With Tony Abbott repeating ad nauseum that it will be anybody else’s fault other than his if the GST rises, you can be sure it will come up soon so, since it is impossible to get any truth out of the Coalition, it’s worth having a look at a few GST facts.
Firstly, it is incorrect to say the GST can only be raised with the consent of the States and Territories. The legislation requiring unanimous approval can be amended at any time by the normal parliamentary process. With a majority in the House of Representatives, Abbott would only have to get 6 Senate crossbenchers (or the Greens or Labor) to agree and he can do what he pleases.
If the carbon price was a great big new tax on everything, the GST beat it hands down. In the quarter after it was introduced the GST caused the CPI to rise approximately 3%. The carbon price saw a rise of about 0.7%.
In seven out of eleven CPI groups (i.e. Food, Alcohol and tobacco, Clothing and footwear, Housing, Household furnishings, supplies and services, Communication, and Recreation) the one-off GST effect was significant ranging between a minimum of 1.3 per cent (Food) to a maximum of 8 per cent (Clothing and footwear).
Around 47 per cent of the consumption of goods and services in Australia is covered by the GST. That is below the OECD average of 55 per cent and way behind New Zealand where 96 per cent of goods and services are covered by a consumption tax.
The GST raised $56 billion or 16 per cent of total Australian government tax revenue in 2013-14 and all of the money is distributed to the states and territories.
This implies that if we raised the current GST to 12.5% (and didn’t broaden the base) we could raise an extra $14 billion annually.
The effect on prices would not be huge. Something that used to cost $44 will cost $45, $88 will cost $90, $220 will cost $225, $1100 will cost $1125.
If the base remained the same, leaving out fresh food, residential rent, most health and education, then the regressive effect of a rise would not be as harshly felt by low income earners. Perhaps power and phone bills could stay at 10%.
When the GST was introduced several other indirect taxes like sales tax were abolished to help alleviate the price rises. When the carbon tax was introduced, the tax free threshold was raised by $12,200, which meant people earning $18,200 paid zero tax instead of $1830 (give or take low income supplements etc), a fact which seems to be ignored by those who screamed blue murder at the supposed $550 a year imposte from the carbon tax.
The scheduled increase in the threshold to $19,400 was abandoned with the carbon price, another fact lost on the axe the tax advocates. We could increase it to, say, $20,000 as compensation for any rise in GST, saving $342 tax with less people having to fill in returns.
Currently the top tax bracket (> $180,000) pay $54,547 plus 45c for each $1 over $180,000 (plus a 2% Medicare levy plus a temporary 2% debt reduction levy). Perhaps it is time to have a new top bracket with 55c for each $1 over $300,000. In the early 1950s the top tax rate was 75 per cent.
As far as the proposed reduction in company tax is concerned, data from the tax office shows Australia’s 900 biggest companies were able to claim deductions and exemptions worth $25 billion last year. Far from paying the corporate tax rate of 30 per cent, they paid an “effective tax rate” of just 19.3 cents in the dollar on pre-tax profits.
How about the superprofits being made by the banks or aren’t we allowed to mention anything to do with financial institutions who feature heavily as political donors and advisers.
If we want to help business let’s get rid of the 17.5% leave loading on annual holidays rather than penalty rates. Bring back the capped small business instant asset write-off to help with the costs of setting up and expanding business.
And as for scratching your head about what to do about tax avoidance by global corporations, every one of them says they are complying with the letter of the law . . . so change the freakin’ laws! They are not going to miss out on billions of dollars profit if they are forced to pay a few million in tax. Taking advice from the big four accounting firms about this is worse than letting the mining companies write the mining tax.
Obviously there are superannuation, negative gearing and capital gains tax concessions, and fossil fuel subsidies for any government serious about raising revenue.
I suppose it’s too late to campaign to bring back the carbon and mining taxes and the FBT on novated car leases and the billions in revenue that went with them.
It’s kind of hard to take Hockey’s taxation white paper seriously when Tony Abbott keeps repeating his slogan of “lower,simpler,fairer” taxes. I feel for you Joe.