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Australian Businesses Call For Level Heads On GST Reform

by Mary Swire,, Hong Kong

21 July 2015

The Australian Chamber of Commerce and Industry (ACCI) has called on heads of government in Australia to remain open to the idea of goods and services tax (GST) reform when they meet for a leaders' retreat this week.

Changes to the GST rate or base require the unanimous support of states and territories, as well as the endorsement of the Commonwealth and the passage of relevant legislation by both federal houses of Parliament.

New South Wales Premier Mike Baird this week endorsed GST reform. In a video posted on his Twitter account, Baird called for an increased GST rate and said he would "put all the dollars raised into health, into the challenge we face." He added that any reform package must "importantly look after those families who need support, families under AUD100,000 not being any worse off."

Baird called on Prime Minister Tony Abbott and other state and territory leaders to "look at this and deal with this in a constructive way" at the leaders' retreat.

Commenting on Baird's recommendation, Kate Carnell, CEO of the ACCI, said: "It has long been recognized that the GST is a relatively efficient tax and it makes sense for it to do more of the heavy lifting. Premier Baird has shown he has listened to these arguments in announcing his willingness to support an increase in the rate of the GST. We hope that other heads of government around Australia remain open to the idea at this week's leaders' retreat and beyond so that we can undertake the tax reform we need without political opportunism stymying debate."

Carnell did however raise concerns that Baird "is proposing the extra revenue collected be added to government coffers rather than be used to offset other less-efficient taxes. Given the Premier's proposal would increase taxes by about AUD30bn, or AUD3,000 per household, each year, it is clearly not a revenue-neutral proposal. Australia needs tax reform, not tax increases."

ACCI, together with the Business Council of Australia (BCA) and the Australian Council of Social Service (ACOSS), has released a set of tax reform objectives, which focus on the need for bi-partisanship and inter-jurisdictional cooperation.

The organizations said: "Every one of the leaders knows that we need to reform a tax system that's out of step with the rapid economic and social changes Australia faces. A rethink of financial relationships between the Commonwealth Government and states and territories is also needed and this should complement national tax reform. Governments and stakeholders must remain open to looking at the tax system as a whole, and considering all the options which could deliver the optimal system for the 21st century global economy."

Speaking at a pre-retreat press conference, Prime Minister Tony Abbott said he did not think an agreement on GST reform would be finalized "in the next couple of days." He praised Baird and South Australian Premier Jay Weatherill – who has backed Baird's call for a debate on the GST – for their willingness "to have a constructive, responsible discussion." Abbott described their actions as "a sign that this generation of leaders at both the state and national level are prepared to do what's necessary to make our country strong, not just for today but for tomorrow and for next year and the next decade."

The Council of Australian Governments will hold its leaders' retreat from July 22-23.

TAGS: tax | goods and services tax (GST) | Australia | legislation | tax rates | tax reform | trade association | trade | services

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