Two years ago I did a series of posts on possible options for tax reform. There was quite a deal of debate around the country in the lead up to the 2006 Budget about ways we could improve the fairness and efficiency of our tax system – all of which basically went nowhere. The major parties instead shrunk the issue down into the usual pre-election tax cut auction.
It was a promising sign that the weekend’s 2020 summit appeared to reignite the possibility of comprehensively reviewing our entire tax system. However, not long after the Prime Minister said he supported a ‘root and branch’ examination of the entire tax system, both he and the Coalition ruled out any increase to the GST beyond its current ten per cent level.
I know this just reflects the reality of politics and the way the media covers it, but it is still unfortunate that there is already a scramble to rule out various changes to the tax system before the examination of it even starts.
If I’d had my way, there wouldn’t be a GST at all, but now that it is a central part of our tax system, it rather defeats the purpose to have a ‘root and branch’ review of our tax system while ruling out a major aspect before the review even starts. Of course, the prospect of reducing the overall GST level to below 10 per cent should also be considered, as well as whether existing exemptions should be expanded or contracted.
The GST should be part of any tax review, along with all the other political ‘untouchables’ like negative gearing, captial gains tax exemptions, the special tax treatment for family trusts and all the existing tax deductions, offsets and credits.
I can understand having a starting point that any change should be considered within the context of an overall aim of not increasing the overall tax take, but ruling things out beyond that seems to be self-defeating.
Worth reading: Tim Colebatch from The Age outlines some the basic arguments and issues.