Economists want GST hiked to 12.5 per cent

Increasing the GST to 12.5 per cent could raise more than $14 billion a year, new modelling shows.

Consulting firm PwC has also found expanding the consumption tax to five exempt categories – fresh food, health, education, childcare and water and sewage – would raise another $21 billion.

Releasing its modelling on Tuesday, PwC said tax reform would be critical to recovering from the coronavirus-led economic recession, arguing the GST was ripe for the picking.

“Increased use of GST is an obvious option to consider to make the overall tax mix more efficient,” the report said.

“The potential for economic growth benefits makes it attractive to consider the value of higher consumption taxes, particularly given Australia’s relatively low reliance on consumption taxes.”

The firm acknowledged tinkering with the GST would adversely impact low-income earners, who spend a greater proportion of their households incomes to meet everyday needs.

It said robust compensation would be required to offset the imposition.

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