Retailers put focus on whole tax system, not just GST

The most important is that in a hi-tech economy individuals and organisations  respond fairly quickly to changing conditions. That is the nature of a competitive economy. It means that governments must equally respond reasonably quickly to changing conditions, especially on the tax front.

True, Australian governments have been pretty good at patching up emerging one-by-one defects in the tax system. Usually only one or two horses bolt before the loophole in the stable door is closed.

But governments have been much slower to change large sections of the tax regime to suit changing conditions. Most recently, the response by the present government to the Henry Tax Review was woeful.

Out of dozens of sensible suggestions it picked just one of the significant suggestions - the mining tax - and completely messed up the process to implement it.

But worse than messing up the mining tax, it in effect knocked on the head the other suggestions, at least in the medium term.

The two most important of those, perhaps, were to wind back John Howard’s irresponsible boost to middle class welfare under which cheques were posted out to income-earning families - “Gosh, thank you, Mr Howard” - but the amounts were later taken back in income tax.

Good for Howard’s election chances, but bad government.

Treasury head Ken Henry saw the folly in this and urged reform. But the Rudd-Gillard Governments put the recommendations aside. Along with other sensible suggestions like road-use charges and removing inefficient taxes (payroll, stamp duty etc).

Even before the review began, critical areas were put beyond its purview: the GST, the family home and superannuation.

But these, and capital gains tax, cried out most for change.

The GST has been a worthwhile tax. It should be higher and have fewer exemptions. For a start, rent should be subject to GST. Have no fear, tenants would not be paying, landlords would, especially if in the transition landlords were prohibited from increasing rents beyond existing lease provisions.

At present, the Federal Government gets virtually nothing out of the rental market. In some years negative gearing has resulted in the Tax Office giving more in deductions than it has taken in tax. Abolishing negative gearing has been tried and failed, but imposing the GST on rents would work.