The government is facing a new call to raise the GST but shield low-income earners from the ill effects by handing out a hefty rebate to all taxpayers each year.
The new proposal, put forward by teal independent MP Kate Chaney and highly respected economist Richard Holden, would hike the GST from 10 per cent to 15 per cent.
At the same time, it would remove the current exemptions for the likes of fresh food and private education and health.
In order to ensure low-income earners aren’t unfairly impacted by the take hike, Chaney and Holden have proposed a universal $3300 “basics rebate”, to be paid to every Australian adult, which would effectively provide a $22,000 GST-free threshold.
They say the changes would leave the lowest 60 per cent of income earners better off than under the current system, while at the same time giving the federal budget an extra $23.8 billion in revenue in 2026-27.
“Intergenerational inequity is built into our tax system,” Chaney said.
“Younger generations are facing the growing burden of funding an ageing population and will bear the cost of future interest payments to cover the structural deficit forecast for the next decade.
“We have to have courageous conversations about other revenue sources to avoid handballing this problem to future generations.”
Holden said the proposal would have the added benefit of allowing the government to cut income tax rates and index them, ending bracket creep in the process, and still provide billions of extra funding for the budget.
Ahead of its productivity roundtable this month, the government has faced repeated calls to change the tax system to remove the reliance on personal income tax and fix the structural deficit the budget has fallen into.
“Australia’s tax system is pretty strange relative to other… advanced economies,” Holden told 3AW this morning.
“We get about twice as much of our revenue from income tax and about half as much from the GST, or value-added taxes, as other countries.
“That’s very inefficient, it holds back productivity, it holds back innovation, it has intergenerational problems where it taxes younger people of working age a lot more.”
Although Treasurer Jim Chalmers is sceptical of raising the GST, and Prime Minister Anthony Albanese has all but ruled it out, the consumption tax has been cited by economists as an obvious target for reform because it is so efficient.
Holden acknowledged politicians had typically been averse to raising the GST, but said he hoped the time was right for the government to embrace the courageous move.
“This moment with the Chalmers economic roundtable is the moment where this has got a little more traction and a little more attention,” he said.
“So I think that’s the question: is the upcoming August 19 roundtable going to be a moment for genuinely thinking about bold ideas?”
Senior Nationals senator Bridget McKenzie this morning encouraged the government to use its massive parliamentary majority to properly address tax reform and stagnating productivity.
“This is a great opportunity that only comes around every couple of decades,” she told Today.
“This government’s got a huge mandate. They have to use it.
“It might get some people off, particularly their traditional stakeholders, but they’ve got to use it. They’ve got to be bold.”
