The GST turns 20 today. Is it time to increase the tax rate or broaden the base?
It was 20 years ago today the GST was introduced, and it was the dawn of a new taxation era for Australians.
After decades of it being on and off the table, John Howard took it to an election, which he narrowly won, and scraped it through the Senate — because he had to.
The forced removal of some taxes on alcohol, fuel and cigarettes punched a huge hole in government revenues, but the compromises made to get the GST across the line have meant it has never raised as much as intended.
Now, the pandemic means government budgets — federal and state — are haemorrhaging.
So, two decades on, is it time to lift the GST, apply it to everything, both or neither?
"We've had the pandemic and there's a lot of churn and tumult in the economy," former prime minister Mr Howard told ABC News.
"What does that mean for economic reform? Some people will argue it's an ideal opportunity."
Mr Howard and Peter Costello's plan for the GST was for everything to be subject to the tax — including fresh food. But politics got in the way and so fresh food was exempt along with health and education.
The GST now raises around $70 billion a year, which is about 13 per cent of Australia's total tax haul.
It is well short of what it could be, and has been in decline since it was introduced thanks to our spending habits — more on housing, education and health, less on GST-attracting frippery.
In the coming years, GST revenue will see a far sharper decline than it did in the GFC.
It is a big problem for the states — the GST is a key source of funding to pay for schools, hospitals and everything else. For NSW it is just over 20 per cent of total income, but in Tasmania it is around 40 per cent.
NSW leads push to change GST
NSW Treasurer Dominic Perrottet is the latest state leader to make a big push for a change to the GST.
https://www.abc.net.au/news/2020-07-01/gst-20-years-old-is-it-time-to-increase-the-tax-rate/12407258
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