Time for Canberra to claw back some GST

The demand being taken to today's COAG meeting by state premiers – that the GST base be broadened rather than increasing the rate – is a historic opportunity to right a policy wrong, and the Gillard government must seize the moment.

What wrong? The decision at the time of tax's painful birth, to give all the money to the states. While that was necessary to gain the support of the amendment-happy Democrats in passing the GST legislation in 1999, it has brought nothing but grief since.

Poorer states – stand up Tasmania – like the tax's objective of making good government services available to all Australians, no matter where they live.

Richer states, such as Western Australia, don't like seeing their GST dollars flowing to poorer states when they'd rather spend the money smoothing out bumps on their freeways to make driving their sports cars more fun.

But that's the system we got, and the recent review by Nick Greiner et al says it's actually working quite well.

What's not working so well is the federal government's efforts to balance the budget – and it is a 'federal government' problem, rather than a 'Gillard government' problem. If Tony Abbott wins the next election he intends to substantially cut spending, but it's not as if he would have a choice. Top economists now say we might find ourselves $8 billion in the red at the time of the next budget as corporate profits and taxes continue to disappoint.

What's this got to do with the GST? Well it appears state premiers are so jumpy about the falling-off of this major revenue source, that they're willing to do some serious horse trading to convince the feds to take the politically difficult step of widening the tax's base to include food, health and other essential goods.

The Financial Review reports today that the states are willing to give up some stamp duties to convince Canberra to act, though it's not clear which ones.

But a smart move for the Gillard government would be to leave those to one side and put a different deal to the cash-starved premiers: "We'll widen the base, if you let us keep a bit of the increased tax-take."

That would really be a win-win-win. The federal government would get a few billion more to achieve a surplus; the states would get a more robust revenue stream (spending on those essential goods doesn't vary as much as 'discretionary' spending); and despite what lefties like Kim Carr say, our most vulnerable people will be better off.

"WHAT!" I can hear Senator Carr splutter over his cornflakes. "Better off?!"

Yes. Because some of the policy decisions of his government have indeed been 'Labor reforms' that assist lower socio-economic groups – if only the government had the money to pay for them.

There are the pension increases and tax cuts included in the carbon tax package; there are the as-yet-unfunded Gonski education reforms and the National Disability Insurance Scheme (together costing about $14 billion a year); and there's the historic health funding package agreed last year under which the government pays 60 per cent of hospital costs on an activity-based funding model (A blow to state bureaucracy, February 2011).

A jobless person who finds themselves 10 per cent worse off at the supermarket till when GST is added to their basket of milk, veggies and occasional Tim-Tams (I think we all agree they're a basic human right), will later that day get better health care, better state-funded education for their kids, and perhaps better care for a loved one knocked out of the workforce because of a disability.

The argument that widening the base of the GST is squeezing the most vulnerable works only if it's considered in isolation from other social reforms. Moreover, poorer Australians would pay 10 per cent extra on a bog-standard litre of milk, while investment bankers would pay 10 per cent on a litre of dolphin-friendly-organic-milk-from-happy-cows-receiving-daily-shiatsu-massages – that is, the 'essentials' of wealthier Australians cost more.

The premiers are also demanding a 50 per cent cut in the value of GST-exempt goods flowing into the country via online shopping. That would bring the value down to $500. It's not a bad idea, though dropping that value much lower starts to escalate the cost of policing the policy, which offsets the revenues generated.

The simple way to reform GST is to widen the base and make sure much of the revenue raised addresses issues of social exclusion. And if the Gillard government is smart, this could be the right moment to tell the states it's the federal government that's best placed to handle a good slice of that extra money.

