The GST would be increased and applied to health under a proposal from Government MP Dr David Gillespie.
The proposal has been costed for Dr Gillespie by the Parliamentary Budget Office. The proposal includes an increase in the GST from 10 to 15 per cent, while its application would be broadened to include health, fresh food and education.
The Federal Government would raise additional revenue of $65.6 billion in 2017-18 if the proposal was implemented, which Dr Gillespie argues could be invested in currently under-funded services and projects.
According to Dr Gillespie, the proposal reflects the broad application of the GST in New Zealand.
"They have it applying to about 97 per cent of consumption in their country and we only have it on 47 per cent," he told ABC Radio. "They have it at 15 per cent, we have it at 10 per cent....They seem to be going from strength to strength in their economy."
In a 2013 paper, the Grattan Institute also argued that the GST should be applied to health, including PBS patient co-payments.
It said the current exclusion of health services from the GST, "acts as a hidden and indirect subsidy for these services and products."
"Expanding coverage of the GST to include health would increase the price paid by consumers for a number of subsidised health services and products, including private health insurances, pharmaceuticals and medical services," it said.
While it acknowledged the negative social impact of the change, with increased out-of-pocket costs to consumers reducing medicines adherence, the Grattan Institute said the impact could be offset by increasing the subsidy paid for health services.
In his proposal, Dr Gillespie argues that the negative impact of increasing and broadening application of the GST could be offset by a cut in income taxes and other indirect taxes, such as inefficient state taxes.
