Some ideas are so ridiculous that they can only come from academics.
Writing in the AFR today, two UNSW academics have proposed that the Government increase the rate and base of the GST but provide all Australians with a $7,500 per person GST free threshold. And this would be effected through:
Australia’s sophisticated payments system.
Follow the bouncing ball.
Professor of Economics @ UNSW, Richard Holden and Professor of Law @ UNSW Rosalind Dixon write:
We should use Australia’s digital payment system to give consumers at $7500 GST-free spending exemption from a bigger, non-regressive consumption tax.
And how would this work?
Each Australian adult would receive a $7500 a year “GST-free” spending threshold. That is, the first $7500 of consumption would attract a GST rate of 0 per cent. Beyond that, all goods and services would be taxed at a rate of 15 per cent – including those that are currently exempt such as fresh food, health, and education.
And what would this deliver:
A broader GST would raise more than $60 billion a year, according to analysis by PwC. By our calculations, the compensation stemming from the $7500 exemption would be around $20 billion. This leaves the government with $40 billion a year in fiscal improvement from the progressive GST.
You really must admire the writing here. Is not a “$40 billion a year in fiscal improvement” basically a $40 billion tax grab? Why yes it is.
And how would this all work:
But thanks to Australia’s world-leading payments system, the exemption could be implemented very efficiently. Any Australian adult could register any debit or credit card in their name. Each time such a card was “tapped” at, say, the supermarket checkout the user’s GST-exemption balance would be looked up electronically, and, provided there was sufficient balance remaining, the GST applicable to their transaction would be removed and their balance updated accordingly.
Genius. Just genius. Apart from the fact that this payment system (NPP) is not world leading, far from it, and was forced upon the banks by the RBA, it would deliver even more personal data to the tax office who would need to have access to the data. But who cares about little things like that.
But the compliance question:
Would this mean that cash transactions would not be not eligible for the GST exemption? You bet.
And the academic solution:
There is simply no legitimate reason for tax-dodging through under the table, cash transactions in a world where the New Payment Platform would allow real-time person-to-person transfers. Close to all point-of-sale transactions can already be made electronically.
Right. Because it is simpler to pay electronically, there is no “legitimate reason” for dodgy transactions. Ok. Austrac needs to go. Add that to the savings list.
But of course that would never happen so the government would need to eliminate cash from the economy. Let’s go electronic payments. Great for the government. Great for the banks. Great for the public sector. The rest of us? We don’t matter. We are just food for the system.
So there you go. Bish, bosh, bash. Two birds with one stone. Grab an extra $40 billion p/a in tax from Australians (to start with) and eliminate all cash in Australia to allow the government to take even more through negative interest rates.
A pretty shrewd idea from 2 unworldly academics, one of whom has also previously advocated for a mass bailout of the university sector.
High distinction worthy.