Ross Gittins says – Shine comes off GST as a wonder revenue raiser

With the upcoming price on carbon pollution (erroneously called a “tax” by those waging a fear campaign) it is time to look at the GST, a tax that added 10% to the cost of almost everything that we bought. However people seem to love the GST because the outrage directed at the carbon not-tax was not there for the GST.

In this article from the Fairfax economist, Ross Gittins, Shine comes off GST as a wonder revenue raiser, he explains why the first few years of the GST were a financial bonanza, because spending was high and savings was low. Now, since the GFC (Global Financial Crisis), savings have risen and spending, especially on the taxable items have reduced.

Here is an extract from that piece:

Since health and education are superior goods (we spend an increasing proportion of our income on them as our incomes rise), and costs in both areas grow significantly faster than other consumer prices, we can expect this erosion of the GST tax base to keep rolling on.

And since we know from successive intergenerational reports that most of the pressure on federal and state budgets over the next 40 years will come from health spending, the lasting solution is staring us in the face: the GST’s tax base must be broadened at least to include private spending on education and health.
Source: Shine comes off GST as a wonder revenue raiser by Ross Gittins, 16 June 2012

So, what does this mean? It suggests that if savings go up, so does the chance of a rise in GST or an expansion of what items are GST-taxable.

And that, is how Tony Abbott will fill his $70 billion black hole.


2 Comments to “Ross Gittins says – Shine comes off GST as a wonder revenue raiser”

  1. Gittins is probably the most erudite and reasonable economics commentator around today. He tell is like it is without the scaremongering negativity garbage. Pity we also have the rest of the duds that we have to sift through. Still you only have to do it once I guess (the sifting that is).

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