GST hike to hit poor hard and leave rich unscathed, research shows

Date
    November 4, 2015
    Canberra Times

Malcolm Turnbull's task of convincing wary state governments and Senate crossbenchers to back a GST increase has been made more difficult by new research showing it would have a severe impact on the least well-off but leave wealthier households unscathed.

Lifting the GST to 15 per cent would hit low-income households hard but its negative effects would go almost unnoticed by those at the top end of society, new modelling of the proposed changes has revealed.   


Cassandra Goldie of ACOSS says increasing the GST should not be a starting point for tax reform.

The alternative idea of retaining the 10 per cent rate while broadening its base would be almost as regressive.

And offsetting the tax hike with lower marginal income tax would only make the disparity between rich and poor worse.

The analysis by the respected National Centre for Social and Economic Modelling shows the current 10 per cent GST consumes 13.4 per cent of disposable income for those in the bottom fifth of households, but that would rise to more than 20 per cent if the rate were lifted to 15 per cent, as is favoured by some within the Coalition government.

Households in the top 20 per cent, though, would experience a much milder impact, increasing from a mere 5.9 per cent of disposable income to 8.8 per cent.

Even just broadening the base to include fresh food, water and sewerage, health, and education would hit the poorest hardest, with the 13.4 per cent of disposable income jumping to nearly 18 per cent compared to a rise for the wealthiest from 5.9 per cent to 7.6 per cent.   

The figures go a long way to explaining Labor's trenchant opposition to any GST increase and suggest that any compensation built in to ensure the poorest are left "no worse off" - as the Prime Minister has pledged - will require an enormous "churn".

But the Prime Minister's difficult policy challenge is not without its Labor backers. Three former Labor premiers, Kristina Keneally (NSW), Peter Beattie (Qld), and Geoff Gallop (WA) have told Fairfax Media they would support an increase to the GST subject to certain conditions including compensation for low-income earners, federation reform, and additional money for health and education.

While Mr Turnbull has determinedly kept all taxation options on the table while a white paper is being prepared, he is aware of the likely scare campaign coming his way if lifting the GST is part of the mix.

Girding for that fight, Mr Turnbull has repeatedly stressed that changes proposed would be built around the core Australian principle of fairness.

"Any changes to the tax system have got to be ones that ensure that there is no disadvantage to the most vulnerable Australians, to less well-off Australians," Mr Turnbull said this week.

"We are a very fair society in Australia and it is important that our tax system reflects that."

Cassandra Goldie from the Australian Council of Social Service, which commissioned the modelling, said ACOSS is not opposed to an increase in the GST but it should not be a "starting point" for tax reform given that it would hit low- and middle-income earners the hardest.

While some Labor figures back a higher GST in theory, federally the Opposition is preparing a major anti-GST campaign and is likely to revive the words of the Tony Abbott in relation to the carbon tax, arguing an expanded or increased consumption tax would be profoundly damaging to household budgets, hit spending confidence, and ultimately would be a "great big new tax on everything".

The modelling also shows if the GST was lifted to 15 per cent, and the extra revenue generated was used to fund a cut in personal income tax rates by 5 per cent, the overall progressivity of the tax system would be reduced much more than if the GST was raised alone.

In that scenario, the lowest 60 per cent of households would be worse off and the top 40 per cent would gain at their expense.   

The lowest 20 per cent of households would lose $33 a week (worth 6.6 per cent of income) on average while the top 20 per cent would gain $69 a week (worth 2.1 per cent of income).

Dr Goldie said raising the GST to 15 per cent to fund personal income tax cuts would do nothing to ease pressure on state health, education and welfare budgets.   

"If it's not about raising more revenue, the government has to justify why this option is being considered at all," she said.

The identical topic to this.


http://www.ozpolitic.com/forum/YaBB.pl?num=1446670021

Wider GST could make people sicker.   

Date
    November 3, 2015
    Sydney Morning Herald

Increasing the GST to 15 per cent and extending it to health services and fresh food would slug Australians $15 billion a year and could drive people to eat more junk food, Labor warns.   

Opposition health spokeswoman Catherine King says raising and extending the consumption tax to fresh food would deliver a "disastrous blow" of more than $9 billion a year.   

A 15 per cent GST charge on health would cost sick Australians more than $5 billion a year, she says.

The calculations are based on Treasury figures that show the government would have gained an added $3.5 billion in revenue in 2014-15 if the existing 10 per cent GST had been applied to health.

"With around one million Australians already living with diabetes, a $9.6 billion-a-year hit on healthier foods would make junk food even more attractive, worsening health outcomes and adding to health costs," Ms King said.

It comes after the Parliamentary Budget Office, at the request of Nationals MP David Gillespie, found raising the GST to 15 per cent and extending it to more goods and services would generate an extra $65.6 billion, for a total take of more than $130 billion, in 2017-18.

Treasurer Scott Morrison has not specifically backed calls for the New Zealand-style GST but says everything is on the table.

The Australian Medical Association has called on Prime Minister Malcolm Turnbull to rule out extending the GST to health services, saying it would penalise the country's poorest and sickest.   

The Rural Doctors Association of Australia has warned the move would encourage rural and remote patients to delay visits to the doctor and present at hospital emergency departments instead, placing a bigger burden on the health budget.

Health care must remain GST free, Tasmanian rural doctors warn
By Jane Ryan
ABC News
Posted Wed


Tasmanian doctors are calling on the Federal Government to rule out introducing tax on healthcare services if the GST is broadened.

On a state level, both major parties and the Greens have also voiced their opposition to any change that would see health services taxed.

Treasurer Scott Morrison said this week health was originally excluded from the GST for "very practical reasons" and "those practical issues remain as challenging as they were back then".

Tasmanian GP and immediate past president of the Rural Doctors Association of Australia (RDAA) Dennis Pashen said taxing health services would make it even harder for vulnerable people to afford care.   

"Pre-emptively we're saying to the Government, 'Reconsider the GST if you have to, but for Pete's sake leave health care out of the GST," he said.   

Dr Pashen said people in rural areas died younger and were sicker than people in metropolitan areas.

He said one-third of Tasmanians lived rurally and struggled to access services.

"There's significant barriers to access to care," he said.

"There's a downturn in the rural sector in Tasmania, with losses in forestry, mining and agricultural industry in Tasmania that have social impacts," he said.

"So anything that pushes up the cost of health care within a rural area will impact on access to care."   

He said if access to health care became more expensive, people would not seek primary intervention and they would get sicker and the cost of treating them would rise.

"It does impact downstream by causing more complications of chronic disease, more hospital admissions with more severe levels of illness," he said.

Baronvonrort wrote on Nov 5^th, 2015 at 8:53am:



and getting far more than that back in tax cuts 

Libs consider the GST hike precisely because the rich are unscathed but still perceived to be doing something.

mariacostel wrote on Nov 5^th, 2015 at 9:32am:


So you claim.

mariacostel wrote on Nov 5^th, 2015 at 10:00am:


I wasn't into politics at the time, so I didn't pay it much attention.

The point remains the GST absolutely does impact people with more disposable income less. It's unavoidable. Unless you have alternative modelling?

Reducing income tax and increasing GST is moving from progressive tax to a less progressive tax. If you have to compensate people, it means the tax isn't fair.