Discussion of increasing the GST to a rate higher than 10 per cent is off the agenda at this week's tax summit. The likely reason is that because GST is the most visible of our taxes, any increase is likely to make the Government more unpopular.
On the surface, the GST appears unfair, as it is a regressive tax that hits the poor much harder than it does the wealthy. But that's due to the way it is implemented, and it doesn't need to be that way, according to the St Vincent de Paul Society, whose economics advisor John Wicks would like to see it doubled to 20 per cent.
Wicks advised Vinnies to support the GST in the lead up to the Howard Government's decision to introduce the tax on 1 July 2000. Vinnies' submission in 1999 pointed out that because such taxes are regressive, governments around the world have recognised that they must include compensation in order to minimise the hardship they will cause for people on lower incomes.
The crucial issue, the submission said, was 'the method and the degree of compensation that should be implemented'.
The compensation the Howard Government opted for was limited to an exemption on basic food. All other countries except Sweden incorporated a much more sophisticated and fairer compensation mechanism in their GST type tax. Wicks says the decision to opt for minimal compensation benefited the wealthy by $3 billion and cost the poor $2 billion, as the wealthy spend more on food.
Rather than an across the board exemption, he advocated a 'Get out of GST' card for food purchases. It would be given to those on lower incomes and include a limit to prevent misuse.
He also wanted the percentage of the tax to be on a sliding scale determined by the contribution of the particular good or service to the common good. This might see luxury items such as designer clothes taxed at 30 per cent and textbooks with very low or no GST.
John Wicks told Eureka Street last week that he has not changed his advice to Vinnies, and that the Society still supports a raising of the GST in conjunction with a fairer compensation mechanism, even though discussion of GST changes is taboo at this point.
Vinnies is not alone in its disquiet about Australia's unfair tax system. UnitingCare Australia’s National Director, Lin Hatfield Dodds, said last week that most Australians would be surprised