GST: Fresh food, healthcare and education to cost billions more if tax broadened, PBO finds
10th Dec 2015
New modelling shows basic foods would cost Australians more than $7 billion extra annually if the GST was applied, while a leaked document reveals states and territories are facing a $50 billion shortfall by 2030.
The Parliamentary Budget Office (PBO) analysis has found scrapping a raft of GST exemptions would raise at least $21 billion in additional revenue a year from 2017-18.
The PBO found applying the tax to basic foods would raise $7.2 billion in 17-18, while health and medical care would reap $6.4 billion.
PBO’s 2017-18 scenarios
- Applying a 10 per cent GST to basic food would raise an extra $7.2 billion ($4.8 billion after compensation)
- Applying a 10 per cent GST to basic food, health, medical care, education, child care, water and sewerage would raise an extra $21.6 billion ($16 billion after compensation)
- Increasing the GST to 15 per cent without expanding the base would raise an extra $32.5 billion ($24.6 billion after compensation)
- Increasing the GST to 15 per cent and applying it to basic food would raise $42.7 billion ($31.4 billion after compensation)
- Increasing the GST to 15 per cent and applying it to basic food, health, medical care, education, child care, water and sewerage would raise an extra $65.8 billion ($49.3 billion after compensation).
It also said education would collect $4.9 billion, childcare would add $1.6 billion, while water and sewerage would add $1.1 billion to revenue.
The PBO assumed compensation would be provided under any government change, meaning much of the extra revenue would be returned to low income households.
“In the absence of compensation arrangements … each of the scenarios analysed would have a greater relative impact on lower income earners,” the PBO report said.
The independent office has modelled a range of scenarios, from removing the GST-free status of basic food through to applying a 15 per cent tax to a broader base.
It found the changes could raise between $7.2 billion and $65.8 billion in 2017-18, before compensation is provided to the poorest 40 per cent of households.
Meanwhile a leaked COAG document shows state and territory governments face a combined deficit of nearly $50 billion in 2030, including about $35 billion in health and $10 billion in education.
The document has been prepared for Friday’s Council of Australian Governments (COAG) meeting and is the second leak in as many days before Prime Minister Malcolm Turnbull meets premiers and chief ministers on Friday.
Treasurer Scott Morrison will discuss the situation with state and territory counterparts at a meeting in Sydney today.
The GST is set to be discussed, along with state-based charges, such as property and payroll taxes, along with competition reform.
The Commonwealth is pressuring states to abolish about $85 billion worth of inefficient revenue-raising measures.
South Australian Treasurer Tom Koutsantonis said he wanted an open conversation about potential tax changes.
“What I’m not prepared to do though is to turn up here and just skirt around the edges and have another photo opportunity,” Mr Koutsantonis said.
“Let’s talk turkey, let’s get some real results, let’s actually achieve something for the nation and for the states.
“Let’s, just for one day, put our partisan politics to the side and do what’s best for the federation and the country.”
West Australian Treasurer Mike Nahan said the GST had to be the meeting’s focus, saying WA was comfortable with a 12.5 per cent GST that applied to more goods and services.
“The major focus has to be GST because that’s the efficient indirect tax and without increasing that you can’t get rid of inefficient indirect taxes,” Dr Nahan said, but warned the carve up must also be improved for his state.
“We’re not going to tolerate an increase in GST that distributes 70 per cent of GST collections from Western Australia to other states, that’s the bottom line.”