This report examines the trends in Australia’s goods and services tax (GST) relative to the size of the economy over the last twenty years, including the impact of demographic change, and possible trajectories for future GST collections.
The report finds that Australia’s GST, originally promoted as a ‘growth tax’, has not kept up with economic growth over the last twenty years. It identifies four key trends have contributed to this decline in GST relative to the size of the economy:
- prices of GST-free goods and services have grown stronger than prices of those that are taxed;
- household consumption—particularly rent and education—is treated differently when calculating GDP than it is for tax purposes;
- growth in the proportion of GST-free spending is driven by younger generations rather than an ageing population; and,
- household consumption has contributed less to economic activity in recent decades due to the mining boom and increased household savings.
The report also predicts that GST is likely to continue to grow at a slower rate than GDP.
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