A push to raise the GST as part of the government’s economic roundtable is being met with resistance, with the community services sector warning it would increase the burden on low-income earners.
A number of prominent economists have advocated raising or broadening the 10 per cent GST to fund cuts to less-efficient levies such as income taxes.
Australian Council of Social Service chief executive Cassandra Goldie objects to the proposal on the grounds it would increase inequality.
“We need a fairer and more effective tax system that secures the revenue we need to fund essential services and safety nets while encouraging more productive investment to create jobs and lift living standards,” she said.
“This can be done with reforms that lift productivity and overall revenue without increasing the burden for people on low and modest incomes.”
While Prime Minister Anthony Albanese has said increasing the tax on consumption does not fit with his agenda, Labor is pledging to overhaul Australia’s tax system as part of an economic roundtable in August.
The summit is aimed at kick-starting the nation’s stalled productivity growth and living standards.
Shifting from income to consumption tax would ease the burden on younger working Australians but it would also widen wealth inequality, deepen poverty and deliver only modest economic efficiency gains, a report produced by the council found.
Broadly speaking, personal income tax is more progressive than the GST because people pay a higher rate the more they earn, whereas low-income earners tend to pay a higher proportion of their money on consumption taxes than people on higher incomes who save more.
Instead, the government should take steps that reduce inequality while lifting productivity and revenue, report author Peter Davidson found.
To that aim, they could tighten loopholes for family and corporate trusts, limit negative gearing, reduce tax concessions on superannuation and halve the 50 per cent discount on the capital gains tax.
Changing the capital gains tax discount has been backed in by the Greens and Labor-aligned think tank the McKell Institute, which argued it could be tweaked to encourage new housing supply and make it easier for Australians to own their own home.
Prospective homebuyers hoping for lower mortgage rates could get a clearer indication of the Reserve Bank’s next move on Thursday when governor Michele Bullock speaks for the first time since a surprise surge in unemployment last week.
Ms Bullock will talk about the RBA’s dual mandate of maintaining low inflation and unemployment in a speech to the Anika Foundation in Sydney.
Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.
