The case for a GST increase

Published: Feb 02 , 2016
Author: Keith Stacey

The state premiers are clamouring for an increase in GST to 15% or for a removal of the current raft of exemptions. Premier Baird is the latest to join the chorus. The purpose of course is to meet the increasing demands of education and health on state budgets. However while the states will be the beneficiaries it is the Commonwealth that will bear electorate’s wrath for proposing the increase.

The difficulty for all government is that the electorate, while demanding extra and better services, seems somewhat reluctant to actually pay for them. The magic pudding is still alive and well in the minds of many. In this environment it requires a certain bravery (as defined by Sir Humphrey Appleby) to make a proposal.

In negotiating terms there will be the inevitable horse-trading with the independents in the Senate who are probably already drawing up their wish lists for special deals for their favoured causes. Remember that the current system is a result of negotiations between John Howard and Meg Lees, leader of The Democrats.

The proponents of an increase will also have to provide a detailed compensation package for the entire community and be prepared for the inquisition on the impact on this group and that. As always the devil is in the details and who can forget the problem John Hewson had with the question about the GST impact on a birthday cake.

Notwithstanding all these considerations there is something that politicians forget at their peril and helps to explain the strange inconsistency in the electorate’s behaviour. All proposals must pass the credibility test for them to be considered and ultimately accepted.

The electorate is rightly sceptical of any increase in expenditure because of the underlying doubt that existing taxes are wisely spent. The existence of parallel departments of Health and Education in the Federal system is but one example. It seems the politicians would rather raise taxes, however difficult, than make savings in current expenditures. What are your thoughts?

Keith Stacey


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About the author:

Keith Stacey
Keith is a Principal Consultant with Scotwork and has over 30 years experience as a business consultant, educator and trainer. He is a regular consultant to senior executives in professional practice and his principal interests in management are strategic planning, project management, client-relationship management and conflict resolution.

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