GST on fresh food 'makes sense'

But increasing the GST from 10 per cent to 12.5pc or 15pc – as raised during the current debate on tax reforms in Canberra - has his clear disapproval.

“The only condition I’d place on the extension of the GST to fresh food is that there can’t be a net increase in taxation,” he said.

“I wouldn’t cop that.”

Senator Leyonhjelm said he would only support an increase in the GST rate of 10pc if the government agreed to offsets in income tax, company tax, or one of the other “annoying taxes”.

He said gaining his agreement to lift the GST rate would require “a very substantial tax reform with an overall significant lowering of the tax burden”.

“If they put the GST rate up once there would be no stopping them putting it up every decade and it’s already over 20pc in most of Europe,” he said.

Senator Leyonhjelm said extending the GST to fresh food would raise $6.3 billion per year in government revenue, according to estimations based on Treasury figures, while Shadow Treasurer Chris Bowen’s estimation of $9.45b per year was based on increasing the rate to 15pc.

“I’m saying leave the GST at 10pc but extend it to fresh food,” he said.

“I think it would make sense to extend the GST to fresh food.

“It’s ridiculous that we have a GST on a tin of peaches but not on fresh peaches.

“We have a GST on frozen peas but not on fresh peas however there’s no nutritional difference between them.”

Senator Leyonhjelm said the idea that “fresh is best” does not withstand scrutiny and was also “illogical”.

He said excluding fresh food from the GST resulted from a deal done by former Prime Minister John Howard with the Democrats “who wanted to make their presence felt, back in the days when they had the balance of power in the Senate”, when the GST was introduced, in 2000.

“It didn’t make sense then and doesn’t make sense now,” he said.

The issue took another interesting twist last week during question time when Shadow Agriculture Minister Joel Fitzgibbon asked Agriculture and Water Resources Minister Barnaby Joyce how much a lamb roast would cost “if the government hits fresh food with a 15 per cent GST”.

The jibe was of course a reference to Mr Joyce’s prediction that the Carbon Tax – passed in the previous hung parliament and repealed by the Abbott government – would hike the price of a Sunday roast to $100.

Mr Joyce said his counterpart’s question was based on a “completely false premise” as there was no policy direction to increase the GST.

He said the question also gave him a chance to talk about record prices currently being gained for sheep “because of the three free-trade agreements which our nation has signed with China, Korea and Japan”.

“I will be heading to China, Korea and Japan in about three days’ time,” he said.

“We have also signed new live animal destinations to Bahrain, to Egypt, to Lebanon, to Cambodia, to Thailand and big ones into China.”

But Mr Fitzgibbon told Fairfax Agricultural Media a GST was “inherently regressive” meaning poorer families would be hit harder by any extension to fresh food.

“And therefore by definition people living in rural and regional Australia will be hit hardest,” he said.

Mr Fitzgibbon said efforts to tackle topical issues in society, like obesity, were also linked to healthy food consumption.

“The last thing we need to be seeking to do with diabetes, obesity and heart disease which are so topical in our community, is to be making those foods more expensive,” he said.

Independent South Australian Senator Nick Xenophon said he didn’t support an increase in the GST because it was a “lazy way” of raising government revenue.

Senator Xenophon said the government should be looking at how to operate more efficiently and to reinvent itself in the 21st century amid shrinking tax bases and an ageing population, with greater demand for services, education and innovation.

“We ought to be looking at what other countries are doing like the Swedes,” he said.

“I cannot support (increasing the GST) until we know there are no alternatives and I believe there are alternatives.”

However, Federal Treasurer Scott Morrison said the debate wasn’t about tax or the GST but about “how we grow our economy”.

“Just last night the OECD said we can make our tax system more growth friendly,” he said.

“That’s why we are having a discussion about tax because it’s about how do we grow our economy and jobs.

“The problem we're trying to solve is how do we grow our economy faster and support jobs more - that's what the debate is about.”

Mr Morrison said the government hadn't proposed anything on the GST.

“The only people that have proposed something on the GST are state governments and former Labor premiers and a number of Coalition members,” he said.

“The government has responded to a request from the States and Territories to develop some options in response to their question.

“Bill Shorten famously, when he was in government, said he agreed with the Prime Minister when he didn't even know what she'd said.

“Now he's opposing something that the government hasn't even proposed.”