A public debate about the Goods and Services Tax (GST) is something we have to have, but considering some of the recent contributions, the silly season wasn't a good time to start it. Consider the following examples.
The 10% GST rate has been described as merely an 'introductory' rate (like a teaser home loan interest rate) which was never meant to remain. That would be news to a lot of people.
Related to that is the notion that Australia's rate is well below the OECD average (19%), and therefore there is plenty of scope to increase it. The OECD countries that have such high GST (VAT) rates also have much higher levels of government spending and overall tax burdens. It is not obvious why we should follow their tax policy examples, considering the economic strife many of them are in.
Much of the commentary has focused on broadening the GST to cover items such as uncooked food. One claim was that the Abbott government already has a mandate to broaden the coverage because the Howard government won the 1998 election proposing to include all food in the GST base! Whatever there is to the mandate theory, it doesn't stretch back 16 years and six elections.
Another suggestion is that the GST should be broadened to cover private school fees and health insurance premiums because these are mainly paid by rich households. This would make the GST more selective and distorting, not less. If the tax is to be extended to education and health (a contentious issue that raises more complexities than food), it should be to all education and health services, not just ones picked out for 'tax the rich' reasons.
If the GST is ever increased or broadened, it is likely to lead to a higher overall tax burden.
A trade-off between (say) a broader GST at a 15% rate and a top income tax rate of (say) 33% as in New Zealand is nice to contemplate but unlikely to be achieved.
Robert Carling is a Senior Fellow at the Centre for Independent Studies.
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The silly season GST debate
The 10% GST rate has been described as merely an 'introductory' rate (like a teaser home loan interest rate) which was never meant to remain. That would be news to a lot of people.
Related to that is the notion that Australia's rate is well below the OECD average (19%), and therefore there is plenty of scope to increase it. The OECD countries that have such high GST (VAT) rates also have much higher levels of government spending and overall tax burdens. It is not obvious why we should follow their tax policy examples, considering the economic strife many of them are in.
Much of the commentary has focused on broadening the GST to cover items such as uncooked food. One claim was that the Abbott government already has a mandate to broaden the coverage because the Howard government won the 1998 election proposing to include all food in the GST base! Whatever there is to the mandate theory, it doesn't stretch back 16 years and six elections.
Another suggestion is that the GST should be broadened to cover private school fees and health insurance premiums because these are mainly paid by rich households. This would make the GST more selective and distorting, not less. If the tax is to be extended to education and health (a contentious issue that raises more complexities than food), it should be to all education and health services, not just ones picked out for 'tax the rich' reasons.
If the GST is ever increased or broadened, it is likely to lead to a higher overall tax burden.
A trade-off between (say) a broader GST at a 15% rate and a top income tax rate of (say) 33% as in New Zealand is nice to contemplate but unlikely to be achieved.
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