| With tax reform back on the Australian political agenda in the wake of the Henry Tax Review, an alternative opinion has arisen in the form of CPA Australia on Lifting GST rates. Since the GST was introduced on 1 July 2000 it has remained at the original rate of 10%, levied on most goods and services, with some exemptions. It replaced the Federal wholesale sales tax system and allowed a reduction in the rates of personal income tax and property tax. There have been calls from various quarters since 2000 for the GST rate to be lifted, but so far, they have not received any serious support.
This could all change with some compelling arguments by CPA Australia on Lifting GST rates. While no-one particularly likes the idea of increased rates of tax Brisbane, it is probably time for some robust debate on the issue, given that the financial situation in Europe seems likely to drag on for some time. This uncertainty keeps consumer wallets shut, reducing the amount of tax available for collection.
CPA Australia is not saying that any increase in GST should happen overnight. Rather, it is suggesting that by increasing the rate to 20% in stages over the next decade, we would be positioning ourselves well to take part in the Asian century. It is apparent that the rest of the century will be dominated by Asian economies, and Australia is well-placed to take advantage of this.
The initiative by CPA Australia on Lifting GST rates is not merely conjecture. They commissioned KPMG Enotech to look at the likely effect an increase would have at 12.5%, 15% and 20% while removing inefficient taxes such as insurance and motor vehicle taxes, payroll tax and commercial conveyancing duty. The study reported that broadening the existing 10% GST tax base to include some currently exempt items, and abolishing insurance and motor vehicle taxes and half of commercial conveyancing duties, could produce an annual increase in consumer living standards of around $4 billion.
Alternatively, rather than broaden the base, by lifting the rate to 12.5% the revenue raised would cover the abolition of the insurance and motor vehicle taxes and 10% of commercial conveyancing duties, resulting in a lift in consumer living standards of approximately $1.6 billion. There were similar results at 15% including the replacement of 40% of payroll tax revenue and at 20% the ability to fund all existing inefficient state taxes and reduce personal and company tax rates by 1%, increasing consumer living standards overall by $4.6 billion. These are results that should have any CPA Brisbane interested in the concept.
The GST was unpopular at the outset, but it has proven to be an efficient taxation method and is now embedded in Australia’s commercial and household communities. With everyone already having systems in place to collect, remit to the ATO and report GST, the idea by CPA Australia on Lifting GST should at least be debated in the Australian community.
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