Chartered Accountants Australia and New Zealand (CAANZ) has released modelling which it says shows that increasing the GST can be both fair and affordable.
CAANZ says tax reform can be 'fair and affordable'
The CAANZ tax formula shows that if GST is increased to 15 per cent across a fully broadened base, it could generate revenue of $265 billion over four years.
The formula includes corresponding cuts in personal income taxes and increases to benefits and pensions to compensate those on low or fixed incomes. After deducting this compensation, the government could be left with $94 billion over four years, out of which $38 billion of inefficient state taxes could be abolished.
According to CAANZ, net takings for the states and government if the GST were to be increased to 15 per cent across a fully broadened base could be $56 billion over four years.
Rob Ward, head of leadership and advocacy at CAANZ said the modelling shows fair tax reform is achievable in the current Australian political and economical environment.
“We developed the formula to show how a rise in GST, and a sensible approach to other tax treatments, can be both fair and affordable."
“The level of GST increase and base broadening is up to government, but our model demonstrates that at 15 per cent we can provide appropriate levels of compensation to those who need it and still generate additional revenue.”
Mr Ward said currently, 70 per cent of federal government tax revenue is collected from personal and company income taxes.
“This is a time bomb,” he argued.
“With fewer people paying taxes in the future, supporting a higher proportion of retired people, income tax could fail to generate a sufficient flow of funds for the federal government to maintain the standard of living that we’ve come to expect in Australia,” Mr Ward said.
“Tax reform has become a necessity for Australia and will require strong political leadership and cooperation between the Federal Government, States and Territories to achieve.”