So it begins. WA Premier Colin Barnett has started a political process that will inevitably lead to significant tax reform, including his desired increase in the GST's scope and/or rate. How long the process takes will depend upon the integrity of our state and federal politicians. Yes, it is likely to be many years.
Barnett called for leadership on the GST issue from Tony Abbott, but it's not the federal government that needs tax reform, let alone the political cost of broken promises and scare campaigns. The “leadership” is going to have to come from those who most urgently require it – the states. Only when the states unite in demanding change will Abbott be able to wash his hands of it, pointing out as his treasurer already has that the GST is the states' tax merely administered by the commonwealth.
One of the achievements of the 2011 tax summit (that the then-opposition childishly snubbed), was to spell out that the states are all hurtling at varying speeds towards a fiscal brick wall. They've trashed their own tax bases and show little inclination to take politically unpopular decisions to fix their inequitable and damaging revenue sources, but they're all facing soaring health, education and infrastructure needs. Which is why it has been argued here before that we'll only get serious about changing the system when the states demand it.
Barnett is the first to make the demand. If his remains a lone voice, he will be ignored by Canberra. As usual, our pollies are more interested in keeping the better-paying jobs of government than acting first and foremost in the best interests of the nation. If the WA premier can build consensus among his peers though, the game changes.
While that's happening the premiers are far from powerless. A small example of Barnett's own weakness – the sort of thing that catches a ratings agency's eye – was his backdown on reforming WA's over-the-top solar power feed-in tariff. Like similar stupid and inequitable schemes in other states, the majority end up subsidising a minority to little purpose – a bit like the motor vehicle FBT/novated lease lurk.
Treasurer Joe Hockey has dismissed calls from state governments to overhaul the goods and services tax and has challenged premiers to bring their own spending under control, saying the GST is not a cure-all for their budget woes.
Mr Hockey’s refusal to countenance raising or widening the GST came as Liberal Party elder statesmen Alexander Downer and Jeff Kennett urged the new Coalition government to tackle reform of the tax, and as cabinet minister Bruce Billson admitted the government understood “there is a need to consider the tax framework that supports our nation”.
The comments followed calls by West Australian Premier Colin Barnett for Tony Abbott to show national leadership and consider raising the rate or broadening the base of the tax, and as the nation’s three big east-coast states called for other changes to the GST, including applying it to web purchases.
Speaking from Bali, Mr Hockey poured cold water on the reform push, telling AFR Weekend that the government would in no way waver from its pre-election commitment that there be “no change to the GST, full stop, end of story”.
Mr Hockey said he could understand some of the structural challenges facing Mr Barnett – as well as all premiers – but added that “changing the GST is not a silver bullet”. Why WA’s budgetary performance is deteriorating
“And quite frankly, I think we’ve got to look at other areas to try and improve the sustainability of the states’ finances, given they in particular have enormous growth challenges with the expenditure side and have now for a few years had some challenges on the revenue side.”
In downgrading WA’s AAA credit rating on Wednesday, rating agency Standard & Poor’s pointed to the Barnett government’s “unwillingness to address long-term structural issues’’ for driving the state’s “deteriorating budgetary performance’’. It pointed to the government’s “limited political will’’ to rein in spending.
While some states fell short of supporting Mr Barnett’s call for full-scale GST reform on Friday, he said “I’ve got to tell you in private they do”. Victorian Premier Denis Napthine said he did not support changes to the rate, though he did renew his call for an overhaul to distribution arrangements so his state got a “fair share” of revenue.
Queensland also failed to back Mr Barnett, with acting state Treasurer Jeff Seeney saying: “We’ve got no comment to make [other than] it’s certainly not something the Queensland government has considered.”
Mr Kennett, a former Victorian premier, urged Mr Abbott to face up to the need for a GST reform agenda.
Politicians limit their ability to govern
But he predicted that GST reform would not happen in the first term of an Abbott government because former prime minister Julia Gillard’s government had “destroyed trust in politicians”.
“One of the difficulties of our democratic process and the shortness of terms is that a lot of politicians give a commitment to make sure they don’t scare the public but then actually limit their ability to govern,’’ he told the AFR Weekend.
