Consumption taxes set to rise

You can expect to be paying more consumption tax in future.

That’s the clear message that is emerging from the overhaul of Australia’s ramshackle tax system, led by the Treasury Secretary, Ken Henry.

But it won’t be extra GST.

The Prime Minister ruled the unpopular goods and services tax, which raised $44.2 billion for the Federal government last financial year, off limits, so far as the inquiry is concerned.

Too controversial.

Don’t want to be raising that one again.

But what is a consumption tax?

By definition, it is one you pay on something, as you consume it.

The GST, which is levied on just about everything, except food, is a consumption tax.

So is the excise you pay on the fuel you use.

Remember Paul Keating’s famous declaration?

“They are making every service station a branch of the tax office.”

Consumption taxes have never been popular.

But they have always been favoured in Treasury circles, where the phrase, “user pays,” is seen as a true sign of fiscal virtue.

That is showing up again, in a Consultation Paper, that Ken Henry’s review committee has just released.

It says, on page 14, that there are three bases for taxation, labour, capital and consumption.

The committee also notes that the Federal government has big expenses coming up, as Australia’s population ages.

It admits, in effect, that increasing tax on labour and capital is not easy.

So what will that mean, to you?

All that, according to the committee’s paper, is:- “suggesting an increased reliance on consumption taxes.”

That won’t be popular.
But it will happen.
The committee will make its final report to the government late next year.