Is a GST increase on the cards?

The possibility of lifting the GST rate was raised in the most unlikely of places on Monday – the Victorian premier’s press conference to provide the latest COVID-19 update.

It has become somewhat of a joke among those who regularly watch the premier’s press conferences that some of the questions journalists ask are being directly provided from federal politicians in Canberra, but Premier Daniel Andrews made it official when he was asked about the possibility of a GST increase.

Channel Seven journalist Laurel Irving asked whether Premier Andrews would consider giving up payroll tax in return for an increase in the GST.

He responded: “I wonder who in Canberra asked you to ask this question, Laurel! Interesting.”

Talk about the possibility of raising the GST, or reforming the GST system to get the economy growing again in the wake of the damage caused by the pandemic, raised its head in July, when independent firm PriceWaterhouseCoopers (PwC) released a discussion paper on the topic.

Australia’s current rate of GST is 10 per cent, which is well below the OECD average of 19 per cent.

The PwC analysis showed that lifting GST to 12.5 per cent and extending it to include fresh food, education and health would generate $40 billion a year.

When asked about the possibility of increasing the rate back in July, Prime Minister Scott Morrison avoided giving a definitive response, while treasurer Josh Frydenberg said the government’s “focus had been on cutting taxes, recognising that tax reform was one of the key areas that we need to drive forward on”.

Premier Andrews said there might be an opportunity for tax reform but said that the conversation needed to go deeper than “just jacking up taxes”.

“I’m not aware of a proposal,” Mr Andrews said. “If one came forward, we would look at it.

“Tax reform and just jacking up taxes are two very different things.

“It is easy for people in Canberra just to sort of point a finger at the states and say why don’t you abolish a whole lot of these things,” he said.

“Payroll tax supports the provision of police, nurses, teachers and all sorts of different things. It is a significant percentage of our revenue base.”

Mr Andrews also attacked the way that the GST was currently distributed among the states, suggesting it was unfair.

“We don’t get 100 cents in the dollar that Victorians pay in the goods and services tax, we get, through a convoluted and, we think, unfair formula, we get a percentage of that,” he said.

Any time GST increases are discussed, there is also the issue that it hurts those on fixed incomes, including retirees, hardest.

While some models for GST increases look at increasing welfare payments to adjust for these changing circumstances, this also creates further problems.

“I gave a speech, I think at CEDA some time ago, where I talked about the notion that increases in the GST can be very problematic in that by the time you compensate everybody for the fact they’re worse off, there isn’t much left,” Mr Andrews said.

Do you think the federal government will use the COVID crisis to try and push through a GST increase? Would you support a GST increase? Would you support a GST increase if it were accompanied by an increase to the Age Pension?

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Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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