I’m very pleased the Turnbull Government is pushing to raise more money from the GST, as this would allow cuts to more inefficient taxes such as income tax and stamp duty, and would be good for productivity and economic growth. The OECD (in a 2008 working paper Tax and Economic Growth) has noted:
“A revenue neutral growth-oriented tax reform…would be to shift part of the revenue base from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption.”
A GST increase would also provide greater funding certainty for state governments, which is why NSW Premier Mike Baird supports such a move, and why the Queensland Government should, too. My previous comments on the GST include:
GST much more efficient way to raise revenue than income tax
Stamp duty has to go – time to consider greater reliance on land tax and GST
4BC interview on KPMG’s analysis of GST increase for CPA Australia
Gene whilst providing funding stability to the states the GST however fails to deliver the same funding stability to regional towns and cities who are now effectively 2nd and 3rd teir beggars who stand in line waiting for the crumbs that haven’t been allocated to the capital cities. What the govt should explore is annexing the extra 5% GST and allocating these funds direct to local authorities on a sliding scale where small towns and indigenous communities are weighted to receive a higher level of funding and the weighting would be reduced for the larger councils through to the capital cities and their surrounding areas who would receive no weighting at all. Regional Australia is at a cross roads and in real danger of not just stagnating but actually retreating, this would be a terrible outcome for the country both economically and socially.
Interesting idea. Thanks for the comment, Glen!
The tax debate (if we can call it that) is very welcome. But it isn’t much use without a serious look at recurrent expenditure and the economic viability of public investment in capital.
I suspect that greater certainty in the tax revenues is needed (and amending the GST will partly fix this problem), but I also suspect there are a lot of very simple things that could be done on the expenditure side to reduce the need for more Government revenue.
Yes, I agree! Thanks for the comment, Jim.