17 September 2012
Business leaders call for GST review as Barry O'Farrell reignites debate
The Australian
BUSINESS leaders yesterday signalled they would press a Coalition government to radically overhaul the Goods and Services Tax by expanding its base and increasing the 10 per cent headline rate in order to fund cuts to the company tax rate.
The tax debate was reignited after NSW Premier Barry O'Farrell declared the federal government should consider changes to the GST to ensure adequate future revenue flows to the states and territories.
Mr O'Farrell said the domestic consumption tax should be reviewed in a fresh round of tax discussions between the states and the commonwealth.
The move has been dismissed by Julia Gillard but has the backing of some senior corporate leaders. Tony Abbott also ruled out an increase in the GST. This could put the Coalition on a collision course with big business if it wins the next election.
The former chairman of the Australian Board of Taxation, Dick Warburton, said yesterday the GST could be increased to fund wider tax reform to ensure Australia remained competitive. "At the very least, the GST should be on the table and debated, rather than just cut off, as both sides of politics have done," he said. "There should at least be a debate.
"There is room to increase the GST from 10 per cent to maybe 12 or even 15 per cent," he said.
"The GST is an extremely efficient tax as opposed to the extremely inefficient, smaller state taxes such as stamp duty, insurance taxes and fire levies."
"The business community should try and raise it (the issue) and give some good reasons for change and it might give some courage to the government," he said.
HSBC Australia chairman Graham Bradley, who is also deputy chairman of the Business Council of Australia, said the economic circumstances justified a review of the GST.
"We have 90 per cent of the economy becalmed and the engine of our economic growth -- resources and energy -- weakening," Mr Bradley said.
"It is even more important that, looking ahead, we do some fundamental things with tax to stimulate other sectors of the economy including manufacturing."
Business Council of Australia chief executive Jennifer Westacott yesterday called for a review of "all sources of taxation, federal and state, with a view to designing a tax system that will meet the needs the needs of future generations".
"The GST cannot be removed from a conversation about tax reform," she said. "It is incumbent on all political leaders to ensure there is comprehensive tax reform, given the looming fiscal challenges we face."
Ms Westacott said tax reform should be based on a shift away from taxes on capital and income and towards a greater reliance on revenue generation from indirect taxes.
The BCA and other members of the business community say the revenue generated by a broader-based GST and a higher rate could be used to stimulate business by cutting the corporate tax rate and removing state taxes such as stamp duty and payroll tax.
Mr Warburton said Australia's 10 per cent GST was relatively low compared with many other countries around the world.
New Zealand, which introduced a 10 per cent GST in 1986, had since raised it to 15 per cent.
According to some estimates, the annual GST revenue of some $50 billion could be increased by another $35bn by simply removing most of the exemptions.