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So we tax food and rent (Time for Canberra to claw back some GST, December 6).
Clever - I think not. It would be political suicide.
GST is very regressive in nature: that's why the CBA-backed Grattan Institute and the 0.1% prefer extending it instead of adopting The Henry Tax Review's more thoroughgoing recommendations which would see the uber-wealthy paying their fair share at last (Time for Canberra to claw back some GST, December 6).
Whenever anybody says "Govt should live within their means" don't they mean taxpayers should stop demanding every more services and more money for existing services (Time for Canberra to claw back some GST, December 6). Or do they mean, "cut everybody elses Govt handouts, but leave mine alone"?
I also cannot remember the now booming mining states refusing any Govt handouts in the 70's and 80's when they weren't rolling in cash.
If we are going to "punish" SA and TAS by per capita payments, then shouldn't we also pay more money to be spent on the capital cities rather than the bush?
Excellent article but can you actually see a govt of any colour doing the hard yards to tax the rich a touch more to pay for the increased concessions that will be required for the poor? (Time for Canberra to claw back some GST, December 6.) Bryan Kavanagh also an excellent point, we just had a massive Henry Tax Review with some excellent, but ballot box suicide, suggestions. Labor are gone at the next election why dont they introduce them for the good of the country. Get rid of neg gearing for a start
Australia already has a reputation of expensive food from many foreigners (Time for Canberra to claw back some GST, December 6). As a regular traveller to the US I can attest to this as you can buy a can of coca cola for 5 cents (you read correctly!!) and it doesn't finish there. Increasing the cost of food will simply hurt the poor and retirees who are seeing the returns on their money in the bank go down every year.
There is a better solution: get rid of state governments. these groups are already a blight on the political agenda wasting billions of dollars and entering into 'arrangements' with councils whom they permit to act illegally whilst the blind eye is turned. State governments are a blight and they either need to be fixed or scrapped. I can only think that this is the time to scrap them.
Implement the GST in the manner it was originally designed to be. The real problem is we are grossly over-governed until we have a look at the whole structure of Governments we will not have the necessary finance for our wealth creating infrastructure needs (Time for Canberra to claw back some GST, December 6).
Our businesses are struggling under ever increasing State and Federal impost. Neil Phillips is correct. Sure the lower paid will be worst off, but at lest they will have some income. Taxes,just look what it would mean to business to have these State taxes abolished Payroll Tax, Stamp Duty and Land Taxes; These are the real killers of Retail, Manufacturing and Construction as well as many other industries.
At the present rate of decline it will be two years into a Liberal Government before we have any turn around - I previously predicted 12 > 18 months but the hole is getting too deep.
Here is a no brainer way to save money - reduce the number of Politicians (Time for Canberra to claw back some GST, December 6).
Since we all agree they are a worthless waste of Taxpayers money, and do little but bitch and argue all day long then we would not notice any changes in service by cutting our reperesentation by half.
Just think of all the overpaid Pensions we would not have to fund from our taxes.
Vote 1 for a Smaller Governemnt starting at the top, be a leader in at least some thing by increasing Political Efficiencies.
Dont worry it would never get past the first sitting - too much Self Interest for any real discussions of worth.
Governments in general the world over, play the part of highwaymen who rob the rich and the poor indiscriminately - the rich more but only because they have more to take from (Time for Canberra to claw back some GST, December 6). The fact that some highwaymen, like some mafia bosses, also show largesse to some sometimes, does not take away from the fact they run their business primarily to keep themselves, their cronies and their families firmly on the pig's back. Do we really want policies that keep these brigands well funded? We want well-funded citizens not well-funded so-called representative; we want well-funded masters (we), not servants (they) who want for nothing because they very nearly take everything from us, especially our dignity and feelings of independence. To understand politics one must first digest the basic concept that all governments at all times consider they haven't got enough. Anyone who thinks that finding a new clever tax will satiate the vampires of state, is delusional. Accede to a new tax or an increased one is only the genesis to the next demand because the cupboard is bare. Face it, the way they look after their own needs and have enough bribe left to buy votes, the cupboard will always be bare, and we need to understand that or forever be frustrated because the system doesn't work properly as it can never do. Advocating brigands take more from us to achieve a surplus, is definitely not the way to go. It is we, the theoretical masters of the wasteful follies that go on, who want the surpluses, which is just another way of saying: "More of our own money left to spend by us in a manner of our own choosing."
There is a lot of merit in toying with the GST. I still don't believe that broadening the base is the best way to go (Time for Canberra to claw back some GST, December 6). We are proberly the only developed country in the world that has a 10% consumption tax.
Neil Phillips says we are grossly over governed. In some ways he is right, but I don't think that's the biggest problem. Why is our PM earning a salary greater then the president of the US, which brings into focus the remuneration packages we pay our politicians. Are they worth it?
