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Overhaul of GST overdue and 'inevitable', say business groups

2 Jan 2013 SYDNEY MORNING HERALD
BY MADELEINE HEFFERNAN


AN OVERHAUL of the goods and services tax is inevitable and could help raise living standards, business groups say.

Paul Drum, CPA's head of business and investment policy, said it was "inevitable" the GST would either be broadened - to include key items such as health, education and fresh food - or increased from the 10 per cent level set in 2000. He said this would help smooth out government revenues, by reducing reliance during downturns on company taxes, and help pay for the removal of "inefficient" taxes, such as those on insurance, commercial conveyancing duty and payroll tax.

"It's been a taboo topic for the last decade, but we don't need more government obfuscation - we need to get back to the table to find the right model," Mr Drum said.

This week the former prime minister Bob Hawke joined the chorus calling for a fresh look at the rate and breadth of the GST.

Decades after rejecting his treasurer Paul Keating's plan for a 12.5 per cent consumption tax on services, Mr Hawke said the GST was a "legitimate area for discussion".

"Whether they should do it or not, that's a matter for the current leadership at a federal and a state level," Mr Hawke is reported as saying.

Others to have called for a review of the GST include the independent MP Tony Windsor, the International Monetary Fund and the Business Council of Australia.

A CPA-commissioned report conducted by KPMG Econtech found that either broadening the tax or increasing the rate to 20 per cent would "would lead to an overall higher standard of living".

"This is because the costs of imposing the GST are smaller than the benefits of abolishing the inefficient taxes," the report says.

Burchell Wilson, a senior economist at business group ACCI, said the case for revisiting the GST was compelling. "Australia benchmarks poorly with respect to other advanced economies in relation to the amount of revenue it raises from the GST, its base is narrower, and the rate is almost half that applied [on] average by our OECD counterparts," he wrote in a 2011 report.

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