Home > Tax Policy > Papers by topic > Consumption

Consumption

- eg, GST; alcohol, tobacco, fuel and gambling taxes; excise taxes; customs duties
- see also Concessions; Environment; State taxes

Chartered Accountants – Federal Budget Tax Bulletin 2017-2018

Chartered Accountants Australia & New Zealand (May 2017).  The 2017-18 Federal Budget indicates that the government is in a state of readiness for an earlier than expected Federal Election.

The pre-Budget announcement of needs-based school funding – together with big bets on infrastructure, the removal of the Medicare rebate freeze, a crackdown on non-residents investing in Australian real estate and a one year reprieve for the popular small business $20,000 instant asset write-off – will have broad appeal to voters.

In terms of the economic outlook, the Treasurer remains optimistic that Australia will continue its slow recovery, returning to surplus by 2020-21. This rosy outlook is based on assumed real GDP growth of 3% per annum.

Overall we are pleased with the superannuation measures announced, which demonstrate the need for a comprehensive review of the financial arrangements impacting on retirement – particularly superannuation, taxation, aged care and social security – to ensure that the whole system is fair, sustainable and fit for the long-term.


CPA Australia -  2017-18 Federal Budget Report

CPA Australia (May 2017). A detailed summary of the tax, superannuation, housing affordability, small business and other key measures announced in the Australian Federal Government’s 2017-18 budget.


The Tax Institute Submission – Treasury Laws Amendment (GST Low Value Goods) Bill 2017

The Tax Institute (10 April 2017). The Tax Institute’s submission to the Senate Standing Committee on Economic in relation to the Treasury Laws Amendment (GST Low Value Goods) Bill 2017.


GST reform in Australia: Implications of estimating price elasticities of demand for food

Tax and Transfer Policy Institute (March 2017). This paper uses detailed information about household supermarket purchases from the Australian Nielsen Homescan Survey to estimate price elasticities of demand for a range of food categories. An instrumental variable strategy is employed to address endogeneity issues. The estimates obtained from our analysis are used to study five scenarios in which the rate of the GST on food categories is increased or in which the tax base is broadened to include currently GST-free categories. Our findings reveal that there is considerable scope for raising revenue by increasing the rate and broadening the tax base. Low-income households (the bottom 40% of the income distribution) can be compensated for the loss in consumption induced by a tax increase. We demonstrate that increasing the rate of the GST from 10% to 15% and broadening the tax base would increase tax revenues by up to $8.6 billion, whereas compensating low-income households would require up to $2.2 billion. We also provide a detailed list of tax revenues and compensation payments associated with each food category to allow readers to “build their own tax reform” by choosing the categories that should be taxed.


A sugary drinks tax: recovering the community costs of obesity

Stephen Duckett and Hal Swerissen, Grattan Institute (November 2016). This paper argues that Australia should introduce a tax on sugary drinks to recoup some of the costs of obesity to the community. The best option is an excise tax of 40 cents per 100 grams of sugar, on all non-alcoholic, water-based drinks that contain added sugar. Such a tax would increase the price of a two-litre bottle of soft drink by about 80 cents, raise about $500 million a year, and generate a fall of about 15 per cent in the consumption of sugar-sweetened beverages, as consumers switched to water and other drinks not subject to the new tax.


Effects of a federal value added tax on state and local government budgets

Jim Nunns and Eric Toder, Urban Brookings Tax Policy Center (April 2016).  This paper explores how a US value-added tax could effect other revenues and spending through changes in incomes, relative prices and asset values.


Fortune 500 companies hold a record $2.4 trillion offshore

Citizens for Tax Justice (March 2016). All told, American Fortune 500 corporations are avoiding up to $695 billion in U.S. federal income taxes by holding $2.4 trillion of “permanently reinvested” profits offshore. In their latest annual financial reports, 27 of these corporations reveal that they have paid an income tax rate of 10 percent or less in countries where these profits are officially held, indicating that most of these monies are likely in offshore tax havens.


