Liberal Party leads push to raise or broaden the GST to pay for coronavirus pandemic costs

New push to increase the GST to 12.5 per cent to cover the cost of the pandemic – and the Liberal Party is leading the charge

  • Federal Liberal Party president Nick Greiner wants the GST base broadened out
  • New South Wales Treasurer Dominic Perrottet called for GST to be increased
  • The GST has been at 10 per cent since it debuted in Australia on July 1, 2000 
  • Fresh food like fruit and vegetables have also been exempt for past two decades
  • Some Liberal figures have called for the rate to be increased to 12.5 per cent 

The Liberal Party is leading the charge to raise and broaden the GST to cover the cost of the coronavirus pandemic. 

Since its debut in Australia 20 years ago this week, fruit and vegetables have been exempt from the ten per cent Goods and Services Tax.

Some Liberal figures want it increased to 12.5 per cent. 

The federal government is set to deliver the steepest budget deficits since World War II as coronavirus threatens to cause the sharpest downturn since the 1930s Great Depression. 

The Liberal Party is leading the charge to raise and broaden the GST to cover the cost of the coronavirus pandemic

Federal Liberal president Nick Greiner, a former New South Wales premier, wants the GST broadened so the commonwealth government can give more money to the states.

‘I do think personally that making the base wider is sensible if you want the GST to be the most significant source of state revenue,’ he told Sky News Australia.

‘Having a GST or a value added tax or a consumption tax that covers only 60 per cent and it doesn’t cover fresh food, health, education, the private spending on those, they’re the things that are growing.’

NSW Liberal Treasurer Dominic Perrottet has called for the GST to be raised beyond its existing ten per cent level so the states can, in exchange, abolish inefficient payroll and stamp duty taxes. 

‘GST is one of our most effective taxes, and it has a relatively low economic cost, but we definitely do not use it as much as many other nations,’ he told the National Press Club in Canberra on Wednesday.

Revenue from the federal government’s GST is distributed via the Commonwealth Grants Commission to the states and territories, which have all declined to levy income taxes.

Former Telstra chief executive David Thodey’s report for the NSW government into federal-state financial relations, released yesterday, called for the GST to be increased.

Since its debut in Australia 20 years ago this week, fruit and vegetables have been exempt from the Goods and Services Tax. Pictured is a Woolworth supermarket in Brisbane

Since its debut in Australia 20 years ago this week, fruit and vegetables have been exempt from the Goods and Services Tax. Pictured is a Woolworth supermarket in Brisbane

Mr Greiner said Australia would have less revenue to fund an economic recovery if the GST wasn’t increased.

Foods that are GST free

Bread and bread rolls without a sweet coating (such as icing) or filling

Flour, sugar, pre-mixes and cake mixes

Cooking oil

Unflavoured milk, cream, cheese and eggs

Spices, sauces and condiments

Bottled drinking water

Fruit or vegetable juice 

Tea and coffee (unless ready-to-drink)

Baby food and infant formula (for children under 12 months of age)

All meats but not pet food

Fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)

Honey, jam and peanut butter

Breakfast cereals

Source: Australian Taxation Office 

‘It’s harder for Australia to recover and increase its ongoing, long-term economic growth which is clearly the answer to fixing the jobs problem created by COVID,’ he said.

‘The cost of inaction is very great but it also kicks the problem downstream.’ 

In 1999, the Australian Democrats led by Meg Lees only agreed to pass then prime minister John Howard’s GST package through the Senate if fresh food was exempted.

Labor was opposed to the GST, campaigning against it at the 1998 election, while the Australian Democrats were divided over the issue – having no senators in federal Parliament within a decade.

Mr Greiner doubted Labor would support GST reform at a federal level.

‘I don’t think GST reform is very likely without a grand bargain between the centre left and the centre right and I don’t sense that’s about to happen,’ he said.

Prime Minister Scott Morrison, a Liberal MP from NSW, last year ruled out raising the GST following calls from West Australian Liberal senator Dean Smith to raise it from 10 per cent to 12.5 per cent.  

The only major change to the GST occurred on January 1 last year when the exemption was extended to tampons, the opposite of what Mr Greiner is broadly advocating in broadening the base.

Deloitte Access Economics is predicting a $143billion budget deficit for 2019-20, representing 7.3 per cent of gross domestic product – the largest since World War II.

The government has already spent $154billion on three stimulus packages and the Parliamentary Budget Office fears public debt by the end of the decade will be $620billion higher than forecast. 

Federal Liberal president Nick Greiner, a former New South Wales premier, wants the GST broadened so the commonwealth government can give more money to the states

Federal Liberal president Nick Greiner, a former New South Wales premier, wants the GST broadened so the commonwealth government can give more money to the states

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