Tax debate shines light on flawed revenue base

Australian Treasurer Joe Hockey's pledge to consider excluding tampons from a sales tax has raised concern the government could end up shrinking its revenue base at a time when it needs expanding.

Hockey asked the Treasury to cost the removal of the 10 percent goods and services tax from the sanitary product after women holding a giant tampon questioned the treasurer on the fairness of the levy on Australian Broadcasting Corp's Q&A program.

The debate over removing the GST from the item has shone a spotlight on a sclerotic tax system that has failed to keep pace with Australia's changing spending patterns and left the government struggling to plug its budget deficit. Hockey's move to review the levy on tampons, in place for 15 years, could prompt a flood of demands for essential items to be excluded.