Historically, household consumption has been relatively stable as a proportion of GDP. For over 50 years, tax reform reviews in Australia have accepted that the revenue from a tax on consumption expenditure would grow in line with the broader economy.
Consistent with that prevailing view, the 1998 ANTS White Paper proposed a value-added tax for Australia. The so-called goods and services tax (GST) commenced on 1 July 2000.
The objectives of GST set out in the ANTS White Paper were:
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- a secure and growing source of revenue for the States and Territories;
- removing the reliance of the States on Commonwealth grants and distorting taxes; and
- ensuring that ‘the erosion of indirect tax revenue is halted permanently’.
A Review of GST’s performance published in UNSW Business School’s eJournal of Tax Research – gst-where-to-next – concludes that the existing GST system is unlikely to satisfy the objectives set for it in the White Paper.
It suggests that the growth and stability of GST revenues is unlikely to be achieved by broadening the base and/or increasing the rate.