Rectify GST to ease tax burden

For as long as I can remember, the Liberals always promised tax cuts in an election, so it looks as though it's going to be a long time between drinks.

For as long as I can remember, the Liberals always promised tax cuts in an election, so it looks as though it's going to be a long time between drinks.

I'm not counting abolishing the carbon tax/emissions trading scheme because it never got into full swing and its impact was mostly subsidised away by handouts. Besides, it's not the carbon tax that's pushing up power prices but the 2020 renewable energy target both sides swear by. I dread what the Coalition's "direct action" add-ons might do.

In much the same vein, the mining tax never got off the ground, either, since nobody paid it, except for the extra accounting costs and another layer of red tape. Anyway, the increase in the levy paid by bosses to your super that it was supposed to fund will be postponed.

The 1.5 per cent cut in company tax comes closer to a hip-pocket benefit by taking some pressure off prices, only it's compromised by the 1.5 per cent parental leave levy on the 3000 most profitable companies. That leaves only reversing the clampdown on salary sacrificing for private use of company cars.

For its part, Labor doesn't seem to have a tax policy at all. Guess it's run out of things to tax. If there's one thing the election campaign has highlighted, it's the rising real cost of the biggest spending commitments already there. Sorry, that can mean only that taxes will have to rise.

Without admitting as much, the Coalition has even promised a tax review, as if we need the cost of another one. Hang on, taxes are already rising of their own accord. The official, non-partisan pre-election economic and fiscal outlook shows income tax collections will jump 29 per cent by 2016-17, or almost 10 per cent a year. Yet wages will be rising only 3.25 per cent a year.

It's true more jobs would boost revenues. But unemployment is expected to rise in that time so that can't be why.

More likely it's good old-fashioned bracket creep.

I know the GST never took off as an election issue, but don't think Treasury will give up so easily. Not to put too fine a point on it, but the rate is too low and too much is exempted. Tony Abbott says "the GST won't change, full stop", which sounds awfully like John Howard's "never ever". So there's room for taking it to the next election, as Howard did.

But there's another possibility before then. That would be to lower the exemption from GST on online purchases from offshore. The states, whose tax it is, are pushing for the threshold to be halved to $500.

Frankly, it could go down to $100 and still be five times higher than other comparable countries - which, by the way, seem to have no trouble collecting the revenue, which was why ours has been set so high.

Not only would this be a revenue spinner if it were collected from credit and debit card companies rather than customs stamping parcels, but it would generate growth by stopping some retail spending going offshore.

The high threshold creates a hole that is getting bigger as online shopping expands. That's draining revenue that would be going to the states. And, when it comes to tax, if it's a state problem, then it's also a federal one.

Read David Potts in Weekend Money, with

The Sunday Age.

Twitter @money potts

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles