Asia & the Pacific Policy Studies

The policy and politics of reform of the Australian Goods and Services Tax

By David Pearl

In February this year, Prime Minister Turnbull took Goods and Services Tax (GST) reform off the table, but history would suggest it will come into play again. Consumption is simply too important a tax base to ignore if we want to improve our tax system. With that in mind, and in light of the recent GST debate, this article offers a dispassionate examination of the economics and politics of this tax. The popular myths and misconceptions about the GST are highlighted. The point is made that fairness objectives are better achieved in other ways, including through our progressive personal income tax system. The article concludes with a brief discussion of the barriers to GST reform. It suggests that there may be sound psychological reasons for resistance to change. The importance of trust is stressed in this connection. This is not a matter of keeping promises, but requires effective, credible and patient advocacy from would-be reformers.

(Photo by andy wagstaffe on flickr)

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