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Liberal MP calls for GST on food

Liberal backbencher Dan Tehan has called for the GST to be broadened to include fresh food which is currently exempt from the tax.

Writing in the AFR, Tehan said that by broadening the indirect tax to include fresh food as well as other currently exempt goods and services like health and education the government could collect as much as $21.6 billion in extra revenue each year.

He said that governments have not broadened the GST because of ‘flawed arguments of unfairness or political cowardice’.

He pointed to New Zealand as an example Australia could follow.

“Since its introduction in 1986, New Zealand has raised its GST twice. It also recognised from the start that the only way to reap a full GST benefit is to have minimal exemptions,” Tehan wrote.

“Their GST covers 96 per cent of their consumption. Australia’s only covers 47 per cent and is shrinking, down from 53 per cent a decade ago.”

“As a result, the Kiwis now enjoy a company tax rate of 28 per cent and a top marginal income tax rate of 33 per cent.”

Both the Labor Party and the National Farmers’ Federation (NFF) dismissed the call to broaden the GST.

"Be in no doubt: this is not members of parliament acting alone," acting opposition leader Tony Burke told reporters in Canberra on Monday.

"You look at what is being flagged today and there is no doubt this government is paving the way for changes to the GST."

Burke added that applying GST on food would hit people’s pockets "every time they go and buy food, every time they go to the grocery store, every time they reach out for the fundamentals and essentials of life".

According to the NFF, including fresh food in the GST would have a negative impact on the welfare of Australian farmers and Australian families.

“We want Australians to eat more fresh food, not less. Increasing the cost of food could mean consumers demand less fresh fruit, vegetables and protein, leading to a decrease in overall sales and poorer health outcomes,” said NFF CEO Simon Talbot in a statement.

“The reality is that the retailers aren’t going to forego profit. This means that farmers are likely to be forced to absorb the increase in costs. They are not able to pass on their costs.”

Tehan said attempting to protect the poor by GST exemptions is not good policy because everybody, not just the poor, benefit from the exemptions.

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