The idea was recently put forward by coalition agricultural backbench committee chair Dan Tehan in a passionate opinion piece that appeared in Australian Financial Review.
National Farmers' Federation CEO Simon Talbot said whilst understanding the budget pressures currently faced by the government, introducing a GST on fresh foods would have a negative impact on the welfare of Australian farmers.
"From our viewpoint, it makes no sense to increase the cost of fresh food," Talbot said.
"The reality is that the retailers aren't going to forego profit. This means that farmers are likely to be forced to absorb the increase in costs. They are not able to pass on their costs."
Broadening the "taboo tax"
According to Tehan, broadening the scope of the GST would deliver over $21 billion in extra annual revenue and allow for further serious reduction in direct taxes.
"While OECD (Organisation for Economic Co-operation and Development) countries have applied their valued-added taxes more broadly, Australia has an aversion to broadening this taboo tax, either due to flawed arguments of unfairness or political cowardice," he wrote.
"Tax reform, particularly broadening the GST, is not the easy path. But it is the right one for our future.
"We must finish the job of tax reform begun last century by doing it well."
GST review
Tehan told reporters the government was conducting a GST white paper process, with tax reform a critical part of the agenda.
"If our tax system is to remain efficient and internationally competitive, then we have to reduce our reliance on direct taxes, such as income and company tax, and look to replace that with indirect taxes such as the GST,” he said.
"This is not about increasing the amount of tax the government takes – it's about making our tax system as efficient as possible and it's a debate as a nation that we need to have.
"If you look at New Zealand they have far less exemptions to their GST than Australia, which enables them to have much lower income tax rates and a lower company tax rate.
"My view is, we need to have a mature discussion about our tax system and that has to include the current exemptions that exist in Australia when it comes to the GST."
Responding directly to the NFF's statement, Tehan urged them to keep an "open mind" on the process of tax reform.
"Ultimately in the end what we need to be doing is what's in the best long-term interests of the nation."