Tasmanians polled on tax reform, GST

The Australia Institute (January 2016). A ReachTEL poll of 1,139 Tasmanians showed 61% of residents were opposed to an increase in the GST rate and just 26% supportive. Respondents also indicated where they would like additional revenue from a GST increase to go. 52.2% wanted more money for health, education and government services. Only 3.4% wanted it to pay for a cut in the company tax rate. “There is clear message coming from these polls – that Tasmanians don’t want the GST increased to cut other taxes,” Executive Director of The Australia Institute, Ben Oquist said. “Treasurer Scott Morrison continues to call for revenue neutral tax reform. But respondents to this poll want the opposite; they want more money for schools and hospitals. “Raising taxes on goods and services, which hits lower income people hardest, and using that revenue for corporate tax cuts has almost zero support in the state of Tasmania. “Australia does have a revenue problem and our overall tax take does need to rise to meet the heath, education and environmental needs of a prosperous society. “However there are more effective, efficient and far fairer ways to raise the revenue than a GST increase. Ending tax concessions for the wealthy via superannuation and the capital gains tax would be a better place to start economically,” Oquist said.


The distributional impact of the GST

Ben Phillips and Matthew Taylor, NATSEM (November 2015). This paper, commissioned by the Australian Council for Social Service, with support from the Carnegie Foundation, provides the distributional household impact of the existing Goods and Services Tax (GST) and a range of alternatives for expanding the rate and breadth of the GST.


A GST reform package

John Daley and Danielle Wood, The Grattan Institute (December 2015). Extending the goods and services tax to cover many of the categories currently exempt could raise $17 billion a year, while increasing the rate to 15 per cent would generate about $27 billion a year. Raising more GST revenue, either through a higher rate or applying it to more goods and services, is preferable to most other means of raising revenue, including higher income taxes. Current governments face many challenges, such as funding growing healthcare costs, reducing deficits, and cutting inefficient taxes. A broader or higher GST could fund any of these initiatives – although not all of them. Broadening the GST base to include fresh food, health and education would be more efficient, and would reduce compliance costs. But if the politics of taxing those categories proves too fraught, then raising the rate of the GST would be a satisfactory second best. A well-designed GST package that increases the rate to 15 per cent could lead to a tax and welfare system more progressive than at present. Higher welfare payments and targeted tax cuts would make low and middle-income households on average better off. New household-level modelling shows that spending about 30 per cent of the additional revenue on welfare – increasing the base rate of pensions and allowances by about five per cent – would leave two-thirds of low-income households better off overall. Committing a further 30 per cent of additional revenue to income tax cuts would allow the government to shave 2 to 2.5 percentage points off the bottom two tax rates. With the welfare increases, these cuts would fully offset the GST increase for households earning up to $100,000 a year. These measures would leave $11 billion of additional revenue that could help the states address the looming hospital funding gap, fund tax cuts that promote economic growth or reduce Commonwealth budget deficits. But not everyone can be fully compensated. Government budgets are in deficit, and promising ‘no losers’ will be a sure-fire way to erode the revenue benefits from the package.


International VAT/GST guidelines

OECD (November 2015). More than 100 countries and jurisdictions have voted to endorse the new OECD International VAT/GST Guidelines as the preferred international standard for coherent and efficient application of Value Added Tax/Goods and Services Tax to the international trade in services.


The effects of a higher GST on households

ACOSS (November 2015). ACOSS has released new modelling from the National Centre for Social and Economic Modelling (NATSEM) to show what an increase in the GST to 15% would mean for households across the community. The NATSEM modelling also shows what  it would mean if the Federal Government used the revenue from an increase in the GST to fund a reduction in personal income taxes across different income groups.

“The NATSEM modelling of an increase to 15% on the existing base of the GST or a broadening of the GST base to fresh food, health and education confirms that either change would be regressive. Low and modest income households would clearly pay a higher proportion of their income, in comparison to higher income households through an increase in the GST, whether by increasing the rate or broadening the base by removing the exemptions,” said ACOSS CEO, Dr Cassandra Goldie.


SACOSS GST Fact Sheet

South Australian Council of Social Service (July 2015). A quick analysis of the figures which show why proposed GST changes may be a bad deal for South Australian households, and for low income households in particular.


