Australia’s top economists, including Ken Henry, Chris Richardson, Miranda Stewart, John Freebairn, and Richard Highfield, have all called for it to be broadened.
Mr Frydenberg told Fairfax Media “the GST is set and we have no plans to lift it”, but in 2015 praised a proposal by then NSW premier Mike Baird to consider raising the GST, warning Australia was losing out on one of the most efficient taxes while other countries were pushing ahead.
The GST is an considered an effective tax because it is hard to avoid and has a minimal impact on productivity because it does not discourage someone from earning more or a company from expanding.
“It has been especially pleasing to see NSW leading the debate on the need for state tax reform by way of a proposal to raise the GST rate to 15 per cent,” Mr Frydenberg said as assistant treasurer in 2015.
“The government and I are keen to have this conversation about the future of our tax system and the GST, and ultimately we, as a nation, have to determine the most appropriate reform for the specific economic challenges we face.”
That discussion was scuppered when the Turnbull government shelved its tax white paper in 2015. Three years later economists remain despondent that no further progress has been made and that the GST base continues to take hits from exemptions.
“In my view the GST is a very underperforming, underutilised form of tax,” said Richard Highfield, Australia’s former second tax commissioner and OECD tax administration chief.
The Tax and Transfer Policy Institute’s Miranda Stewart said the tax had been weakened by exemptions, including on toiletries such as condoms for men and since October, tampons for women.
“The GST is for the benefit of all,” said Professor Stewart. “It needs to be broadened and strengthened, not undermined.”
John Freebairn, who advised the Henry review a decade ago, said the NZ increase to 15 per cent with very few exemptions on any products showed how to implement the GST properly.
“Looking after poor people you don’t do it by excluding food, you do it by targeted increases in social security and a slightly more progressive income tax system,” he said.
PricewaterhouseCoopers partner Pete Calleja said a digitised tax system means that different items could be taxed at different rates, with essential items taxed at 5 per cent, while those considered luxuries are taxed at 15 per cent.
“You could get a very different yield by broadening the base,” he said.
One of the country’s most progressive think tanks, Per Capita, previously opposed any increase in the GST, but have left the door open to supporting a move to an NZ-style package with other benefits.
“I’m not saying absolutely no way could there ever be an increase in the GST – but in the absence of significant package of offsets we could not support it,” said Per Capita executive director Emma Dawson.
Former Treasury official Chris Richardson said Australia’s tax system was in crisis and needed an urgent reform agenda.
“We are having terrible conversations with ourselves. If you ask me what we can do? I say we pray,” the Deloitte Access economics partner said at the Melbourne Institute conference last week.
“I’ve tried across my career to fight very hard to leave Australia and the world a better place. It’s not clear that we’re going to move the dial that much. It will be about protecting what we already have,” he said.
Eryk Bagshaw is an economics reporter for the Sydney Morning Herald and The Age, based in Parliament House