Broaden GST and lift rate, OECD says

Australia should broaden the base of the GST and consider increasing its relatively low rate, while scrapping a number of state taxes, a global agency says.

The Organisation for Economic Cooperation and Development (OECD) made a number of recommendations for tax reform in its latest economic survey of the Australian economy released on Friday.

"Tax reforms, including a lower corporate tax rate, a broader resource rent tax and more efficient state taxes would facilitate ongoing structural adjustments," the Paris-based institution said.

The GST rate has remained at 10 per cent since it was introduced in mid-2000, and fresh food, education and health products are exempt from the consumption tax.

But the OECD said the base should be broadened and the rate increased.

In exchange, state taxes should be rationalised, such as reducing or removing conveyance duties, while it says subsidies to first-time buyers should be cut.

The OECD also said the minerals resource rent tax (MRRT) should be broadened and state royalties should be replaced by a mining rent tax modelled on the federal approach, "allowing states to set their tax rates".

Labor's 30 per cent MRRT only taxes the super profits of coal and iron ore companies, and revenue is used to credit royalties paid my miners and a number of other initiatives.

The OECD also recommends pursuing a reduction in the 30 per cent corporate tax rate and a possible extension of the loss carry-back scheme to unincorporated firms.

The agency called for the creation of a stabilisation fund to better insulate public spending from revenue changes caused by volatile terms of trade movements.

However, it welcomed the federal government's introduction of a carbon price, saying it should encourage investment in clean energy technologies and help enhance "competitiveness in a carbon-constrained world".

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