"There needs to be more grunt to the argument
being made than just putting the hand out and saying it
should come to us first," Mr Tehan said.
"Just calling for their share of a rate increase,
I think, lacks intellectual rigour."
PROPOSALS
Treasury is actively working on developing a number of
proposals to extend the GST to financial services after
South Australian Premier Jay Weatherill raised the issue
in September.
According to Parliamentary Budget Office figures, the
current rate of GST would raise $18 billion over the
next four years, and $4.8 billion in 2016-17 alone.
Based on a GST of 15 per cent, that figure could be
closer to $27 billion, but government sources cautioned
this was likely to be an "upper limit".
Financial services – whether they relate to mortgage
loans, investment advice or trading – were exempted from
the original GST partly because of the complexity, with
many transactions at the time still recorded and
executed in paper format.
Since then, proponents including Mr Weatherill say
technology and increased digital automation mean such
concerns can be overcome.
A study commissioned by the South Australian government
calls for financial services to be taxed the same as
other parts of the economy, either through a GST on
implicit and explicit fees, or on margins.
This would involve apply GST on services such as the
fees charged by banks on mortgage applications and
financial advice.
However, there is recognition within the government of
concerns raised by some economists that applying the GST
to a loan application charge, for instance, could
trigger a behavioural shift wherein banks scrap such
imposts.
Other options may be to copy the model of how GST is
applied to gambling and gaming services.
For instance, gambling GST is levied at 1/11th of a
player's losses. Similarly, GST could be charged on
1/11th of a bank's interest paid and interest earned
over a period of time.
Mr Tehan said when the GST was introduced in 2000, there
was almost unanimous agreement that the complexity of
applying it to financial services outweighed the
benefits.
"Since then both time and technology have changed
Australia", and the GST now covers 47 per cent of the
economy compared to 53 per cent at the start.
In New Zealand, the GST has consistently covered about
96 per cent of all goods and services.
The International Monetary Fund last year chided
Australia's relatively high reliance on company taxes as
being harmful to growth because it discourages
investment in productivity, and introduces a bias
towards the use of debt.
"Reconsidering the GST exemptions should be a priority
agenda item as we embark on further tax reform," Mr
Tehan writes in Monday's Financial Review.
"Applying the GST to financial services is where we
should start.
"The financial services sector has come a long way since
the year 2000, as has the technology used to record and
track the financial movements.
"We are now very close to having the ability to apply
the GST to these services and it should be the first
thing that is reviewed when we consider broadening the
GST."
Mr Tehan challenged organisations such as the Business
Council to lead the argument for raising the GST to fund
lower company tax rates, and allow for wages growth and
higher standards of living.
Source:::
The Australian Financial Review, dated
09/11/2015.........