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GST overhaul inevitable and desirable, business groups stress

Date: January 02 2013


Madeleine Heffernan

AN OVERHAUL of the goods and services tax is inevitable and might help raise living standards, business groups say.

Paul Drum, CPA Australia's head of business and investment policy, said it was ''inevitable'' that the GST would either be broadened - to include key items such as health, education and fresh food - or increased from the 10 per cent level set in 2000. He said this would help smooth out government revenue by reducing reliance during downturns on company taxes, and help pay for the removal of ''inefficient'' taxes, such as those on insurance, commercial conveyancing duty and payroll tax.

''It's been a taboo topic for the last decade, but we don't need more government obfuscation - we need to get back to the table to find the right model,'' Mr Drum said.

This week former prime minister Bob Hawke joined the chorus calling for a fresh look at the rate and breadth of the GST.

Decades after rejecting his treasurer Paul Keating's plan for a 12.5 per cent consumption tax on services, Mr Hawke said the GST was a ''legitimate area for discussion. Whether they should do it or not, that's a matter for the current leadership at a federal and a state level.''

Others to have called for a review of the GST include independent MP Tony Windsor, the International Monetary Fund and the Business Council of Australia.

A CPA-commissioned report conducted by KPMG Econtech found that broadening the tax or increasing the rate to 20 per cent would ''lead to an overall higher standard of living. This is because the costs of imposing the GST are smaller than the benefits of abolishing the inefficient taxes.''

Burchell Wilson, senior economist at business group ACCI, said the case for revisiting the GST was ''compelling''. Australia's GST rated poorly because its base was narrower, and the rate was ''almost half that applied on average by our OECD counterparts'', he wrote in 2011.

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