A prominent Australian accounting organisation, CPA Australia, has proposed the possibility of increasing the Goods and Services Tax (GST) as discussions arise around the tax system reform in the country. This comes 25 years after the GST was introduced by Prime Minister John Howard’s government on July 1, 2000.
Ahead of an economic reform roundtable later in the year, CPA Australia plans to submit a five-point proposal aimed at fundamental changes to the GST. Currently, the GST is set at 10 per cent on most goods and services across Australia. Chris Freeland, the Chief Executive of CPA Australia, emphasised the need for a mature discussion about the limitations inherent in Australia’s tax system. According to Freeland, the GST has seen little change and its ongoing inconsistencies, including the selective taxation of some food items, have largely gone unaddressed.
CPA Australia is advocating for the government to explore what a broader tax base would entail and to assess the potential revenue changes that could result from a variation in the GST rate. Freeland indicated that increasing the GST could lead to reduced income tax rates for both individuals and businesses, noting that many tax experts view a GST increase as a pivotal move toward diversifying the overall tax system. This shift could potentially relieve taxpayers from the heavy reliance on personal income tax, thereby increasing disposable income which could stimulate economic growth.
However, Freeland cautioned that any modifications to the GST should take into account the impact on lower-income families and pensioners, who might suffer disproportionately from an increased GST without sufficient compensatory tax reductions. He referenced OECD statistics showing that Australia’s reliance on income tax poses a significant burden compared to other nations, suggesting that a shift could balance the tax load more equitably across society.
In summary, the dialogue initiated by CPA Australia represents a critical examination of the GST and the broader Australian tax landscape, aiming for a system that supports economic growth while addressing inequalities.