With the government’s full tax cut plan passing parliament last week, PwC tax leader Pete Calleja has now called for a focus on additional reform to help steer Australia on the right economic path, including considering consumption tax reform.
“While these tax cuts are significant and will provide welcome relief for lower and middle-income earners, they will be insufficient by themselves to sustainably stimulate the medium- to long-term economic growth we aspire to going forward,” Mr Calleja said.
“An agenda to boost productivity should be in focus, including targeted incentives to encourage more women and older Australians into the workforce, and policies that encourage local and foreign businesses to invest in Australia.
“We need to be supporting small to medium enterprises with accelerated depreciation incentives for investments in plant and equipment and intangible property.
“We also must not shy away from the merits of broadening the tax base through consumption tax reform, with appropriate relief for low-income earners.”
Broadening the GST?
The Tax Institute had earlier called for the government to consider relying more heavily on broad-based consumption taxes as a trade-off to abolishing 115 taxes that contribute to only 10 per cent of total revenue take.
It noted that Australia is ranked 34 out of 36 countries in terms of the share of revenue from GST/VAT.
“Only 13 per cent of revenue in Australia comes from GST, whereas the OECD average is 20 per cent,” the Tax Institute said.
“Where the GST base can be broadened, this may allow for the reduction in other tax bases, such as corporate tax, or a shift away from less efficient taxes such as the 115 other taxes that individually contribute very little to revenue.”
There appears to be little appetite in Canberra to broaden the GST, with Finance Minister Mathias Cormann shooting down the suggestion in the wake of the federal election.
“We have no plans at all to broaden the base of the GST,” Senator Cormann said in May.
“If we had such a plan, we would have taken it to the Australian people before the election.”