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How you could pay a higher GST and get reimbursement if you are a low income earner

Australia’s GST can be increased and expanded to include fresh fruits and vegetables with a compensation package for the poor, as the corona virus affects government revenues.

Professional services giant PwC has assessed how the federal government could generate additional revenue to pay for programs designed to offset the effects of the COVID-19 lockdowns, including the $ 70 billion JobKeeper wage subsidy program.

PwC said this could be achieved by increasing the goods and services tax, which has remained at 10 percent since its introduction in July 2000.

Influential figures from the Liberal Party have called for an increase in the GST.

Professional service giant PwC has calculated how the federal government could generate additional revenue by either increasing the goods and services tax or broadening the base

Professional service giant PwC has calculated how the federal government could generate additional revenue by either increasing the goods and services tax or broadening the base

An increase to 12.5 percent would generate an additional $ 14.5 billion a year.

Formerly known as PricewaterhouseCoopers, PwC calculated that revenues would increase to $ 40 billion if the GST base were expanded to include fresh fruits and vegetables, education and childcare, which had been exempt for two decades.

Broadening the GST base but keeping the tax at ten percent would make an additional $ 20.7 billion.

PwC said any increase in GST or inclusion of essential items requires compensation for the poor.

“Broadening the GST base and / or raising the GST rate will have the most impact on low-income households, as more of their income is needed to pay for the increased GST,” PwC said.

“The crucial issue for the implementation of any reform of the Australian GST will be an accurate understanding of the impact on low-income incomes and designing robust compensation for it.”

The increase in consumption tax should also include compensation for people on low incomes, who already spend a greater portion of their income on the GST.  Depicted is a Sikh volunteer distributing vegetarian meals in Kensington, northwest Melbourne, after the housing committee flats were closed

The increase in consumption tax should also include compensation for people on low incomes, who already spend a greater portion of their income on the GST.  Depicted is a Sikh volunteer distributing vegetarian meals in Kensington, northwest Melbourne, after the housing committee flats were closed

The increase in consumption tax should also include compensation for people on low incomes, who already spend a greater portion of their income on the GST. Depicted is a Sikh volunteer distributing vegetarian meals in Kensington, northwest Melbourne, after the housing committee flats were closed

The PwC report also noted that Australia’s existing tax system was ill-equipped to deal with crises like COVID-19, which “led to an increase in government spending and a decrease in government revenues.”

GST rates worldwide

SINGAPORE: 7 percent

AUSTRALIA: 10 percent

NEW ZEALAND: 15 percent

CANADA: 5 percent federal GST plus provincial retail taxes from six to ten percent

UNITED KINGDON: 20 percent (value added tax)

PwC chief economist Jeremy Thorpe said Australia is one of the lowest GST rates in the developed world.

Australia’s GST collections have also not kept pace with the overall growth rate of the economy, in part because people are spending a greater proportion of their income on areas currently exempt, including housing, healthcare and education, he said.

“Our 10 percent GST rate is one of the lowest among developed economies, and would still be well below the OECD average of 19.3 percent at 12.5 percent.”

New Zealand, Australia’s closest neighbor, has a GST of 15 percent, rising from 12.5 percent in October 2010.

The UK has an even heavier value-added tax of 20 percent with food and children’s clothing exemptions, and the rate increases from 17.5 percent in January 2011.

Singapore has a much lower GST of seven percent.

Canada has a federal tax of five percent at the federal level plus provincial retail taxes that range from six percent to ten percent.

An increase to 12.5 percent would make $ 14.5 billion a year.  Formerly known as PricewaterhouseCoopers, PwC calculated that sales would increase to $ 40 billion if the GST base were broadened to include fresh fruits and vegetables, education and childcare

An increase to 12.5 percent would make $ 14.5 billion a year.  Formerly known as PricewaterhouseCoopers, PwC calculated that sales would increase to $ 40 billion if the GST base were broadened to include fresh fruits and vegetables, education and childcare

An increase to 12.5 percent would make $ 14.5 billion a year. Formerly known as PricewaterhouseCoopers, PwC calculated that sales would increase to $ 40 billion if the GST base were broadened to include fresh fruits and vegetables, education and childcare

The United States has no national sales tax, with states, cities, and counties charging their own taxes.

Foods that are GST-free

Bread and rolls without a sweet layer (such as frosting) or filling

Flour, sugar, premixes and cake mixes

Boiling oil

Milk, cream, cheese and eggs without taste

Spices, sauces and spices

Bottles of drinking water

Fruit or vegetable juice

Tea and coffee (unless ready to drink)

Baby food and infant food (for children under 12 months)

All meat, but no pet food

Fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)

Honey, jam and peanut butter

Breakfast cereals

Source: Australian tax office

Dominic Perrottet, treasurer of New South Wales, has called for the GST to be increased or broadened to allow states and territories to abolish inefficient payroll and property taxes.

Liberal Party federal president Nick Greiner, a former NSW prime minister, wants the GST broadened so that the states have more money.

The federal government collects and distributes the GST to the state and territories through the Commonwealth Grants Commission.

In 1999, the Australian Democrats led by Meg Lees only agreed to allow the Senate’s GST package to pass through the Senate as fresh food and a range of other items were exempt.

Labor was against the GST and campaigned in the 1998 elections, while the Australian Democrats were divided on the issue before conditionally supporting it – causing the party’s virtual collapse.

Mr. Thorpe said that even before the coronavirus pandemic, Australia’s tax system was not well equipped to support economic growth with GST collections in fiscal 2018-19 – the lowest since the tax was introduced two decades ago.

“In a well-structured reform package, expanding the GST should lead to higher economic growth,” he said.

Mr. Thorpe estimated that a revenue-neutral switch from lowering income tax and increasing GST in the long run would increase gross domestic product by one percent.

Since March, the federal government has spent $ 153.7 billion on three stimulus programs to fight the decline of the corona virus.  JobSeeker's unemployment benefit has also temporarily increased by $ 550 every two weeks, in addition to the usual $ 565.70 single rate, as part of a $ 66 billion program.  Pictured is a Centrelink queue at Norwood in Adelaide in April

Since March, the federal government has spent $ 153.7 billion on three stimulus programs to fight the decline of the corona virus.  JobSeeker's unemployment benefit has also temporarily increased by $ 550 every two weeks, in addition to the usual $ 565.70 single rate, as part of a $ 66 billion program.  Pictured is a Centrelink queue at Norwood in Adelaide in April

Since March, the federal government has spent $ 153.7 billion on three stimulus programs to fight the decline of the corona virus. JobSeeker’s unemployment benefit has also temporarily increased by $ 550 every two weeks, in addition to the usual $ 565.70 single rate, as part of a $ 66 billion program. Pictured is a Centrelink queue at Norwood in Adelaide in April

“The full effect on economic growth will depend heavily on how the GST reform is included as part of a reform package,” he said.

Since March, the federal government has spent $ 153.7 billion on three stimulus programs to fight the decline of the corona virus.

Most of that has gone to the $ 70 billion Job Keeper program, which funds $ 1,500 biweekly wage subsidies through the end of September.

JobSeeker’s unemployment benefit has also temporarily increased by $ 550 every two weeks, in addition to the usual $ 565.70 single rate, as part of a separate $ 66 billion program.

Westpac, Australia’s second largest bank, predicts a $ 230 billion deficit for 2020-21 that would be 11.7 percent of GDP – by far the highest since World War II.

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