One tax still off the table as treasurer weighs reform
The International Monetary Fund report is calling for a hike in the GST and other tax changes, while praising the handling of Australia's economy.
TREASURER Jim Chalmers won’t change the GST despite urging from an influential global economic body to lift the consumption tax.
In its latest report, the International Monetary Fund praised the federal government’s handling of Australia’s economy during difficult conditions as inflation pressures return.
“Executive directors welcomed Australia’s progress toward a soft landing and internal balance,” the report said.
“They commend Australia’s robust institutions, flexible markets, agile policy toolkit and flexible exchange rate, which position the country to manage external risks from trade policy uncertainties and tighter global financial conditions.”
But the IMF urged the federal government to explore ways to improve its fiscal position, including raising the GST rate from 10 per cent.
“(Directors) encouraged comprehensive tax and expenditure reforms, while protecting and prioritising infrastructure investments to enhance productivity and support growth,” the report said.
“Directors highlighted the need for a holistic strategy to address housing supply constraints, emphasising implementation of supply-boosting measures and tax reforms.”
The IMF said a GST increase and the removal of existing exemptions on products such as fresh food could be used to reduce corporate taxes.
But the treasurer said a higher GST rate was off the table.
“There are some ideas which are consistent with the government’s direction and some which are not,” Dr Chalmers told reporters in Brisbane on Monday.
“We’ve made it clear that we don’t intend to go down that path when it comes to the GST.”
Dr Chalmers is expected to put forward a change to the 50 per cent discount on capital gains tax for property investors in the lead-up to the federal budget in May.
Unions have called for the discount to be cut to 25 per cent, arguing the generous concession incentivises professional landlords to invest in property, driving up prices.
But new Opposition Leader Angus Taylor has pledged to fight the change, saying a smaller discount would weigh on much-needed housing supply.
When pressed on the mooted capital gains tax change, the treasurer insisted the government hadn’t committed to the measure.
“We haven’t changed our policy, we’re rolling out income tax cuts and the standard deduction and the boost to the low-income superannuation tax offset, that’s our focus,” Dr Chalmers said.
The report followed an inflation uptick, which prompted the Reserve Bank to hike interest rates.
The overview of Australia’s economy also called for better ties between the federal government and states and territories.
“Directors also recommended improved fiscal co-ordination across the federation and regular monitoring of sub-national fiscal positions,” the report said.
