Publication date: 19 Jul 18 |
Source: THE TAX INSTITUTE
SYDNEY, 19 July 2018: The release of the Parliamentary Budget Office report into the Australian Tax System, highlights the incredible reliance we place on individual income tax.
“An odd arrangement currently exists where basic food, health and education are all GST free supplies”, says Professor Robert Deutsch, Senior Tax Counsel at The Tax Institute.
“This was part of a compromise deal made in the late 1990s is designed to ensure that the lower paid sectors of our community are not disadvantaged”.
“This disadvantage arises as lower paid workers dedicate a higher percentage of their available resources to the purchase of such supplies. Excluding such supplies from the GST base ensures poorer sectors of the community are protected”.
“However, this outcome is secured by the perverse decision to ensure that when a person on income of $300,000 purchases milk, goes to the doctor of their choice or sends a child to an expensive private school, none of these things are subject to GST. That is absurd”.
“In effect, this excludes 95% of the population that can afford to pay GST on these products, because we are trying to protect 5% who cannot”, says Professor Deutsch.
“A better way to achieve the objective would be to impose GST on these three categories, and then ensure an adequate compensation package is provided to the 5% that require protection”.
Treasury figures show that revenue from these three sources would give rise to about $18 billion in additional GST. Compensation to those in genuine need (ie low paid workers; pensioners; disability recipients), could be, say $6 billion. That translates into a $6,000 per person, which would reflect expenditure on these three sources of roughly $60,000 a year per person.
“In other words, an additional $12 billion could be raised through taxing these three categories in full, and providing compensation to the 5% that really need it”.
Professor Deutsch adds, “If this would have been done consistently over 18 years, an additional $180 billion could have been raised. How many hospitals and schools could that additional revenue have funded?”.
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