Financial Transaction Taxes in Theory and Practice

Leonard E. Burman, William G. Gale, Sarah Gault, Bryan Kim, Jim Nunns, Steven Rosenthal, Urban Brookings Tax Policy Center (June 2015). In response to the financial market crisis and GFC, there has been a resurgence of interest in financial transaction taxes (FTTs) around the world. The Tax Policy Center estimates that a well-designed FTT could raise about $50 billion per year in the United States and would be quite progressive. We discuss the effects of an FTT on various dimensions of financial sector behaviour and its ambiguous effects on economic efficiency


Get Regular Excise: The case to reindex the fuel excise

The Australia Institute (June 2015). The Howard Government decision in 2001 to cut indexation has cost the budget more than $46 billion in tax revenue to date. If no change is made the total cost to the budget is projected to top $160 billion by 2025. Additional carbon dioxide emissions attributable to the policy are projected to reach 16 million tonnes by 2025.
A report released today from The Australia Institute also provided a breakdown of impact on lower income Australians.


Public comments received on discussion drafts of two new elements of the OECD International VAT/GST Guidelines

OECD (February 2015). On 18 December 2014, the OECD invited comments from interested parties on discussion drafts of two new elements of the OECD International VAT/GST Guidelines. These discussion drafts related to (i) the place of taxation of business-to-consumer supplies of services and intangibles (B2C Guidelines) and (ii) provisions to support the application of the Guidelines in practice (Supporting provisions).


TAI Challenges CPA on GST Modelling

The Australia Institute (February 2015). The Australia Institute (TAI) has challenged modelling and analysis used in a report from the Certified Practicing Accountants (CPA) which argues for increases to the GST.

The CPA report assumes that the economy will grow more quickly because of cuts to taxes funded by the increase and broadening of the GST.

“The economic model used assumes that lower marginal tax rates will encourage people to work more,” said TAI Senior Economist, Matt Grudnoff.

“But also the model also assumes that the economy will move back to full employment over the next few years, which means that there will be jobs available that will allow people to work longer hours.”

“This suggests the model is built on the premise that the only reason we have rising unemployment is because the dole queue is filling with people just waiting for their marginal income tax rate to fall 2 by per cent.

The Australia Institute undertook a survey last year asking Australian workers if they knew their marginal rate of tax. Only 30% of people knew what it was. This suggests that the link between working hours and marginal tax rates may be quite limited.


Who’s the fairest (and most efficient) of them all – income or consumption taxes?

Peter Davidson, Need to Know Oz Social Policy Blog, 16 January 2015.


GST Arguments are really about Protection

Richard Denniss, The Australia Institute (January 2015).


How to extend the GST without hurting the poor

Matt Grudnoff, The Australia Institute (January 2015). The Coalition Government’s proposed amendments to the GST have been attacked for disproportionately impacting low-income households. But the GST doesn’t have to be so regressive. By extending the tax to include private health insurance and private education, the government can boost revenue, broaden the tax base, and do so in a way that does not overburden Australia’s poorest families.
This paper looks at the potential gains and impacts involved from extending the GST to private schools and private health insurance. As the predominant consumers of private schools and private health insurance are higher income households, broadening the GST to include taxes on these services could raise $2.3 billion per year in additional revenue without heavily impacting upon low-income earners.
At a time when the government faces a tough challenge bringing the budget back to surplus, and an even tougher challenge of winning the public’s acceptance of cost-cutting and revenue raising measures, strategic reform to the GST could be just the policy to bring to the table.


Reforming State Gas Taxes

Richard Auxier, Urban Brookings Tax Policy Centre (November 2014). The US federal government and most US states have per-unit gas taxes. Because they tax gallons purchased, and not a percentage of purchase price, revenues are falling across the country as Americans buy less gas. If states do not want to cut transportation projects they now have to increase tax rates or find new revenue sources. This brief examines the national trends affecting gas tax revenues and describes what different states are doing (or not doing) in response to an eroding tax base.


International VAT GST Guidelines

OECD (April 2014). The Guidelines seek to address the problems that arise from national VAT systems being applied in an uncoordinated way. They set standards that should ensure neutrality in cross-border trade and a more coherent taxation of business-to-business (B2B) trade in services.


Changes In The Organisation Of Business Activity And Implications For Tax Reform

George A. Plesko and Eric J. Toder, Urban Brookings Tax Policy Center (February 2014). This paper reviews the changing economic significance of various business entity types since the US Tax Reform Act of 1986 (TRA86) and the implications of these changes for the design of tax  policy.


