Hike GST, slash income tax to boost productivity, AMP's Shane Oliver says after Jim Chalmers' economic reform address
Treasurer Jim Chalmers has been urged to hike GST and slash income tax to bolster productivity, as the re-elected Albanese government looks to drive economic reform in its second term.
Mr Chalmers vowed to boost productivity, deliver meaningful tax reform and improve the budget during an address to the National Press Club on Wednesday.
The Treasurer failed to mention GST during his speech, but faced questioning about possible changes to the tax ahead of Labor's productivity roundtable - where Australia's economic agenda will come under the microscope.
'I suspect the states will have a view about the GST. It's not a view I've been attracted to historically, but I'm going to try not to get in the process of shooting ideas between now and the round table,' Mr Chalmers said.
AMP's chief economist Shane Oliver urged Labor to hike the GST and apply it across the board to minimise income tax.
'In an ideal world you would have less reliance on income tax and reduce the disincentive effects associated with it and have more reliance on GST,' Mr Oliver told SkyNews.com.au.
'The GST is a good tax. Economists like it because it's neutral.
'It's seen as a fairly efficient tax because if you're taxing all goods and services at the same rate it doesn't distort people's economic decisions.
'In theory, if we increase the reliance on an efficient neutral tax like GST and reduce the reliance of a distorting income tax which impacts incentive then we should be able to increase productivity in the economy.'
He pointed to the economic policies of some of Australia's allies as inspiration for how the nation could limit income tax.
'Maybe the GST should be 20 per cent and apply to all goods and services like it does in Europe,' Mr Oliver said.
'That would fund a huge reduction in income tax. You'd be able to push out the tax thresholds by at least $10,000, or probably $20,000, and substantially lower the top tax rate down to 30-35 per cent.'
CPA Australia's chief executive Chris Freeland also urged for reform from the Treasurer as the tax system remains 'overly reliant on personal and company income tax'.
'We welcome that the Treasurer was careful not to rule in or rule out any changes at this stage,' Mr Freeland said.
'That must also include examining and fixing the GST and federal-state arrangements.
'Australians deserve a mature and honest conversation about the trade-offs required to fund the services and resources they expect.'
CreditorWatch's chief economist Ivan Calhoun said the Treasurer expressing a more open attitude towards GST than he, or his predecessors, had in the past was positive.
'He actually used that three letter GST acronym which has just been off the agenda for any political party,' Mr Calhoun told Sky News' Business Now.
'He's certainly looking broadly and trying to look at what are the themes and the policies that need to be addressed for the long term and that's a very positive development.'
Mr Chalmers also touched on Labor's plan to double the tax rate above $3m in super accounts and hit unrealised gains during his appearance at the National Press Club.
While the Treasurer was steadfast Labor would continue with its plans to legislate the super tax, it has faced backlash from many business leaders, including Wilson Asset Management founder Geoff Wilson.
He told SkyNews.com.au taxing unrealised gains, alongside the overreliance on tax from companies and personal incomes, was disadvantaging younger Australians.
"Whilst the average OECD country gets 34 per cent of its tax revenue from companies and income tax, Australia is 62 per cent and the highest in OECD," Mr Wilson said.
"This is a disincentive for young people to be productive and a disincentive for companies to invest.
"To make matters worse the impending taxation of unrealised gains will only make Australia increasingly uncompetitive.
"Any taxation reform must unwind the proposed taxation of unrealised gains. We are already over taxed and our modelling estimates the negative impact of this tax will be a $94.5 billion deadweight loss to the Australian economy."
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