The Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. Revenue from the GST was supposed to grow over time, so that state and territory governments would have a reliable income source to help them fund the important services they provide long into the future. But it has failed to live up to that goal. 

The decline of GST revenue has been driven by inequality. This is because wages haven’t kept up with the cost of housing, which means lower-income earners have less money to spend on other things that GST is applied to, and wealthier people are able to avoid GST on things they are more likely to use, like private health insurance and private school fees.

A simple solution to the impact of rising inequality on the decline in GST growth would be for the Commonwealth to collect new taxes to add to the pool of revenue the Commonwealth provides to the states. This could include new taxes on wealth, sugar or a simple royalty on gas exports. Alternatively, the Commonwealth could end tax concessions such as the Fuel Tax Credits Scheme.

Key findings

• If the GST had kept up with economic growth, states and territories would have received an additional $231 billion in revenue in the time since it was introduced.
• Broadening the GST to include private school fees and private health insurance would generate an additional $1.8 billion per year, overwhelmingly from high-income households.
• Any attempt to simply increase the GST rate above 10% would exacerbate the inequality already caused by the exclusion of so many goods and services preferred by the highest income households.
• Tax concessions cost tens of billions each year; just the Fuel Tax Credit Scheme costs about $11 billion per year.