Australia is no longer the lucky country. Contrary to what we are told the ability to save is getting harder and harder. Mr Burgess and company would refute this comment as they peddle statics based on flawed calculations. It's called propaganda, to make us feel good when in fact not all is well.
Back to the story, no I don't think anyone will be better off by broadening the scheme. Sure some of these unfunded policies may see the light of day, but any commonwealth motive behind a grab for the GST would be to pay down debt. So states beware.
However in saying that there would be many who buy "dolphin-friendly-organic-milk-from-happy-cows-receiving-daily-shiatsu-massages" who can no longer afford this luxury, and buy the same milk I do, putting pressure on supply and demand, thus forcing up the price. Instead of 10%, we could be looking at 12% plus. We will be told of course that the government only increased the cost by 10% (GST), the rest wasn't their fault. But it was this action that forced to cost higher.
Increase the rate of GST, full stop and be done with it. Commonwealth government wants some of the loot, I don't have a problem with that, so let the states deal with it.
Thanks, Rob. When even journalists think its a good idea to increase the tax, we are buggered (Time for Canberra to claw back some GST, December 6).
It's time for Tasmania to get off its fat, green backside and join the rest of us in reality (Time for Canberra to claw back some GST, December 6). And the same can be said for our governments right across Australia. "Gee, we can't balance our books. Okay so we all agree, let's jack up the GST and tell some fairy stories about the disadvantaged being better off." The Gillard Govt has wasted money hand over fist and now we all have to pay. Some of the recent State Labor Govts couldn't have run a chook raffle.
What rubbish! No matter what the states promise to do – i.e. give up stamp duties etc, they promised that at the introduction of the GST and did not do it then why would taxpayers believe them now (Time for Canberra to claw back some GST, December 6). Don't touch the GST. Governments are profligate spenders, a few million here, a few million there and always prepared to lift their own incomes no matter how difficult or dire the public are doing it. More power to Mr Abbott if he is prepared to cut the fat. I am all in favour of Kerry Packer's attitude...."don't give the Govt more than you have to, they are not very good at handling it anyway" (my version). Bottom line, leave the GST alone.....and stop inventing new taxes to make life more difficult.
The GST looks about right to me, it is a percentage, that means it goes up with activity, plus it goes down with inactivity. To raise or widen it is just increased taxation, simple as that (Time for Canberra to claw back some GST, December 6).
Regarding gathering GST on overseas on-line purchases not being cost effective. Everyone is MISSING the point. Taxing overseas purchases should not be about increasing the tax take, it should be about stopping the local retailers going broke. Evening the playing field. Even if it costs money initially so what?
I love on-line shopping but why should it be GST exempt at the cost of huge numbers of local jobs?
Why give overseas retailers a free kick? Especially when we are hearing that the big ones like Amazon pay little or no tax anyway.
Taxed Enough Already (Time for Canberra to claw back some GST, December 6).
It is bad enough having a large centralist federal government being in charge of where all the income tax revenue is spent, let alone giving them more cash from the GST waste.
To relieve the fiscal power imbalance between the federal government and the states, income taxes should be levied by the states and a proportion on a per capita basis should be forwarded to the commonwealth.
The tragedy of this debate is that most of the arguments say essentially the same thing, and have been spoken of for far too many years already (Time for Canberra to claw back some GST, December 6).
As a country, we demand much from Government, by way of services and facilities for an aging community and a changing technologically driven world. As a community of limited numbers, we mount furious debate about our collective inability to pay increased taxation of any form. I am reminded that Governments, of any colour, do not of themselves make any money from their efforts, but rather they take ours! Therefore, to achieve the modern levels of services and facilities, taxation is an ongoing necessity. GST is an established tax system that appears to be sub optimal in impact and collected revenue, as a result of concessions and omissions conceded for political reasons at the time of introduction. Perhaps we ought to, as a starting point, revisit this initial decision, and apply GST across the total spectrum of Goods and Services. In some way this will allow a more balanced argument to proposed adjustments to a range of State based, and inefficient taxes. In turn, this may allow for some serious reduction in State Government employees. Our collective public sector, is by any measure, too large, and for our population, with too many layers. Efficiency demands we cause our Federal Government to initiate a review of Government with a clear objective of removing one layer. A simpler structure ought to be the precursor to a simpler, more efficient and equitable taxation system. We, as a community, need to demand efficiency / productivity from Government, rather than allow them to perpetuate a political and fiscal system that serves a self indulgent agenda, not for the benefit of ALL Australians.
Sam Richards, regarding the GST on online purchases, here's my experience from yesterday when trying to purchase a pair of runners (I have wide feet, so my choices are very limited). (Time for Canberra to claw back some GST, December 6.)
Figure below are all for the identical type of shoe:
$189 from a B&M store in Melbourne
$140 ($130 + $10) postage when purchasing from manufacturer's .au website
