Think tank: Abbott government would raise $6 billion
from GST on fresh food
The Abbott government
would raise an extra $6 billion a year if it extended
the GST to cover fresh food but Australia's farmers are
furious about the suggestion, warning it would have a
"negative impact" on farmers and poorer consumers.
The Grattan Institute, a think tank, estimates the
federal government would raise over $6 billion a year if
it applied the GST to fresh food, which is currently
exempt from the tax.
It comes after Country Liberal MP Dan Tehan said on
Monday that the Abbott government should begin the new
year "by broadening the GST" to cover exempted items
such as fresh food, health and education, saying the
move would deliver up to $21.6 billion in extra revenue
each year and enable further serious reductions in
direct taxes.
But the suggestion that fresh food be covered by the GST
has been slammed by the National Farmers' Federation
with its chief executive, Simon Talbot, saying big
retailers would only force the extra costs on to farmers
and consumers would start to eat less healthily as a
consequence. |
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"Increasing the cost of food could mean consumers demand
less fresh fruit, vegetables and protein, leading to a
decrease in overall sales and poorer health outcomes,"
Mr Talbot said on Monday.
"[And] the reality is
that the retailers aren't going to forgo profit. This
means that farmers are likely to be forced to absorb the
increase in costs."
But Jim Minifie, a Grattan
Institute program director, said he did not think
consumers would change their behaviour that much in
response to the GST being applied to fresh food.
"People do respond to prices and if some food items were
to increase in price by the amount of the GST then there
would be a subtle shift towards items that are already
taxed," Mr Minifie said.
"But that's probably
going to lead to a less-distorting tax ... and it's very
much a secondary issue because the response wouldn't be
that big," he said.
The Australian National
Retailers Association, which looks out for the interests
of the country's big supermarket chains, department
stores and specialty retailers, was not available for
comment.
Labor slammed the suggestion that the GST should be
broadened to include exempt items, saying it would be
another broken promise by the government.
"Senior Victorian Liberal Dan Tehan has loudly added his
support to slugging families with more GST at the
checkout but wants to go further – he wants to include a
GST on school education, university education,
healthcare and financial advice," Shadow Assistant
Treasurer Andrew Leigh said.
"The Abbott
Government went to the election pledging no changes to
the GST. Now it is letting one of its Committee Chairs
propose raising the cost of hospital bills, private
school fees and fresh food by 10 per cent," he said.
Australia's GST has a relatively narrow base. It applies
to only about 60 per cent of a comprehensive consumption
tax base, and Australia's "coverage ratio" is the
seventh-lowest of 32 OECD countries.
The Grattan
Institute says the government could collect far more
revenue if it extended the GST to cover basic food ($6
billion); health ($4.8 billion); education ($2.8
billion); water and sewerage ($0.9 billion); and child
care ($0.8 billion), based on 2012-13 budget figures.
Assistant Treasurer Josh Frydenberg on Monday tried to
hose down Mr Tehan's comments, saying the GST would be
part of the government's white paper on tax.
"But we have no plans to either increase the GST or
broaden its scope," he said.
"Dan [Tehan] is a valued member of the team, he's
entitled to his opinion but let's just see where the
discussion paper and the tax white paper goes. But we're
happy to have a comprehensive discussion about tax
reform in this country because it's long overdue."
The Food and Grocery Council looks after the processed
food industry, which us already subject to the GST.
Source:
Sydney Morning Herald , Australia, dated 05/01/2015
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