform. Most tax specialists believe that increasing the GST is the key to broadening the overall tax base. Reducing the reliance on personal income tax would put more money in people’s pockets and ultimately generate more revenue to drive economic growth.
“OECD statistics show that Australia has an unsustainably high burden on income tax, which means workers and businesses contribute a lot more of the base compared to other countries.
“Of course, you also have to look at who would be impacted, such as lower-income households and pensioners, to make sure they’re adequately compensated during the transition.
“Milestone dates aside, this is now the time to develop a step-by-step approach to deliver once-in-a-generation reform of the tax system while educating and informing the public of its necessity along the way. Broad public and political support will be essential to ensure our tax system is fit for purpose for at least another 25 years.”
CPA Australia’s five-step plan to reform GST will be further explored in a submission to Treasury in preparation for the Economic Reform Roundtable.
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View Comments
Any increase in the GST rate will adversely affect people like me who are self-financed retirees. We've already suffered from drops in the interest rate over the past few years. When the government claims to compensate those on low incomes (again, me), it's only specific groups, e.g. age pensioners, that receive the benefit.
There are other ways to raise income, or example by increasing taxes on those who currently benefit from Howard-style policies.
May I suggest they remove GST on all food and power bills.
So many words, so little said.., get money from where it is.., miners, corporations, banks, speculators, grossly rich. Generational reform? Bah.
GST is a regressive tax. I pay the same level of GST on the goods I buy as a multi-millionnaire would in buying the same goods. GST also takes tax contributions from those who have no income, such as children.
It's good to see the negative responses to this.
"Australia has an unsustainably high burden on income tax, "
Well, the OECD would say that, wouldn't they.
"lower-income households and pensioners, to make sure they’re adequately compensated during the transition."
How about after the transition?
"its inconsistencies and design flaws – such as taxing some foodstuffs and not others – have been ignored."
Well, just tax the bloody lot then!
As Lyndal said, GST is a regressive tax that impacts those with little.
Point 4 of the plan is "to increase GST’s contribution..."
So they want to make a regressive tax worse than it is now.
There is no morality in numbers.
The GST is a tax which is disproportionately affecting the poorest of our population.
No, don't apply the GST to unprocessed foods, fresh foods, the healthiest foods available.
Rather than looking at the GST as being a potentially greater source of revenue, the ability for those on high incomes able to avoid paying their share of income tax is part of the problem.
Why should people earning more than a million dollars in a year get away with paying ZERO dollars in income tax when a person on the minimum wage is paying close on 24% of earnings on income tax?
The report came from a CPA, a Certified Practicing Accountant, a person who is paid to reduce the tax 'burden' for those who can afford to employ a CPA to minimise the tax paid.
The truth is that the person on higher incomes, paying the top marginal rate of tax has enough left out of the pay packet top live a comfortable life, is not on the same 'struggle street' as the young family trying to put together the deposit for a home while paying extortionate rent on their leased apartment
I'm all for tax reform, provided the voices listened to in formulating that reform include those on struggle street.
Nothing positive to be said, Steve.
Actually, the reason I put this one through was to encourage debate. It’s a topic we need to talk about it.
I recall when the GST was being introduced, both Howard and Costello said that it was a States' Tax and would replace regressive state taxes including Stamp Duties.
This was during the 1998 campaign when Howard reversed the Never Ever mantra that got him into office and told us that he was taking the Australian people on a great adventure in tax reform. Turns out, they both lied as stamp duties were not eliminated.
We need to be very clear, if we are to change the GST, on just what regressive state taxes it will replace.
I remember the GST was supposed to replace a number of other taxes. Ha ha. As has been pointed out the GST is a regressive tax and disproportionately affect those on lower incomes. As others point out (ad Infinitum I might add) the resource exploiters, the obscenely wealthy. The tax avoiders, the multinationals of all stripes that earn money here but pay minimal to no taxes should all be targeted. As also pointed out above the CPA represents those who advise on tax evasion/ avoidance so have to be recognised as a very artisan voice in discussions about tax reform. As recipient of a small ComSuper pension I am advised I will receive a 1.2% CPi increase this week. This will result in a reduction in both my and my wife’s part pensions. Seems a bit unfair that she loses because of my gain. Of course the net result to our joint finances is a minimal increase overall.
If self-serving billionaires, like the appalling Gina Rinehart, Rupert Murdoch and other selfish members within the very upper levels of wealth in the Top 1%, PAY THEIR FAIR SHARE OF TAX and NOT be allowed to hide their money in off-shore tax havens and/or get off Scott (Morrison) Free with a wide range of despicable tax breaks/concessions, perks and dodgy claims that, in effect, allow these wealthy parasites to pay a level of tax that is (comparatively) way, way below what ordinary working- and middle-class Australians are paying, then - and ONLY then - will the tax system in this country be fair and equitable!
The tax-free threshold (especially for young married couples with families) needs to be increased so that anyone earning a moderate income of $30,000 or less should not have to pay ANY tax at all.
The government needs to do a thorough investigation into the REAL source(s) of income for the Top 1% of earners earning more than $300K+ per annum to ensure that they are not hiding their money elsewhere - it is THESE very wealthy Australians who then need to pull their weight by paying a FLAT RATE of 50% tax!
I agree with Bert Hetebry (above) that the GST MUST be removed from all fresh, healthy foods (basic items like breads, vegetables, fish, meat and fruit), that will help poorer, more vulnerable members of our society (particularly families with children) to eat healthier, more nutritious foods. The ability to purchase and eat more nutritious meals will, also, possibly save on medical/health/obesity problems later in life.