$65 (including postage) from a US based shoe re-seller. When I attempted to finalize the purchase, a flag came up saying that "due to the Free Trade Agreement we cannot ship this product to Australia". A little WTF moment there.
$55.17 (including postage) from Amazon, with said shoes arriving in about 10 days.
At that price, I'm happy to give the government the $5.52 in GST. I am still so way in front it's not funny.
Gerry and Sol just don't get it.
The more you tax , the less you get. The economy eventually grinds to a halt. The private sector slows as money is taken from consumers and rediredted to the ever increasing non productive public sector (Time for Canberra to claw back some GST, December 6).
Social handouts dramatically increase to support rising unemployment and more Australian businesses close or move off shore. More people demanding social benefits and entitlements. Less incentive as the government takes further control of our lives.
What a dumb idea. Does anyone in government have a simple understanding of basic economics these days or have these principles also been changed to prop up the current federal government's socialist manifesto?
We already have the highest costs and lowest productivity in the developed world..Just what we don't need...more TAX.
When I travel overseas I can't bring back $1000 of duty free goods, so why is it that I can buy $1000( probably in reality higher than that) worth of goods and not pay GST (Time for Canberra to claw back some GST, December 6). How about we make a new tax collecting agency that is self funded by collecting tax on all these private imports, with this agency having to pay a dividend to the government of 90%. If it is self funded it will collect the money so it can pay itself and the government. This will not stop people buying on the internet, and maybe it will protect some Australian jobs and businesses. The new government agency looking into dumping can start with all these private imports. It is always amasing to me how we Australians want cheaper stuff but still want the high wages.
One doubts that government's and politicians have any idea on how to behave in a financial prudent manner (Time for Canberra to claw back some GST, December 6). Just like the councils that increase the rates constantly,and waste it on crazy outright hair brained schemes. After all,it is not their money. It is extracted from the helpless rate and taxpayers.
Introducing a new broad gst would affect the pockets of labour voters much more than the liberal voters. Julia in my view would not follow this path (Time for Canberra to claw back some GST, December 6).
Mr Rob Burgress you must try another way sell to sell this new tax. I suggest you go back to the time GST was introduced and sold to the Public. The public were convinced that they would be no worse off and they were showered in government gifts.
The GST should be extended to all food items that have some sort of processing done to them.The exemptions are ridiculous and its is time to simplify which items are taxed and which items are not taxed (Time for Canberra to claw back some GST, December 6).
I was priviledged to attend an economic outlook seminar at which Saul Eslake was the keynote speaker (Time for Canberra to claw back some GST, December 6). When asked about broadening the base of the GST he was all for it, but with an interesting argument. Due to the complexity of our GST, thanks to the now non-existent Australian Democrats, it costs 14% of revenue to administer. In New Zealand where the tax has many fewer exemptions the equivalent figure is 2%. If we could achieve the 2% administrative take, the other 12% would be 'free' money. We'd have fewer civil servants and maybe fewer tax lawyers.
The down on their luck at the supermarket checkout paying an extra 10% just isn't so (Time for Canberra to claw back some GST, December 7).
Been to an IGA in a housing commission area lately? The fresh fruit and veg. area is the size of a postage stamp. The items that are obviously in high demand all attract the GST. The problem with the deal hungry Democrats was that they had no idea what the down-on-their-luck brigade eat.
A simple broadening the GST to all goods and services, whilst concurrently lifting the tax free threshold for individuals to say $35K, would in my view ameliorate the regressiveness on the the poorer members of society, whilst massively increasing the tax receipts to pay for those items that we all insist on as a modern progressive society... roads, hospitals, education et al. And we would have the bonus of a much simpler management of the GST come BAS time (Time for Canberra to claw back some GST, December 6).
Can't be too hard?
Gee, everyone wants to pay more tax (Time for Canberra to claw back some GST, December 6)! Heres a thought, instead of increasing taxes, how about we control costs. What are the expenditure thresholds for politicans and public services sector? For example, if I have a level at $500, and it gets spent weekly by 10,000 people in various governments around Aust., then how much is being spent? We have councils, state and federal governments, with thousands of people holding on to the same wallet, the tax payers wallet! They all fight to get more so they can go back to their own electorate and sprout their accomplishments. Who is looking at the big picture? We dont need to increase taxes, we need to be more effective on how the money is controlled. Many of us forget that GST is a tax collected and paid by businesses. The government does little other than to spend it. Lastly, those of you that think the 'well off' should pay more, think again? Statistically, these people are the high end users of credit. In other words they may have nice cars, homes etcetera, but it is all tied up in one big credit bubble. So increasing the GST will with out a doubt do more harm than good. Each time the governments want more money, they jump at tax grabs. Downsize the governments, remove the mass of unwanted levels, implement cost controls and leave Australians alone, it gets tiring paying for incompetance!