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Lower income Victorians worse off under GST rise Analysis

Lower income Victorians worse off under GST rise

Lower income Victorian households would be dramatically worse off under proposed changes to the GST, and the State Government should maintain its strong opposition to raising the GST without broader tax reform, says the Victorian Council of Social Service.

Following the release today of a new national report outlining the negative impacts of potential GST changes on vulnerable and disadvantaged households, VCOSS has written to the Premier asking that they not sign on to any tax deal unless:

  • there is a broad tax reform package;
  • the unfair income tax issues such superannuation concessions, capital gains tax breaks and negative gearing are addressed;
  • the overall effect of the changes is progressive before compensation is considered; and
  • the reforms tie in with federation reforms which guarantee service delivery.

“Victorian Premier Daniel Andrews is on record as opposing an increase in the GST or broadening it to include food, and we welcome his calls for a tax debate that is wider than just the GST. However we are concerned that the national conversation is being dominated by talk of increases to the GST as a one-off, fix-all for tax reform. The report by the National Centre for Social and Economic Modelling released today shows that increases in the GST will impact disproportionately on vulnerable households,” said Emma King, CEO of VCOSS.

The NATSEM report shows that increase in the GST rate to 15% off the current base would increase the average living costs of the lowest 20% of households by 7% of their income, compared with 3% for the highest quintile.

Many Victorian households will be hit hard by increasing the GST or broadening its base. The NATSEM report shows that if a 15% GST was used for a 5% income tax cut, 68% of Victorian households would still be worse off.

Raising the GST or broadening its base would disproportionately hit lowest income households, some of whom could be worse off by thousands of dollars each year.

Some of the most vulnerable and disadvantaged people in our community would experience dramatic increases in their living costs under the scenarios modelled by NATSEM. It is particularly concerning to see the disproportionate impact on young people, people reliant on government payments, struggling families and sole parents, and older people no longer in the work force.

“We do need to reform our tax system to pay for the public goods and services like health and education that our community and our economy relies on, but that can and must be done fairly,” said Emma King.

“Tax reform should start by closing the loopholes in the progressive income tax system, and we are calling on the Andrews government to advocate for this as a starting point.”