A bold proposal to give Australians an extra $3300 per year in exchange for a rise in the goods and services tax is being treated with caution by the major parties.
Independent MP Kate Chaney calls for the implementation of a “progressive GST model” as the federal government looks for ways to reinvigorate Australia’s languishing productivity and strengthen the budget at an economic roundtable.
Under the plan first proposed by economist Richard Holden, Australia would lift the rate of the consumption tax from 10 to 15 per cent and apply it to exempt items like food, education and health.
But to mitigate the impact on those with lower incomes, all Australians aged 18 and older would be given a $3300 rebate, meaning they would effectively pay no GST on the first $22,000 of their annual expenses.
While the GST-free threshold would cost Australia $68.8 billion, increasing the tax and removing exemptions for certain categories would raise $92.7 billion, adding $23.8 billion to the Commonwealth’s budget.
“The major parties like to talk about tax cuts and spending but they’re less willing to discuss where the money will come from,” Ms Chaney said.
“We have to have courageous conversations about other revenue sources to avoid handballing this problem to future generations.”
With the government’s economic roundtable to convene later in August, Prime Minister Anthony Albanese said he would not respond to every proposal in the meantime.
“Governments make government policy,” he told reporters in Melbourne on Thursday.
“Our tax policy – the only tax policy that we’re implementing – is the one that we took to the election … which is reducing income taxes.”
Opposition finance spokesman James Patterson said he was concerned two-thirds of revenue generated by Ms Chaney’s proposal would be used to compensate Australians for the tax it collects.
He warned against tax on spending in areas carved out of the GST when it was introduced more than two decades ago, such as education and health.
“The Howard government recognised that people who spend their money on private health or private education are actually taking a burden off the public purse, and therefore it would be unjust to tax them on top of that,” he told Sky News.
It would be an “incredibly brave government” that put a tax on top of insurance and private education fees, Senator Patterson said.
Meanwhile, the Australian Council of Social Service has called for a halving of the capital gains tax discount, a 15 per cent tax on superannuation retirement accounts and a commonwealth royalty payment for offshore gas.
It urges the government to strengthen the not-for-profit sector by supporting digital transformation and making service users the centrepiece of governance and program design.
All policies developed at the roundtable should be assessed on how they improve the wellbeing of people and the natural environment while taking gender and other factors into account, the council said.
“We must better prepare and train people for jobs and finally lift income support to levels that don’t trap people in poverty and destitution,” Dr Goldie said.
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