Banks and other financial institutions were exempted from the goods and services tax when it was introduced because of the difficulty of defining the service to be taxed.

Mr Weatherill is proposing a separate tax that would apply only to margins. He said work published by the National Centre for Social and Economic Modelling showed it would target higher rather than lower earning households.

The South Australian treasury believed the tax would raise $3 billion to 4.5 billion per year. It would operate nationally, to prevent tax competition between the states. All of the money raised would flow to the states.

"I know the first instinct of banks might be to rule out such a thing," he said. "And it's true that some of it will fall on bank profits. But before you shed a tear for the banks, let me remind you that the Commonwealth Bank announced a full-year net [profit of] $9 billion for 2014-15 and in May the other members of the big four each announced half-yearly profits in the vicinity of $3.5 billion."

Mr Weatherill said the $3 billion to 4.5 billion raised would only go some way to meeting a gap in funding for health services of $35 billion per year by 2030 identified by his NSW colleague Mike Baird.

"You might be concerned about the equity effects of extending the GST, but what about the equity of not properly funding state health systems and making them user-pays," he said.

The chief executive of the Australian Council of Social Service Cassandra Goldie said while she didn't rule out extending the GST with compensation for low income earners, it was "the last grand bargain we should accept".

"We had compensation when the GST was first put in," she said. "But since then both Labor and the current government have made major changes to the social security rules that have cut income supports. We are very worried about the idea that you can push up the GST and compensate people and solve the problem.

"Before we go looking at the GST as a source of revenue, we we should look at other changes such as broadening the base of the income tax, and cutting superannuation tax breaks. Those changes could not only raise revenue. they would help the economy."

Former NSW treasurer Michael Egan told the summit the idea that the GST could be raised to cut the rate of company tax was "complete ninkinpoopary".

"There's not a politician anywhere in the world that would dare put that proposition to the electorate because they would just get killed. So the business community should just forget it," he said.

"The other thing people have got to realise, and the business community in particular, is that tax reform can't just be about reducing the burden of taxation. We huge budget deficit and we need to fund the services that people demand. Any changes to the tax system have to take into account that the overall tax burden has to increase."