FED: Treasury says GST free food unsustainable = 2

AAP General News (Australia)
12-17-1998
FED: Treasury says GST free food unsustainable = 2

Greg Smith, Executive Director of Treasurys Budget Group, reaffirmed the departments
estimate that the GST would increase the cost of living by 1.9 per cent in the second year of
the GST.

But Mr Smith told the inquiry the cost of living would be slightly higher in the first year
because some of the 10 state indirect taxes, to be scrapped under the package, would remain
for up to 12 months after the GST came into force.

He said the cost of living would increase by 2.5 per cent in the first year, 1.9 per cent
in the second year and about 1.8 per cent in the third year of the GST.

The Treasury submission said the tax package would have significant benefits for the
economy and would lead to a long-run increase in growth.

"However, this is likely to take some years to flow through," the submission said.

"The assumption used (in the tax package) was that GDP would increase as a result of the
package by one half of a percentage point by 2002-2003."

It said the cost of exports would fall by 3.5 per cent.

But consumers would receive $13 billion a year worth of tax cuts, an extra $2 billion
through increased family assistance, and a four per cent increase in pensions and government
income support payments.

AAP jg/mk

KEYWORD: TAX INQUIRY 2 CANBERRA

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