The debate on whether to broaden Australia’s GST base continues to rage; with Alastair Thomas – main author of the recently released book ‘The Distributional Effects of Consumption Taxes in OECD Countries’ – now weighing into the fray.

Speaking with News Corp Australia Mr Thomas, an OECD tax policy division economist, declared exclusions on the Goods and Services Tax for items like groceries a ‘poor way’ to protect low-income earners.

In an apparently counter-intuitive argument Mr Thomas explained that the revenue collected from broadening the tax base will allow the government to reduce the top rate of tax. But rather than benefitting the rich at the expense of the poor this lowering of the top rate will dissuade corporate tax dodgers and allow the government to rake in more money for the betterment of all.

Labor treasury spokesman Chris Bowen and Greens leader Christine Milne are currently opposing the inclusion of groceries in the GST. They believe such measures wold be regressive and impact on lower-income households more than wealthier ones.

Mr Thomas’s approach takes a wider view: “What matters is the progressivity of the entire tax system. The income-tax and benefits system is the best place to do that. The GST is not the best place.”

The research group CPA Australia seem to agree. Their investigation into the removal of GST exemptions found that doing so would bring in an extra $12 billion for the government in the 2015-16 period.

Some of this money, suggested the CPA, could be used to reduce personal tax burdens for low-income earners.

But the Greens remained unmoved. When presented with the OECD analysis a Greens spokeswoman said, the party “is not in favour of increasing the GST or broadening the base in ways that would make life harder for those who can least afford it.”

Mr Bowen has not yet commented.

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