The Government would almost certainly introduce some form of relief for low-income earners if the GST rate were lifted, says the Institute of Chartered Accountants.
Increasing the Goods and Services Tax is suggested in an interim report to the Government from a high-powered group looking at tax reform.
The report calculates how much money the Government might raise if GST were lifted to 15%, 17.5% and 20%.
The institute's tax director, Craig McAlister, says low-income workers would probably get government assistance if GST went up.
The Tax Working Group says increasing GST could help pay for the Government's goal of cutting personal and corporate tax rates.
Finance Minister Bill English accepts opposition parties' concerns that an increase in GST could hit the poor hardest.
Mr English says the Government will need to weigh up the practicalities of all suggestions put forward by the group before making any decisions, and this could include making no changes to the tax system at all.
Prime Minister John Key saying he is keen on suggestions the group might come up with to prevent well-off people from using tax structuring to get the Working for Families credit.
The Labour Party is against an increase in GST. Leader Phil Goff says the idea is particularly unsuitable at time when many families are struggling.
Green Party co-leader Russel Norman says raising GST will have a detrimental effect on low-paid New Zealanders and believes the best fix for the tax system would be a capital gains tax on investment properties.
'Good case' for GST rise
The Tax Working Group - which consists of business leaders, officials, academics and economists - is due to report back to the Government in four months.
It says there is a good case for increasing GST from its current rate of 12.5%, which it says is low compared with rates overseas.
However, it concedes that a rise in GST would hit those on lower incomes hardest.
