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Today’s Top Headlines

Australian Business Leaders Urge GST Hike To Fund Tax Reform

by Mary Swire,, Hong Kong

06 April 2017

The Australian Institute of Company Directors (AICD) has called for comprehensive tax reform that delivers a more efficient, sustainable, fair, and growth-focused system.

AICD has published "Governance of the Nation: A Blueprint for Growth 2017," which includes reform recommendations across six key areas, one of which is fiscal sustainability.

AICD Chief Economist Stephen Walters said: "Our deficit is AUD36bn (USD27.2bn) and Commonwealth spending is currently set to remain at above 25 percent of GDP over the next four years. It is clear we have a spending and a revenue problem. It's time to tackle both, with cuts to industry assistance, middle-class welfare, and efficiency dividends on the one hand, and comprehensive tax reform on the other."

"We need to get our tax mix right, by taxing smarter, not higher."

According to the report, the Government should seek to reduce Australia's reliance on direct, inefficient taxes that limit growth, including inefficient state taxes. In particular, it argued that the Government should increase the goods and services tax (GST) rate from 10 percent to 15 percent and broaden the GST base, with a substantial compensation package for lower income earners.

ACID pointed out the GST base applies to less than 50 percent of household spending, compared with 97 percent in New Zealand. It said the GST should cover spending on fresh food, education, healthcare, childcare, and utilities.

According to ACID, a higher GST rate and broader base would raise an estimated additional AUD273bn over four years. This would be partly offset by tax cuts elsewhere in the system, but would offer a more sustainable and efficient revenue base, ACID said.

ACID also argued that its proposal for GST reform would allow marginal income tax rates to be reduced by 6.5 percentage points. It added that removal of work-related deductions would allow the top personal tax rate to be reduced from the current 45 percent to 37 percent. It said the tax-free threshold should be cut from AUD18,200 to AUD15,00, while the Low Income Tax Offset should be increased from AUD445 to AUD1,200.

With regard to property taxes, ACID recommended that the Government should reform capital gains tax (CGT) concessions that favor high-income earners and review negative gearing.

TAGS: capital gains tax (CGT) | tax | property tax | goods and services tax (GST) | Australia | tax thresholds | food | education | tax rates | New Zealand | dividends | tax reform | trade association | trade | individual income tax | services | Tax

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