Fresh food GST debate rolls on

Australian Farm Institute executive director Mick Keogh put forward his views to Fairfax Agricultural Media on the debate over broadening the GST that’s erupted in Canberra over recent days.

Last week, Shadow Treasurer Chris Bowen said the Turnbull government’s moves to lift the GST to 15 per cent and extend it to fresh food would deliver a $9.45 billion a year hit to family budgets.

“With around one million Australians already living with diabetes, a $9.6b a year hit on healthier foods would make junk food even more attractive, worsening health outcomes and adding to health costs,” he said.

Mr Keogh said some farming and food industry groups have stated they don’t want the GST extended to fresh food.

But he said if the federal government needed to find ways of increasing tax revenues to cover budget income shortfalls and deficits, the farm sector should have a clear focus on trade-offs.

Mr Keogh said if the government persisted with reforming the GST, subsequent horse-trading would present opportunities for trade-offs, similar to the Telstra privatisation process.

“If the government is determined to change the GST and apply it to fresh food, there could be opportunities for trade-offs in areas like agricultural R&D or regional infrastructure,” he said.

But Mr Keogh said the farm sector would be “more disadvantaged” if the government’s determination to overcome revenue shortfalls and ease budget deficits, yielded changes to individual or corporate tax rates, instead of a GST on fresh food.

He said it didn’t make sense to exclude the GST on fresh food and it was also unclear what the exact impact would be on fresh food consumption, if the GST did capture fresh foods.

Mr Keogh also wrote an extensive opinion article on the debate over whether the GST should be applied to fresh food, and not just some processed foods, in January this year.

He said the move had been criticised by farm industry groups but “before dismissing the idea it might be worth thinking a little more about what alternative budget repair measures are available “and likely to be politically achievable”.

Mr Keogh said the Australian government was currently spending about $40 billion more than it receives in revenue each year which was being funded via increased net government debt, which carries with it an obligation of around $11 billion annually in interest payments, “even at currently historically low interest rates”.

His article said it had been estimated that extending the GST to fresh food would raise an extra $15b in revenue annually.

Mr Keogh said alternatives to applying the GST to fresh food could conceivably include measures like removing the current discount on capital gains tax, or some of the primary producer tax concessions.

“There is little doubt that increasing corporate or personal tax rates or removing some current tax exemptions would have a much bigger negative impact on farm businesses than would the broadening of the GST to fresh food,” he said.

“Ultimately, broadening the GST to include fresh food may be one of the ‘lesser evils’ available to address current government budget deficits and the option may also provide some very important political leverage for the agriculture sector in order to achieve some long-term policy objectives.

“It is hard to avoid the conclusion that those in agriculture who have been quick to dismiss this option, may have done so without sufficient serious strategic thinking about the alternatives.”

When the GST was introduced in 2000, a deal was done between the Howard government and Australian Democrats, to exclude fresh foods from the 10pc tax.

Asked today whether it was possible to have large-scale tax reform without touching the GST, federal Treasurer Scott Morrison said the government was currently exploring options with the States and Territories.

Mr Morrison said the government had not put out any preferred options or proposal.

He said over the past eight years, “gotcha politics” and rule-in and rule-out debates had “euthanised good policy debate in this country”.

“We are clearly in a new phase where we're looking at having a focus on policy discussion which is mature, which is collaborative, and which is focused above all on outcomes, not ideology,” he said.

“We are simply showing the economic leadership that I think Australians expect of us to engage in this conversation for one simple purpose – to grow jobs and to grow the economy.”

Meanwhile, Chris Bowen said while the Coalition was divided on its views, the Labor Party had a united view that the GST should not be increased and not extended to fresh food.

Shadow Health Minister Catherine King said applying the GST on fresh food was “a backwards step”.

“We are desperately trying to get people to eat more fresh fruit and vegetables; we’re trying to say to people we want to make sure that your diets are the healthiest they possibly can be,” she said.

“We don’t support it and the government should rule out, immediately, the GST on health and the GST on fresh food in particular.”