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Why our GST is Better Than Australia’s

GST reforms in Australia will boost economic growth and improve household income by billions of dollars,  according to new numbers out yesterday.

A CPA Australia released yesterday outlines how the abolition of a range of “inefficient” taxes would help  pave the way for a more prosperous Australian economy.

CPA Australia’s chief executive Alex Malley says the report suggests the “fear and misinformation” often associated with GST discussion is misplaced.

He says the report shows that in Australia, additional GST revenue can be used to abolish a number of “inefficient state taxes and also provide for personal income tax cuts and compensation for low income households, while also boosting economic growth.”

Australia has a GST rate of 10%, much lower than New Zealand’s 15%, and a world away from the OECD average of just over 19%.

The report says that, if GST were increased to 15% (keeping current tax exemptions), the additional GST revenue generated in the first year of reform would be $26 billion.

If the tax revenue were used to remove “inefficient taxes” such as insurance taxes, motor vehicle stamp duty and conveyancing duty, the average Australian household would be better off by $92.20 a year and the country’s GDP would increase by $3.1 billion by 2030.

If GST were boosted to 15% and applied to health, education and all food, the additional revenue generated would be almost $43 billion and with the removal of “inefficient taxes,” would boost Australia’s GDP by an impressive $27.5 billion by 2030.

Chartered accounting firm Staples Rodway taxation services director Andrew Dickeson says the CPA report helps shine a light on how good New Zealand’s GST system is.

“For a New Zealander looking at the fact that Australia is thinking about making some [GST] changes, it actually shows what good shape our own tax system is in.”

He says the report helps to underline why New Zealand should “avoid the left leaning parties playing around with GST and trying to introduce a whole lot of exemptions.”

In the 2014 election, Labour proposed having the first $5000 of earnings tax free, as well as removing GST from fresh fruit and vegetables.

Mr Dickeson says this sort of bureaucratic red tape is confusing and creates additional compliance issues, leading to an “unworkable nightmare.”

He says in New Zealand, there is a broad regime where there is GST on everything with only few exceptions.

“In Australia they have all sorts of exemptions on healthcare and food; it just becomes a bit of a nightmare.”

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