Wong rejects GST hike or base extension
Finance Minister Penny Wong says the federal government won't be extending the GST or lifting its rate, changes a former Treasury boss believes are inevitable.
"We have made clear we're not in the cart in jacking up the GST," Senator Wong told Sky News today.
The minister was responding to comments by former Treasury secretary Tony Cole, who says it is inevitable that a future government will extend the GST into areas such as health, education and fresh food and lift its 10 per cent rate.
But Mr Cole, who was Treasury secretary from 1991 to 1993 under a Labor government, says the catalyst for including the GST in genuine tax reform would have to come from a large cross-section of the community, including business and welfare groups.
That was the case when the Howard government introduced the consumption tax in 2000 and used the revenue to reduce other more distorting taxes, he said.
"It's inevitable that at some stage we will broaden the base and change the rate," Mr Cole told The Australian Financial Review.
But Senator Wong dismissed the assertion.
"We don't believe that Australians who go to the supermarket to buy fruit and veg should be bearing the brunt of the cost of tax reform," she said.
Graeme Samuel, a key business figure at the time the GST was introduced, said the tax applied to only 60 per cent of the economy.
He said the GST rate should remain at 10 per cent but its base should be broader.
"General government revenue is under pressure and that is only going to get worse," Mr Samuel told the AFR.
Removing the GST exemptions could add $31 billion to the government's coffers and increase GDP by $20 billion a year, the Grattan Institute has estimated.