CPA Australia calls for higher GST

Finance-iconCPA Australia says a higher rate of GST would boost the nation’s productivity and will take that position to the National Tax Forum

CPA Australia, which represents finance, accounting and business professionals, has released research that asserts a higher rate of GST would be good for Australia’s economy.

“Economic Analysis of the Impacts of Using GST to Reform Taxes”, authored by KPMG Econtech and downloadable here, analyses the impact of increasing the GST to 12.5, 15 and 20 per cent.

The document says that the GST is a “relatively efficient” tax, but notes that “Australia’s GST rate is amongst the lowest in all OECD countries, making it a potential candidate for reform.” (see table below)

Using the GST to drive reform, the document argues, is useful if it replaces other less efficient taxes.

Any increase in GST, it argues, will boost gross domestic product if accompanied by other tax reform.

“This is because the abolition of inefficient taxes leads to higher multi-factor productivity from improved allocative efficiency,” the document says. “Despite the increase in GST, which tends to discourage activity and output, the efficiency effect on output dominates, leading to an overall higher level of GDP.”

CPA Australia CEO Alex Malley said his organisation plans to table the research at the National Tax Forum.

“Our research helps demystify concerns that an increase in GST would hurt Australians. If the forum is to set us on the path to significant tax reform, then we must look at how we can eliminate many of the inefficient taxes Australian businesses face and this includes a serious discussion on the GST. This research raises some interesting points in how changes to the GST can bring about gains in productivity, GDP growth and bring about a boost in living standards,” he said.

“Significant tax reform is ultimately economic reform and if Australia is to successfully address the challenges of the current global economic environment, productivity gains must form the centrepiece and an efficient, world class tax system will be critical to achieving this. The issues covered in this research must be seriously examined if the Tax Forum is to deliver effective long-term economic gains and position Australia ideally for the challenges and opportunities this century presents. They will form a key part of CPA Australia’s presentation at the national tax forum.”

GST rates around the world

Nation

GST Rate

Canada

5

Japan

5

Switzerland

7.6

Australia

10

Korea

10

New Zealand

12.5

Luxembourg

15

Mexico

16

Spain

16

United Kingdom

17.5

Turkey

18

Chile

19

Germany

19

Greece

19

Netherlands

19

Slovak Republic

19

France

19.6

Austria

20

Czech Republic

20

Italy

20

Portugal

20

Belgium

21

Ireland

21

Finland

22

Poland

22

Denmark

25

Hungary

25

Norway

25

Sweden

25

Iceland

25.5

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