Increasing GST on food, education and medical will boost revenue

The new Goods and Services Tax rules suggested to be applied on foods will leave Australians paying around $7 billion extra for basic food products annually.

A document released by the Parliamentary Budget Office showed states and territories will face a shortfall of up to $50 billion by 2030. The PBO analysis has indicated that forcing cuts on GST exemptions would increase the revenue to at least $21 billion per year from 2017 to 2018.

If GST is applied to basic foods, the annual revenue will rise to $7.2 billion in 2017-18, while hiking the same for medicare levy will generate $6.4 billion of revenue. Increasing GST in the education sector will help government collect $4.9 billion, whereas the child care sphere will supplement $1.6 billion to the revenue generated. In addition, water and sewerage would increase the revenue to $1.1 billion.

The PBO believed that allowing compensation would depend upon what the government decides. In case GST compensations were allowed, it would mean major extra revenue portions would be returned to those with low income issues.

“In the absence of compensation arrangements targeting lower income households, each of the scenarios analysed would have a greater relative impact on lower income earners,” the PBO report stated.

The PBO has considered a range of changes in GST rules, including removal of free status to foods by applying a 15 percent tax to a broader base. The changes, as estimated by the office, would lead to a significant hike in revenue between $7.2 billion and $65.8 billion in 2017-18 prior to allowing compensations to 40 percent of households with lower income.

This was the second leak of documents in the past few days, including the one relating to new suggested amendments to GST proposed by Treasurer Scott Morrison on recommendations of the states and territories. A COAG meeting will be held on Friday in which Prime Minister Malcolm Turnbull and premiers and chief ministers of states will meet and discuss the propositions.

According to a recent national health survey conducted by the Australian Bureau of Statistics, obesity and other health issues are rising because of intake of junk food that have less nutritional value. Increase of GST on fruits, vegetable and other healthy food items might increase the health issues, leading to a severe negative impact of the policy on Australians.

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