Henry Review Author Urges Higher Australian GST

by Mary Swire, Tax-News.com, Hong Kong

02 September 2011

Increasing the Goods and Services Tax (GST) from 10% to 15% is necessary for the financial future of Australian States, according to Greg Smith, former Treasury official and one of the authors of the Henry Tax Review, commissioned by the government. Professor Smith was one of the speakers at a Tax Institute Forum in Sydney on August 31.

The States are largely responsible for the financing of health and education, and Professor Smith suggested that a higher GST would help them considerably. At the same time he suggested that inefficient taxes like insurance tax and payroll tax be stopped because they were hurting local economies.

Professor Smith said that he expected to see a rise in GST revenue at the current rate by AUD12bn (USD12.8bn) by the end of the fiscal year 2014, whereas personal income tax is likely to rise by up to AUD55bn. He believes that increasing the GST rate could enable the government to lower income tax and not become reliant on the new carbon and mineral resource taxes.

The Henry Review was not allowed to comment on GST, and it has not been included on the agenda for the government’s October Tax Forum. Because of the government’s unwillingness to consider changes to GST the Henry Review made a recommendation of introducing a new consumption tax, which would be charged alongside GST. The Review said that it would be a more efficient tax, because it would cover most of the consumption tax base, and would also eliminate the need for tax invoices thus simplifying compliance for businesses. The report said of the GST that: "It is an operationally complex tax, designed on tax invoice concepts more suited to the documentary standards of the 1960s than the digital potential of the 21st century."

Greg Smith was adamant that a higher GST is the way forward, however he stressed that it could only work if it was sold by the government in the right way to the people of Australia.

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