A major global economic organisation, the Organisation for Economic Co-operation and Development (OECD), has urged Australia to find alternative sources of revenue instead of burdening a shrinking workforce with increasing taxes. According to the OECD, broadening the goods and services tax (GST) and potentially raising the rate would help create a more balanced tax system where both workers and retirees contribute. Currently, Australia only derives 26.5 percent of its total tax revenue from the GST, compared to the OECD average of 32 percent. However, increasing the GST rate requires unanimous agreement from all states and territories.
One challenge with increasing the GST is that it can be regressive and disproportionately affect lower-income households. To mitigate this, the OECD recommended pairing the increased GST with enhanced social welfare benefits or other forms of compensation. In its economic survey report for Australia, the OECD also advised the federal government to review tax concessions on superannuation. The government has already pledged to reduce tax breaks for those with super balances of $3 million or more, but further reforms such as capping pre-tax contributions or taxing retirement earnings were proposed.
The government’s intergenerational report, released in August, highlighted the financial pressure caused by an aging population and increased spending on aged care and health. The OECD cautioned against relying solely on personal income tax as demographic shifts would lead to a smaller workforce and greater demands on public funds. The report suggested that cost savings can also be achieved through measures such as promoting patient care in primary settings and implementing preventive health policies.
Former Department of Finance head Michael Keating emphasized the need for increased taxes at the Australia Institute’s Revenue Summit. However, he acknowledged the political challenges of raising taxes and stressed the importance of gaining public support. The federal government has recognized the budgetary challenges and has attempted to generate additional revenue through measures such as targeting large super balances, offshore gas companies, and multinational tax evasion.
Assistant Treasury Minister Andrew Leigh criticized tax havens and multinational tax avoidance, describing them as “ripping off” other countries. He highlighted the significant scale of multinational tax dodging and called for action to rectify the situation. Independent politicians Monique Ryan and David Pocock argued that the government could extract more revenue from Australia’s fossil fuel resources. Dr. Ryan expressed disappointment in the insufficient increase in the petroleum resources rent tax, which she deemed as insignificant at $500 million per year.