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GST rise a 'godsend' to ACT

ACT Chief Minister Katy Gallagher.

ACT Chief Minister Katy Gallagher. Photo: Katherine Griffiths

An increased or broader goods and services tax would be a ''godsend'' for the territory, say ACT economists.

And the impact on cost of living could be eased for low-income earners through income tax cuts or increased social security payments.

Chief Minister Katy Gallagher broke with her federal Labor colleagues this week to back Coalition moves to include the GST in a review of the tax system if it wins the September election.

Ms Gallagher said on Monday the GST was a ''tried, tested and efficient tax'' that should be considered as part of any future tax reforms.

University of Canberra economics professor Phil Lewis said on Tuesday state and territory governments, which rely on GST revenue to fund essential services, would welcome an increase on the 10 per cent rate.

Professor Lewis said an increase to 15 per cent would raise ''significant revenue'' but most economists would support a broadly based GST.

Removing exemptions from items such as health and education would bring in an extra $10 billion.

''For a territory like the ACT broadening the tax base of the GST would be a godsend in terms of the government being able to meet demand for services,'' he said.

''Basically everything is focused on payroll tax, stamp duty, car licences, those things, which are very inefficient, so broadening the tax base would be very efficient.''

The ACT relies on the GST more than other states and territories because it does not have the same income streams from industries, in particular mining.

The federal budget included a reduction in GST revenue forecasts for 2013-14 because of continuing consumer caution.

Last week, the ACT government said this could result in a $49 million reduction in GST payments to the territory over four years.

Professor Lewis said the GST was efficient because ''everybody buys things'' and it was harder to avoid than other taxation measures, such as income tax. ''The big argument against it is that everybody pays the tax and people say, 'Well, why should the poor pay it, shouldn't it be the very rich?''' he said.

''What they've done in most other countries is they've reduced income taxes and increased pensions and social security benefits to roughly match the increase in cost of living.''

Economist Ben Phillips, from the University of Canberra, said discussion of the GST ''would appear to be political poison. But the point I would make is if it was so poisonous why have we still got it?'' he said.

A broad-based GST would be more reliable than other taxes, such as stamp duty or mining taxes.

''The simple story, 'if a tax is up that's bad', that's not how it would play out,'' he said. ''It depends on how it's done, if it means you're not paying as much stamp duty or a lower marginal tax rate or can get increased government benefits - it would be in the selling of the package.''

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