Broadening GST would raise more in a year than a debt tax in four

BROADENING the GST to health, education and fresh foods would raise more in one year than Tony Abbott’s mooted debt tax would in four.

BROADENING the GST would raise more in one year than the government’s mooted debt tax would raise in four.

As incomes rise, Australians are spending more on health and education services than ever before.

But because those services are excluded from the GST the tax — which raises about $50 billion — is contributing less revenue than anticipated.

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According to Deloitte Access Economics figures, applying the GST to health and education would raise $6 billion a year.

Broadening it to include fresh foods would raise another $6 billion — a combined $12 billion annual saving from closing loopholes in the GST base.

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By contrast, the government’s debt tax is expected to raise only $10 billion during the four years it is proposed to operate.

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Former Victorian Premier, Jeff Kennett, has urged Tony Abbott to break his promise on the GST to fix the budget.

“If you had the courage to extend it across the board, [it] would just about put an end to continuing deficits.”

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Economists widely agree that reform of the GST would be a better solution to Australia’s budget woes than increasing personal income taxes.

The Commission of Audit revealed savings worth $60 to $70 billion a year will be needed by 2023-24 to keep the budget in surplus by 1 per cent of GDP, as the Coalition has promises.

But the government is unlikely to adopt all the recommended saving — such as including the family home in the asset test for the age pension and capping paid parental leave at average wages.

Tax reform will be needed to plug any continuing budget hole.