Treasurer pours cold water on call to broaden GST

The treasurer says reforming the goods and services tax is not a priority for the federal government as it searches for opportunities to repair the budget position.

Jim Chalmers, who is in the US to meet with global financial leaders, said changes to GST in line with the International Monetary Fund’s suggestions to broaden the type of consumption tax were not at the top of his hit list.

Earlier in the year, the IMF recommended broadening the GST to cover exempt items like health care, which is only expected to chew up a larger share of household income as the population ages.

And although the treasurer recognises the budget is under pressure, he said “modest but meaningful” changes to superannuation tax breaks and a crackdown on multinational taxes were his tax reform priorities, not changes to GST.

Speaking to reporters in Washington, he said reforming the GST wouldn’t necessarily repair the federal budget because GST revenue is passed through to the states and territories.

“There are distributional issues with the GST in particular, every cent goes to the state and territory governments,” he said.

His comments follow a new report from the Grattan Institute warning Australia was on track to return 25 years of deficits and offered a “menu of options” to cut spending and raise revenue.

Broadening and boosting GST made the list, with the institute recommending lifting the tax to 15 per cent and reserving half of those gains for the Commonwealth.

The think tank recommended pairing an increase to the tax with higher welfare payments to cushion the blow for low-income people, who are hit harder by GST because they spend more of their income on essentials.

Its report also recognised that raising the GST was unappetising because the federal government would “bear the political and compensation costs without the revenue benefit”.

But more GST revenue would mean the federal government wouldn’t need to support states so much through other payments, it said.