Research released this week by the Grattan Institute shows that an extension of the GST to cover a broader range of goods, or an increase in the GST rate, would be beneficial to those receiving government payments including the Age Pension.
The modelling shows that extending the GST to cover a broader range of goods would raise $17 billion per annum, while increasing the GST rate to 15 per cent would generate $27 billion per annum in revenue. Both changes, on face value, hurt low-income households disproportionately.
The solution to this, proposed by the Grattan Institute, is to spend roughly 30 per cent of the raised revenue on increasing the base rate of all welfare payments including pensioners, family benefits and Newstart by five per cent. The modelling also ensures that most households earning up to $100,000 are compensated for at least 75 per cent of the cost of the higher GST.
This would see an increase in the GST to 15 per cent, raising $11 billion for the Turnbull Government after increased payments and tax tradeoffs for poorer households are taken into account.
"People in the bottom 20 per cent would actually be in a better position than they are today," said Grattan Institute Chief Executive John Daley. "They would have more money to spend and after accounting for the GST, they would be able to buy more with the income they have than they can today."
What do you think? Do you believe the modelling? If you were to trust the modelling, would the suggested changes to the GST have your approval?
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