CPA Australia Media Release
25 years on, now is the time for generational reform of the GST
- CPA Australia proposes five-step plan to improve the GST
- GST must be broadened to reduce overreliance on income taxes
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:
- Achieve consensus from state and territory governments that GST reform is critical to future federal and state budgets and must be part of economic and productivity reforms.
- Identify what a broadened tax base should look like and model the revenue effects of changes to the rate.
- Assess the impact of changes on business and society.
- Develop tax settings that best rebalance the tax base to increase GST’s contribution and reduce the income tax burden on individuals and businesses while adjusting the transfer system to support the most vulnerable.
- Design a thorough implementation program to ensure that individuals and businesses are prepared for the changes.
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.
Also from CPA Australia:
RBA interest rates decision adds pressure to government’s productivity roundtable
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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.
Why is it that those who favour broadening the GST to include everything including fresh food are those who earn the most.
Any compensation will not, ever, catch all of those who would be adversely and unfairly caught in an increased GST.
All of the tax loopholes need to be closed for the wealthy, property investors, corporations and those with trusts before we start hitting the poor, the elderly, self funded retirees who are not multi millionaires and those on low incomes.
The government could also increase the resources rent tax, the amount that Australia gets from multi billion dollar companies that take out are resources is abysmal in comparison with other countries, time to get a better return on finite resources, but of course no current political party will touch this area of potential income due to the extremely opaque donations to political parties.
A number of commenters say that GST should not be applied to fresh foods. Fresh foods do not attract GST, so I am wondering to which fresh foods commenters believe attract GST.
Here is a list from he ATO of foods that do not attract GST.
Examples of GST-free foods
The following are some examples of foods and beverages that are GST-free:
bread and bread rolls without a filling or a sweet coating (such as icing). A glaze is not considered a sweet coating.
cooking ingredients, such as flour, sugar, pre-mixes and cake mixes
fats and oils for cooking
unflavoured milk, cream, cheese and eggs
spices, sauces and condiments
bottled natural water with no additives
fruit or vegetable juice (of at least 90% by volume of juice of fruit or vegetables)
tea and coffee (unless sold ready-to-drink)
infant formula (for children under 12 months of age)
all meats for human consumption (except prepared meals or savoury snacks)
fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)
spreads for bread (such as honey, jam and peanut butter)
CPA sounds like union by another name would smell or eff u I am alright.
ps
well said, Patricia ‘don’t attract GST’. You forgot the 3 letter word???
YET
Packer made it clear with his ‘I pay whatever tax I am required to pay under the law, not a penny more, not a penny less.’ so the rich pay all the tax required and to say they pay no tax is drivel.
If the solution is money just make a flat tax of 5% on gross income and 10% on money sent overseas.
The CPA’s framework. You’ve gotta be joking. That bunch of economic slime balls don’t give two hoots about equity across the broad Oz demographic. There’s hardly an ethical bone to be found in their corpus.
“…to encourage debate.”
And it worked Michael!
If only we can get the CPA to take note.
The Australian Tax Problem IS NOT raising Taxes , rather it is the distribution of tax deductions, off sets, rebates and other mechanisms legally reducing the amount of taxation any entity has to pay, especially foreign owned multinational corporations.
Reduce these ridiculous give-aways and there is no need to raise GST.
GST impacts the workers more than the bosses and especially the high earners like politicians, bankers, doctors and stock market operators.
Consider GST on a new Ferrari, say $500,000 purchase price would yield $50,000 per vehicle when GST was 10% for each of the about 12 vehicles imported into Australia each year, or $600,000 total PER YEAR.
Now GST on food, say bread at $5.00 per loaf, so $0.50 per loaf with about 3 million loaves per day, a total of $1.5 MILLION PER DAY = about $550 MILLION PER YEAR.
Rich people only eat the same amounts as poor people, so the impact of GST is a greater proportion/percentage of available income.
CPA Australia, Chartered Practicing Accountants Australia, have a vested interest in protecting the current lax taxation laws because their personal taxation strategies use these laws, as do their corporate clients.