Chief economist of HSBC Australia and New Zealand, Paul Bloxham, has called for a raising of Australia’s  Goods and Services Tax. Increases in the GST would allow for cuts in income tax. Cuts in income tax, he says, would increase workforce participation – and kickstart the economy.

By world standards Australia has a very low GST. Because of this the income levels attracting higher tax rates are far too low.

In New Zealand, for instance, the top rate of payable tax is 33 per cent. This rate kicks in when earnings exceed $NZ 70,000 ($A 69,300).

In Australia, by comparison, earnings between $37,000 and $80,000 will attract a tax rate of 32.5 per cent; anything between $80,001 and $180,000 is taxed at 37 per cent; while every dollar earned in excess of that is taxed at 45 per cent.

Mr Bloxham’s advice is to push-u[ the income level at which the 37 per cent rate kicks in. He advised this because the average Australian’s pay will soon reach $80,000.

One major component of Mr Boxam’s advice relies on Australia broadening is base of goods and services attracting the GST (something the government is already considering). At present the GST is applied to less than 50 per cent of all consumption. In New Zealand it is applied to 96 per cent of all consumption.

The Organisation for Economic Co-operation and Development (OECD) issued a statement in December of last year declaring its belief that Australia ‘under-utilised’ indirect taxes – there were too many exemptions to the GST, and it was considered a ‘very poor tool for targeting support to low-income households.”

The OECD went on to suggest the best economic models for Australia to learn from were “New Zealand and Israel (which) have wide bases and rates of 15 per cent and 18 per cent respectively.”

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