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Wednesday, February 26, 2014

Australia: GST is a good tax, so let's raise it

Posted by: Tom Elliott | 25 February, 2014 - 3:49 PM

It's time we seriously considered increasing the goods and services tax (GST).

Today the Business Council of Australia called for a cut to corporate tax and a cut to the top rate of income tax, and to make up for the loss of revenue suggested the government should increase the GST.

It's possibly one of the least popular, and therefore least unlikely, changes to our tax system ever to be announced. But you know what, it actually makes a lot of sense.

The GST is a very good tax. And by that I mean it's very hard to avoid.

There are not many loopholes - unless you operate entirely in cash (which many plumbers and builders still do).

And because the GST is so hard to avoid it's the sort of tax that governments should actually increase.

The problem with increasing company taxes, for example, is that businesses tend to go offshore - they locate themselves in an environment where company tax is very low.

Most of us do not have that option. If the GST is increased, we simply have to cop it and pay up.

For some reason both the Rudd and Gillard governments - and now Abbott government - refused to bring up the GST when they talk about tax reforms. Governments see it as a toxic issue. I don’t buy that.

If you want a tax that works, if you want a tax that can’t be avoided, if you want a tax that Australians can afford, I think increasing the GST is it.

If you need to offer people a trade-off, lower the rate of income tax perhaps.

Not only is raising the GST good policy, it's inevitable as far as I'm concerned.


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