‘Our tax system is broken': Economist defends proposal to raise GST to 15 per cent
Ahead of Labor's Economic Reform Roundtable next week, UNSW economist Professor Richard Holden and WA Teal MP Kate Chaney have floated a radical plan to overhaul Australia's tax system — by raising the rate of the goods and services tax (GST) for the first time since it was introduced at the turn of the century.
Under the proposal — which has already been ruled out by Prime Minister Anthony Albanese — the GST would by raised from 10 per cent to 15 per cent and broadened to include fresh food, health, childcare and education.
To soften the blow, all taxpayers would receive a $3300 annual rebate, effectively removing the GST on the first $22,000 of someone's spending.
'I think there's no doubt that our tax system is broken and it's time for a bold change, but I want to give them something back in return,' Prof Holden told Nine's A Current Affair on Thursday night.
According to Parliamentary Budget Office costings, the plan would raise an additional $95.2 billion for the government in its first year of operation, minus the $3300 rebate to every adult.
Low and middle-income earners would be up to $371 better off, but the top 20 per cent of earners would be $2200 worse off.
That would leave the government with an additional $24 billion a year.
'The Parliamentary Budget Office has gone through that and they say that on average the bottom 60 per cent of income earners would be better off,' Prof Holden said.
He argued the overhaul would give the government room to cut Australia's income tax rates, which are among the highest in the world.
'What this would do after the compensation is leave you with enough money to cut the top marginal tax rate from 45 per cent to 40 per cent, [and] the second marginal tax rate from 37 per cent to 32.5 per cent,' he said.
Ms Chaney denied the $3300 rebate was a 'bribe'.
'No, it's simply returning the GST on the first $22,000,' she told the program.
'What we're saying is we need more tax, paid by people who can afford to spend more. We have one of the lowest GST in OECD countries, about half the average, so by bringing the GST more in line with other countries we will actually be able to have personal income tax cuts and fix the budget.'
She conceded a 5 per cent increase to the GST would 'probably' cause a 'one-off shift' in inflation.
While Mr Albanese ruled out the proposal, Ms Chaney said she hoped it 'starts a conversation' ahead of the next election.
'It's politically really scary for people to talk about tax and I understand that, but if someone doesn't start it then we're never going to make any progress at all,' she said.
Host Ally Langdon pressed Ms Chaney on why more could not be done to cut wasteful government spending instead of raising taxes.
'I would like it if the budget actually matched up each year,' Ms Chaney said.
'The reality is we've got an ageing population which means more health costs, more aged care costs, we have an NDIS, we want to support people with disabilities. People do expect a lot from government services.'
Speaking to ABC Radio Melbourne on Thursday, Labor MP Andrew Leigh said while he liked Prof Holden, the government had no plans to touch the GST.
'The Prime Minister and the Treasurer have a longstanding view on the on the GST,' he said.
'The government isn't doing any modelling at the moment and doesn't have any plans to change the GST.'
Dr Leigh argued there were 'more efficient taxes than the GST'.
'It hasn't been at the centre of the conversation around productivity,' he said.
'There was certainly more discussion around corporate tax, and that's been a matter that has occupied much more discussion from the Productivity Commission for example, which has thought more about investment allowances and company taxes than it has about expenditure taxes.'
Asked whether he supported Ms Chaney's proposal, Mr Albanese on Thursday replied, 'Governments make government policy … the only tax policy that we're implementing, is the one that we took to the election.'
That includes Labor's legislated $5-a-week tax cuts which would grow to $10-a-week in the 2027-28 financial year, and the push to double taxes on superannuation accounts over $3 million to 30 per cent.
Mr Albanese noted there would be a 'range of ideas floated' ahead of the Economic Reform Roundtable set to take place from August 19 to 21, adding that people are 'entitled to put forward their views'.
Despite this, the PM has rejected increases to consumption taxes, like GST, stating they were 'regressive in nature'.
On Sunday, the Australian Council of Trade Unions (ACTU) unveiled its own proposal, calling for cuts to negative gearing and capital gains tax concessions for property investors to be limited to just one property, following a five-year grandfathering period.
Asked about the ACTU plan on Wednesday, Treasurer Jim Chalmers noted the government's longstanding promise to not adjust negative gearing and capital gains tax concessions, but said he didn't want to 'get in the habit of knocking off ideas before we get in the room'.
'The guidelines I've put around people's contribution is to make sure that there's specific ideas, that they're affordable, that they're in the national interest and people try and engage with each other and not just the government on them,' he said.
'Some people have embraced that challenge, others haven't. I've tried not to kind of engage in a daily running commentary on every idea that's pitched up.'
Meanwhile, the Australian Council of Social Services (ACOSS), in its submission to the roundtable, has called for reform to the tax system to raise more revenue, reduce inequality and drive action to address climate change.
'For too long now, people with plenty have been showered with tax breaks that pull investment away from productive purposes and rob essential public services of the revenue they need,' Dr Goldie said.
The council is advocating for changes to employment opportunities and streamlining income support.
'The extra revenue we need to fund care and community services, schools, and an income support system that protects people from poverty must come from those with the most capacity to pay — not those doing it toughest,' ACOSS chief executive Cassandra Goldie said.
'We must better prepare and train people for jobs and finally lift income support to levels that don't trap people in poverty and destitution.'
Opposition leader Sussan Ley on Thursday accused the government of using the roundtable to push tax hikes under the guise of productivity reform.
