Raise taxes to ease virus recovery: expert

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Finbar O’Mallon
(Australian Associated Press)

 

The treasurer has dismissed calls for an increase in the GST to stop young Australians footing the bill for the coronavirus recovery.

The head of a tax policy think tank says the government should up the GST, introduce a land tax and reduce personal and corporate income tax rates.

Tax and Transfer Policy Institute head Robert Breunig told AAP the tax system took more from “economically active” Australians, while retirees paid less.

But Josh Frydenberg said the government had no plans to raise the GST.

“What we are focused on is growing the economy,” Mr Frydenberg told reporters in Canberra on Tuesday.

“Of course there will be a debt burden that will be left to pay in years to come.”

Professor Breunig says tax reform could halve the economic recovery from coronavirus from potentially 10 years to five.

“I think young people are going to pay pretty heavily for the pandemic and for the government response,” he said.

“So it’s either going to be higher taxes or less government services and those things are going to affect young people in the future.”

He warned Australia’s reliance on personal income and corporate taxes would see young people pay more of the recovery bill, which would cost taxpayers hundreds of billions.

“That would be fine if all of us had the same amount of assets and wealth,” he said.

“It would be fine if all of us were going to inherit an expensive house from our parents.”

Prof Breunig said most of the OECD had moved to higher taxes like GST or land taxes.

“The advantage of those taxes is that they’re much harder for people to avoid paying,” he said.

He said lowering corporate taxes would stop companies moving assets overseas to reduce their burden in Australia.

Prof Breunig also wants the family home to be included in the assets test for pensioners.

He said shutting down the economy fell more heavily on younger workers, who make up a larger portion of casuals, new employees and the recently graduated and who would struggle to find work in a slower economy.

Prof Breunig believed with the current spirit of political bipartisanship it would be possible to introduce some of his proposals, despite last year’s federal election being defined by Labor’s plans for massive tax reform and the coalition’s rejection of it.

Any changes would need to be slowly introduced to help older Australians transition to the new system, he said.

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