Australia’s GST Rate is Too Low

September 1, 2011 Taxation in Australia

Australia Needs GST IncreaseAustralia needs a higher Goods and Service Tax rate, and the idea needs to be considered now, despite the government’s unwillingness to do so.

One of Australia’s leading tax experts, Professor Greg Smith, has called for the country to raise its Goods and Service Tax (GST) rate by 5 percent, from the current rate of 10 percent, despite the idea being adamantly opposed by the government. The recommendation was during a speech given at a Tax Institute forum in Sydney on August 31st. Greg Smith was one of the authors of the Henry Review report, commissioned by the Australian government to provide recommendations on the future of Australia’s tax system.

The authors of the Henry Review were barred from investigating GST rate increases as a means of raising federal or state tax revenues in Australia, and GST rate increases are currently also not scheduled to be discussed at the October tax summit. However, a hike to the GST rate and a broadening of the tax’s base, were considered by the authors to be an essential measure to ensure that state governments are able to meet the rising costs of providing education and healthcare infrastructures. To circumvent the government’s unwillingness to discuss GST increases, Greg Smith recommends that a new consumption tax be considered, which would be charged alongside GST.

In his speech Greg Smith also said that the issue of GST taxation is far more important than is currently portrayed in the media. He explained that increased levels of economic activity alone are expected to raise GST revenues by AUD 12 billion by the end of the fiscal year 2014. Comparatively, in the same time frame the highly debated mineral resource tax and carbon tax are projected to raise AUD 6 billion and AUD 8 billion respectively. Personal income tax collections are slated to rise by over AUD 5o billion during the same time. Greg Smith explained that raising GST rates or instituting a new consumption tax could allow the government to lower personal taxes or decrease reliance on the new green taxes.

Photo by Rob Inh00d