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Defence, economic partnerships and security will be on the agenda for Prime Minister Anthony Albanese when he meets his New Zealand counterpart. Mr Albanese will spend the weekend in Queenstown for the annual Australia-New Zealand leaders meeting with Prime Minister Christopher Luxon. It will be the second time across the Tasman for Mr Albanese, who last visited in 2023 to meet with then-Labour prime minister Chris Hipkins. Mr Albanese and Mr Luxon represent opposite ends of the political spectrum, but both have affirmed their nations share a "deep and enduring bond" as friends, neighbours and allies. "I look forward to discussing how we can work together to build on our single economic market, modernise the rules-based trading system, deepen our alliance, and back our Pacific partners," Mr Albanese said. The single economic market was established in 2009 to grow trade and deepen investment links between the two countries, making it easier for trans-Tasman business. Two-way trade between the two countries is worth $32 billion. Co-operation between the two governments is broad, with more than half of the New Zealand cabinet visiting Australia since Mr Luxon's government took office in late 2023. The "complicated" relationship between opportunities and challenges posed by China was likely to be a focus of talks behind the scenes, Victoria University of Wellington's New Zealand Contemporary China Research Centre director Jason Young said. "Both prime ministers have recently visited China," the professor told AAP. "They had, at least, public-facing, very good visits to stabilise and manage the economic relationship. But at the same time, there's a bunch of particularly regional security issues which have an impact on both countries." The pair could also discuss the impact of the US President Donald Trump's tariffs. While Mr Trump raised tariffs against dozens of nations, he showed mercy on Australia and kept levies against most products at 10 per cent. But New Zealand was not spared and was hit with a 15 per cent "reciprocal" tariff. At the most recent leaders' meeting in Canberra in 2024, Mr Albanese and Mr Luxon discussed migration and creating a closer defence partnership. David Capie, another professor from Victoria University of Wellington, said the Luxon government had leaned into its partnership with Australia since coming to power. "You've got a New Zealand government that wants to do more with Australia," the NZ foreign and defence policy expert told AAP. "The upending of the economic order with the Trump tariffs, the Middle East - all of those things NZ and Australia are finding that they're very closely aligned." Yet deportation remains a point of friction, as New Zealand has long protested Australia's practice of deporting criminals with Kiwi passports but with stronger ties to Australia. After the 2024 meeting, the two leaders agreed to "engage closely" on the matter. Prof Capie said the issue hadn't faded away completely but was being more delicately handled compared to the Morrison government era. "You had a lot of deportations and a government that was basically basking in it," he said. "But more importantly, the structural changes to the rights of New Zealanders to be able to find a pathway to citizenship mean that there are going to be fewer and fewer over time." Mr Albanese is expected to be welcomed in a pōwhiri, a formal Māori welcoming ceremony, before he meets with Mr Luxon on Saturday. He will also meet with Australian and New Zealand business leaders and take part in a business roundtable. Defence, economic partnerships and security will be on the agenda for Prime Minister Anthony Albanese when he meets his New Zealand counterpart. Mr Albanese will spend the weekend in Queenstown for the annual Australia-New Zealand leaders meeting with Prime Minister Christopher Luxon. It will be the second time across the Tasman for Mr Albanese, who last visited in 2023 to meet with then-Labour prime minister Chris Hipkins. Mr Albanese and Mr Luxon represent opposite ends of the political spectrum, but both have affirmed their nations share a "deep and enduring bond" as friends, neighbours and allies. "I look forward to discussing how we can work together to build on our single economic market, modernise the rules-based trading system, deepen our alliance, and back our Pacific partners," Mr Albanese said. The single economic market was established in 2009 to grow trade and deepen investment links between the two countries, making it easier for trans-Tasman business. Two-way trade between the two countries is worth $32 billion. Co-operation between the two governments is broad, with more than half of the New Zealand cabinet visiting Australia since Mr Luxon's government took office in late 2023. The "complicated" relationship between opportunities and challenges posed by China was likely to be a focus of talks behind the scenes, Victoria University of Wellington's New Zealand Contemporary China Research Centre director Jason Young said. "Both prime ministers have recently visited China," the professor told AAP. "They had, at least, public-facing, very good visits to stabilise and manage the economic relationship. But at the same time, there's a bunch of particularly regional security issues which have an impact on both countries." The pair could also discuss the impact of the US President Donald Trump's tariffs. While Mr Trump raised tariffs against dozens of nations, he showed mercy on Australia and kept levies against most products at 10 per cent. But New Zealand was not spared and was hit with a 15 per cent "reciprocal" tariff. At the most recent leaders' meeting in Canberra in 2024, Mr Albanese and Mr Luxon discussed migration and creating a closer defence partnership. David Capie, another professor from Victoria University of Wellington, said the Luxon government had leaned into its partnership with Australia since coming to power. "You've got a New Zealand government that wants to do more with Australia," the NZ foreign and defence policy expert told AAP. "The upending of the economic order with the Trump tariffs, the Middle East - all of those things NZ and Australia are finding that they're very closely aligned." Yet deportation remains a point of friction, as New Zealand has long protested Australia's practice of deporting criminals with Kiwi passports but with stronger ties to Australia. After the 2024 meeting, the two leaders agreed to "engage closely" on the matter. Prof Capie said the issue hadn't faded away completely but was being more delicately handled compared to the Morrison government era. "You had a lot of deportations and a government that was basically basking in it," he said. "But more importantly, the structural changes to the rights of New Zealanders to be able to find a pathway to citizenship mean that there are going to be fewer and fewer over time." Mr Albanese is expected to be welcomed in a pōwhiri, a formal Māori welcoming ceremony, before he meets with Mr Luxon on Saturday. He will also meet with Australian and New Zealand business leaders and take part in a business roundtable.
