John Passant writing in the Canberra Times.
The usual bourgeois wet dreams about removing the exemption on fresh food, education, child care and health from the GST came up, as did increasing the rate. One suggestion was moving it from its current 10 per cent to 20 per cent.
While increasing the GST rate or expanding the base has many fans in Australia few of them occupy, or run for, public office.
Advocating an increase in the GST rate is a call to skin taxpayers alive. It should always be resisted (except in some very unlikely situations).
When the GST was introduced it replaced a raft of inefficient state taxes and the Wholesale Sales Tax. With minor exceptions (wine and expensive cars) these taxes were not reformed, they were abolished. If anything we can criticise the Howard government for being too timid – but at the time it was a huge gamble and they nearly lost the 1998 election (and for a while it looked like they would lose the 2001 election). The other point to remember was that the Howard government introduced the GST from a position of fiscal strength. They didn’t need the money – furthermore all the GST revenue was given to the States. So the Federal government has no incentive to increase the rate or change the base (as they bear all the political costs of doing so).
Modifying the GST is something a lot of people talk about – it is a lazy policy solution to the need to cut spending or to re-prioritise existing spending choices.
The GST is a very efficient tax – it has the potential to raise a lot of money – and once it gets out of the political straight jacket imposed by the Howard government it will quickly increase to European levels. So changes to the GST must be matched with the abolition of existing taxes and not be source of new revenue or allow government to avoid tough spending choices.