Australia's Treasury has called for the country's good and services tax (GST) to be increased, saying the current 10 percent rate is among the lowest in the industrialized world and should be lifted to 15 percent.
In a discussion paper released on Monday, the government department suggested Australia relies to heavily on corporate and income taxes while missing out on potential revenue from consumption taxes such as the GST.
The 200-page Re:Think paper said of the 33 developed countries that have taxes similar to GST, Australia charges the fourth lowest. It also criticized the application of the tax by including the example that pizzas, pizza pockets, pizza subs and bakery- style pizza rolls are defined by law and taxed differently.
Treasurer Joe Hockey said Australia needed to change its tax system to make it more competitive.
"Today marks the start of a conversation about how we bring a tax system built before the 1950s into the new century," Hockey said in a statement released Monday.
"As a result of changes driven by globalization and the rise of the digital economy, Australia's heavy reliance on income taxes may be unsustainable. This over-reliance is projected to increase further, largely as a result of wages growth leading to individuals paying higher average rates of tax (bracket creep)."
Raising the GST to 15 percent, which would still be below the average of 20 percent for the Organization for Economic Co- operation and Development (OECD), could increase revenue by 60 billion U.S dollars and decrease the reliance on income tax, where currently 70 percent of government revenue is collected.
Currently, the GST, introduced in 2000, only covers 47 per cent of sales. Health, education and goods sold online are not subject to GST as is fresh food, leading to pizzas being taxed but pizza rolls being able to avoid the tax.
The states and territories will need to agree with the Commonwealth for a rise in the GST, as would the Senate, where the government is in a minority.
The Opposition immediately ruled out supporting a change to the GST with shadow treasurer Chris Bowen calling the proposal "lazy".
Greens leader Christine Milne said she was disappointed the " bads" of pollution and mining were avoiding critique. "(The GST) is where the big end of town wants to start because it doesn't want the focus on that fact that it's not paying its way,"she told Sky News.