Jobs Australia’s Statement of Reform Priorities
David Thompson (September 2011).  Jobs Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


No Taxation Without Information: Deterrence and Self-Enforcement in the Value Added Tax
Dina Pomeranz, National Bureau of Economic Research (July 2013).  Tax evasion generates billions of dollars of losses in government revenue and creates large distortions, especially in developing countries. Claims that the VAT facilitates tax enforcement by generating paper trails on transactions between firms have contributed to widespread VAT adoption worldwide, but there is little empirical evidence about this mechanism. This paper analyses the role of third party information for VAT enforcement through two randomised experiments among over 400,000 Chilean firms. Announcing additional monitoring has less impact on transactions that are subject to a paper trail, indicating the paper trail’s preventive deterrence effect. Tax enforcement leads to strong spillovers up the VAT chain, increasing compliance by firms’ suppliers. These findings confirm that when evasion is taken into account, significant differences emerge between otherwise equivalent forms of taxation.


Would You Prefer Sales Tax to Income Tax? (Video)
Arkady Grudzinsky, TED Conversations (April 2013)

The power to lay and collect taxes is, perhaps, the greatest power of the government. With this power alone, the government can encourage or prohibit certain behaviors without passing additional laws – it can effectively ban alcohol, tobacco, firearms, etc., can coerce people to marry, to have or have no children, buy gas or "green energy", buy real estate, lock up their money for decades in retirement accounts (both policies make people return a large percentage of their income straight back to the banks withdrawing huge amounts of cash from circulation). Taxes inhibit the taxed activity. Grudzinsky provides several arguments in favour of sales taxes compared to income taxes.


Creating an American Value Added Tax
William G. Gale and Benjamin H. Harris (26 February 2013)

This paper proposes a value-added tax (VAT) to contribute to the U.S. fiscal solution. A 5 percent broad-based VAT, paired with subsidies to offset the regressive impacts, could raise about 1 percent of GDP per year. International experience suggests that the VAT can raise substantial revenue, is administrable, and is minimally harmful to economic growth.


Consumption Tax Trends 2012 VAT/GST and excise rates, trends and administration issues
OECD (December 2012)

Consumption Tax Trends provides information on Value Added Tax/Goods and Services Tax (VAT/GST) and excise duty rates in OECD member countries.


Per Capita Tax Survey for 2011: Public Attitudes towards Taxation and Government Expenditure
David Hetherington (September 2011)

The Per Capita Tax Survey for 2011 has asked 1,300 Australians for their views on personal tax contributions, overall taxation levels, public service spending and new tax proposals such as the Minerals Resource Rent Tax and the carbon tax.


Alcohol Taxation Reform: Starting with the Wine Equalisation Tax
Allen Consulting Group Pty Ltd (6 September 2011)

The report ‘Alcohol Taxation Reform: Starting with the Wine Equalisation Tax’, produced by leading economic consultants the Allen Consulting Group, and commissioned by the AER Foundation, concluded that the current tax structure contributes to the Australian wine glut by rewarding producers of cheap, poor-quality wines and propping up inefficient producers.


International VAT/GST Guidelines on Neutrality: report on consultations
OECD (22 July 2011)

The OECD released a paper outlining the outcomes of the public consultation on draft international guidelines on value added tax (VAT)/goods and services tax (GST) neutrality for the final guidelines.


Taxation trends in the European Union
Eurostat (1 July 2011)

An overview of taxation in the European Union, by type of tax (consumption, labour income, company income and capital income), by level of government (federal, state, local), and by country.


OECD Tax Agenda 2011 – VAT and consumption taxes
OECD (12 Apr 2011)

An excerpt from the OECD’s latest Tax Agenda brochure, outlining its current work in a variety of tax-related areas, including: Value Added Taxes; Consumption Taxes.


Consumption Tax Trends
OECD (18 Mar 2011)

Describes a range of taxation provisions in OECD countries, such as the taxation of motor vehicles, tobacco and alcoholic beverages and presents trends for 2010.


Progressive Tax Reform: Reform of the Personal Income Tax System
Australian Council of Social Service (November 2009)

This report advocates strengthening the personal income tax system in order to achieve progressive tax reform. It covers topics such as personal income tax rates, consumption taxes, company income taxes, taxation and saving, taxation and the transfer system.