Shadow treasurer Chris Bowen denies GST increase is inevitable

SHADOW treasurer Chris Bowen disagrees that an increase to the GST is inevitable.

Shadow treasurer Chris Bowen disagrees that an increase to the GST is inevitable.

SHADOW treasurer Chris Bowen disagrees that an increase to the GST is inevitable.

Former Treasury head Ken Henry, who led a tax review under the Rudd government, has warned Australia is facing an "imminent crisis" in its taxation system unless there is comprehensive reform.

He's adamant the GST will have to be increased, but says it's not a silver bullet and further reform is needed.

Commonwealth budget revenue was 26 per cent of gross domestic product (GDP) in 2000-01, but now it's down to 23 per cent.

Mr Bowen said the current tax to GDP ratio is about right.

He supports tax reform without increasing the GST.

"By its very nature it's regressive, and would impact on lower- and middle-income earners more, and if you use money to compensate for that, then you reduce the reason for doing it in the first place," he told ABC Radio on Thursday.

He defended the previous Labor governments' decisions to continue Howard government tax cuts.

Asked if the cuts were a mistake he said: "They were right for the times." The tax cuts were an important part of keeping up consumer spending during the global financial crisis.

But the Howard government tax cuts contributed to the return of the budget to structural deficit, Mr Bowen said.

Tax reform needed to look at small taxes that weren't raising much revenue and distorting taxes such as insurance taxes, which punish good behaviour.