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RSM Bird Cameron says the current GST debate is too narrowly focused to produce any sustainable long-term increases in government revenue.
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RSM Bird Cameron dismisses reform talk
12 January 2015
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Kirsten Schirmer, principal of tax services at RSM Bird Cameron, said the recent debate around the broadening of the GST base to include either fresh food versus private health and private education “feels like introducing band-aids when major and painful surgery is required”.
According to Ms Schirmer, RSM's recent publication, Evolution of Tax, clearly shows that as a consumption tax regime matures, the proportion of consumption tax revenue as a percentage of total tax revenue increases significantly.
“This indicates that either the consumption tax base or the tax rate has gotten bigger or the revenue from all other taxes has suffered a significant decrease,” she said.
“This experience is being replicated in Australia and with the economy flagging and tax revenues falling.
“It is time that an informed and holistic policy debate takes place around our GST: is it to be an increase in rate or the base? What balance between equity and efficiency can and should we live with? What is the most effective way to properly compensate for the regressive effects of either increase?”
Ms Schirmer said the current debate appears too narrowly focused to produce sustainable long-term increases in GST revenues.
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“Anything less than a wholesale yet enlightened change across the board, such as tweaks around the edges to what is GST-free, will just go to introduce further inefficiencies and complexities into a regime that already splits too many hairs and ultimately puts off the inevitable tough decisions,” Ms Schirmer said.
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