GST increase would hit households already under pressure

A recent proposal examining the need to increase the Goods and Services Tax (GST) by the Grattan Institute has been criticised by the St Vincent de Paul Society and is urging the federal government to reject the call warning it would place an unfair burden on people already struggling through Australia’s escalating cost-of-living crisis. The Grattan Institute’s new Budget reboot: How to fund Australia’s future report argues for a higher and broader GST as part of wider tax reform. In the report the authors argue that Australia needs what they refer to as a big-bang tax reform package that will reduce income taxes and increase GST as well as boosting welfare payments. According to the report Australia’s current tax system can’t meet the emerging fiscal challenges such as an aging population and more frequent and severe natural disasters. However, St Vincent de Paul Society National President Mark Gaetani said increasing the GST would be a regressive measure because it would take a greater share of income from low-income households than from those on higher incomes. “An increase to the GST is the last thing everyday households can afford. It would push up the cost of essentials at exactly the moment people experiencing hardship are telling the St Vincent de Paul Society they have reached their limit,” Mr Gaetani said. Recent analysis by Associate Professor Ben Phillips from the Australian National University, has found that increases to the GST would have a regressive impact, particularly when assessed against disposable income, and disproportionately affect lower-income households. According to the St Vincent de Paul Society the GST accounts for 5.4 per cent of disposable income for low-income households, compared with 2.6 per cent for high-income households. Raising the GST to 15 per cent would increase this to 8 per cent for low-income households and 4 per cent for high-income households. CPI indexation of welfare payments would reduce some of the impact for lower-income groups but would not fully offset losses. Middle-income households, which are less likely to receive compensation, could experience relatively greater financial strain. “Tax reform should make Australia fairer, not deepen the financial hardship facing people with the least capacity to absorb further price rises,” Mr Gaetani said. “Any proposal that raises the cost of everyday goods and services must be judged by its impact on people living on low and fixed incomes, including pensioners, jobseekers, single parents and lower-income workers. “Charities like the Society sees the consequences of inadequate incomes every day. “Demand for food relief, help with utility bills and emergency assistance increases every month, while housing costs continue to leave too many people with little or nothing after rent. “A fairer approach would ensure those with the greatest capacity to contribute do so, rather than relying on a consumption tax that falls hardest on households already doing it tough.” Mr Gaetani said Australia needs a responsible, sustainable conversation about revenue and public services, but it must begin with fairness and protect people experiencing poverty and disadvantage. “Reform cannot come at the expense of those people least able to pay. At a time when households are under extraordinary pressure, increasing the GST would move Australia in the wrong direction.”

GST increase would hit households already under pressure

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