A major review has called for a lift in the GST rate or a broader base, 20 years on from the introduction of the consumption tax.
A six-person panel led by businessman David Thodey released a draft report of its review into federal financial relations on Wednesday.
The review was commissioned by NSW Treasurer Dominic Perrottet in 2019 but is expected to be influential as state and federal governments consider tax reform and other ways to improve the federation amid the coronavirus pandemic.
The GST rate has stayed at ten per cent, but the share of household spending subject to GST has fallen from 60.8 per cent in 2001-02 to 55.4 per cent in 2018-19.
NSW Treasurer Dominic Perrottet speaks to the media during a press conference in Sydney
The review recommends state treasuries work on projections of national GST revenues and, in consultation with the Commonwealth, ‘assess and agree options for lifting the GST rate and/or expanding the base over the medium to longer-term’.
Some of the revenue gained from changes should go to lower-income households to maintain equity.
And, at the same time as the GST changes, inefficient state taxes should be reduced.
‘We want taxes that are lower, fairer, smarter and fit for purpose in the 21st century,’ Mr Perrottet said.
‘It’s very fitting that on the 20th anniversary of the introduction of the GST, we have the opportunity to consider what course we chart to revitalise our economy and deliver prosperity for the next generation.’
The review also calls for the replacement of stamp duty with broad-based land tax, as has occurred in the ACT, as well as a national approach to payroll tax reform.
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With the national cabinet, which was temporarily formed to deal with the COVID-19 outbreak, about to become a long-term feature of federal-state relations, the report suggests it be set up as an independent body with its own staff.
The more than 100 Commonwealth funding agreements currently in place should be reviewed to make them perform better.
‘Our federation has served the nation well and, properly calibrated, can remain one of the most economically efficient forms of national government,’ Mr Thodey said.
‘However, we have also found clear areas where it can – and must – be improved for our long-term prosperity.’