Detailed Report: GST and Income Tax in Australia - Economic Analysis

This report provides a detailed analysis of the Goods and Services Tax (GST) and income tax systems in Australia. It begins with an introduction to both tax types, highlighting their rates and significance in generating government revenue. The report then offers a critical analysis, defining GST and income tax, comparing their rates, and exploring public opinion on potential tax reforms, such as increasing GST to lower income tax. The discussion covers the advantages of increasing GST, including its broad base and ease of collection, and addresses the impact on the economy. The report also examines the disadvantages of such changes, considering the current tax contributions of different income groups and the potential impact on various sectors. The conclusion suggests that the Australian government should consider revising both GST and income tax rates to optimize revenue generation and ensure equitable economic growth by broadening the GST base and potentially charging different rates for essential goods and services. The report is supported by various sources and includes a bibliography.

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Introduction
In an economy there are number of taxes imposed on industries, organizations, individuals etc.
By imposing such taxes the government of particular country generates revenue to undertake
various activities of development. Broadly there are two types of taxes namely: Income tax and
GST. In Australia currently GST is charged on almost every good and services at a rate of 10%
(Mccout 2014) and Income tax in Australia is charged at different rates. In Australia income
taxes are as high as 22.78-30.13%, if an individual is earning a sum of $87,001-$18, 0,000. If an
individual is earning $18,201-$37,000 then the person is liable to pay taxes of 0-9.5% on his
income. Now if we see this difference between the tax charged under GST and the taxes charged
under income tax has a huge difference. In this project, we are going to study about the GST &
Income tax in detail.
Critical analysis
What do you mean by GST? GST is good and services taxes that are levied on most of the goods
and services in Australia at a rate of 10%. GST was implemented in taxation structure of
Australia in the year 2000. Now if talk about Income tax, these are the taxes that an individual,
firm, organization needs to pay on the income earned by them in a year. If we compare GST and
Income tax of Australia then we will see a huge difference in the rate of both of these taxes.
Where GST is as high as 10% only, Income tax may reach up to 45% on the earnings of the
individuals or firms. Most of the population in Australia is in favor of increasing GST, in order
to lower the rates of personal income tax (McKenzie 2009).
Increasing GST
Now firstly we will discuss if that happens, how it is going to affect the Australian economy in a
good way. GST is levied on goods and services, and goods and services are bought by everyone.
GST is payable by its end users hence it is really difficult to avoid such taxes (Reuters 2017). In
Australia if the rate of GST is increased even by 5-8%, it is going to benefit the government in a
very good way. Goods and services are the need of everyone; no one can live without goods and
services. Even the poorer of the peoples manages to buy goods or services (food, clothes) etc. So
when an individual or anyone in an economy buys goods or services, they become liable to pay
GST on the services or the goods acquired (ghose 2017). Now if we talk about Income taxes,
Australian government does not charge anything from an individual who is earning $1-$18,200
in a year. Now the people falling under this bracket are not supposed to pay any taxes. However
these peoples are liable to pay GST. When an individual works hard for a year and at the time of
paying taxes, it really crunches his heart to pay a large chunk of his earning in the taxes, whereas
when a person goes to market and buy goods or services, they do not even bother about GST or

anything. Hence GST is not a noticeable tax (Arun 2015). Most of the goods and services falling
under the area of education, fresh food & beverages are exempt from taxes of GST (al 2017).
Only 48% of GST is paid currently in Australia, which is considerably low when compared to
the income taxes.
Decreasing or Maintaining GST
We will now talk about the cons of increasing GST and lowering the income taxes. The current
population of Australia is 2, 46, 41, 662. Only around 10% of the working population of
Australia has paid 50% of the income taxes in the year 2014-15 (kelly 2015). The sum paid by
this 10% of the population was AD $176 billion. This is way more than any other taxes received
by the Australian government. So it is an obvious thing that a government will impose taxes on
such areas, where the revenue generated is enough to develop the entire economy. GST is
exempted on education, fresh foods and beverages, where as income tax are only exempted on
the people earning AD 1$-$18001. So Australian government has a bright scope of earning more
revenue from the income tax payers.
Conclusion
After observing and going through all the facts and information a detailed conclusion is provided
here, Australian government should revise its GST tax rates and income tax rates as well. There
is a need to increase the GST slightly so that, a little burden of income tax can be reduced from
the shoulders of the income tax payers. GST is a tax that is not noticeable, hence it can be
increased to a point where it do not effects the pocket of the tax payers but proves out to be the
most efficient and effective way of generating revenue for the government (irvin 2016). After
considering the income tax rates in Australia, they are way higher than that of GST. In order to
achieve best results out of their taxation structure, Australian government can broaden the area of
GST by not exempting the taxes on fresh food & beverages and education. However they can be
charged at a different rate from the rich and the poor’s. By this the Australian government can
ensure equitable growth in all the sectors of their economy.
Bibliography
al, CE 2017, 'tax kit', comprises principles of taxation law, vol 1, no. 10, p. 5.
Arun, M 2015, 'GST', in Kalyani (ed.), Indian economy, 2nd edn, Kalyani, Delhi.

ghose, D 2017, 'Why GST is over hyped', First post, vol 1, p. 2.
irvin, J 2016, 'Australian GST reforms', Acuity Mag, vol 6, no. 15, p. 7.
kelly, F 2015, The conversation, viewed 27 july 2015, <https://theconversation.com/factcheck-is-50-of-
all-income-tax-in-australia-paid-by-10-of-the-working-population-45229>.
Mccout, P 2014, 'CCH', in Australia master guide for GST, 13th edn, wolters kluwer, sydney.
McKenzie, A 2009, GST , 9th edn, Wolters business, Sydney.
Reuters, T 2017, Fundamental tax legislations, 2nd edn, Jamie Publishers, melbourne.