“I would like a proper review of the tax system including the GST. What the outcome would have been I can’t predict. But you can’t have a proper review without it.”
Mr Kennett said he had hoped, before the election, that there “might have come an opportunity to apply the GST to all exempt areas, not necessarily to raise it, but that [broadening it] would have raised about $30 billion more, that would have helped address the deficit”.
“But bearing in mind that he [Mr Abbott] is establishing a higher standard of leadership then his predecessors, I wouldn’t give it a 5 per cent chance. “We have, as a country, a massive challenge with growth, a bigger challenge with productivity and a big challenge with costs.”
Ofcourse barnett will call for more gst , wa owed 3.6 billion in 2008 and now owe a projected 28 billion, this after the biggest mning boom in 100 years. How else will he pay the bills over there, he cant and is now desperate,after the greatest mining boom any of us have ever seen in our lifetime they owe almost 10 times that of five years ago. GST is only an advantage to pollies as it gives them more money to waste or keep their pay packets increasing and is really of little or no benefit to anybody outside the government ,so it wins no pollies any votes and robs more from the public and real economy. So it makes any polly unfavourable, its not like some things that will please some and not others like say petrol tax, where anybody not owning a car or running five trucks in their buisiness thinks its great , while those that do thinks it sucks, gst pleases nobody but pollies and wins no votes.
SO with a further struggling economy and increased debt ,I see more and more pressure will be thrust apon abbott to increase it from other pollies but again wins no votes . many countries have adopted gst over the years and many have since increased it like nz, which I believe started at 10% and may now pay 15%. So we can expect it to go up eventually ,12.5%.then 15%. we saw many years ago how unpopular it made john houston who was calling for it back in the early 90s, he was effectively ousted, yet from memory,it was his opposition who derailed him for it only to bring it in a few years later. So no member of the public ever really wants it, it will just get thrust apon us like last time when the government starts to struggle even further.
Will tony change his mind, remember we are talking about politicians, just like juliar who said there wont be a carbon tax on her watch to then turn around and bring it in, the pressure was thrust apon her in the same way this will get thrust apon tony abbott as things get tougher.
So I see a massive chance we will see an increase in the gst within three years, maybe well before that ,its almost a given. how else will they fund their bullshit in our dying economy apart from tax increases which we will probably also be seeing. They make the rules after all, this is not a democracy anymore , merely a dictatorship, dictated by morons who waste our money like no tommorow.
If it means scrapping three state government taxes, then I’m all for a GST increase:
Payroll tax: a financial disincentive to employ people -why the hell would you do that?
Stamp duty: well documented already.
Gambling tax/ revenue: a horribly intertwined conflict of interest with a rotten industry.
These 3 taxes combined make up about 2/3 of the current “taxation” revenues of each state government (a bit less in WA because they have less gambling).
The value of these 3 taxes combined are also approximately equal to the value of “general purpose payments” (ie, GST revenue) in NSW and VIC. A bit less in QLD, a lot less in SA and TAS, and a fair bit more in WA (as they get bugger-all GST revenue).
My point is, to adequately compensate for these 3 horrible taxes, GST would need to go up to around 20% (and WA would have to get a bigger share).
Is this fair? I think so. At least you can partly choose to consume (ie, to pay GST), whereas you shouldn’t be penalised for choosing to employ someone or to downsize your house.
(I don’t know what should be done about the gambling industry – maybe a compulsory aquisition of 1/3 of pokie machines given that the rest will be 1/3 more profitable paying less tax. Combine this with $1 maximum pokie bets and $100 maximum sports and racing bets and we’ll be getting somewhere.)
''The GST is not going to change. Full stop, end of story.'' - Prime Minister Tony Abbott
''I think the pressure that will come on Tony Abbott as Prime Minister is that all the states will say the GST is not growing sufficiently to fund basic services like health and education. Do Australians really mind that much if the GST was 10 per cent or 12.5 per cent, if it means maintaining high-quality health and education, disability services and the like? I suspect the Australian people are mature enough to say: 'We'll cop that'.'' - WA Premier Colin Barnett
The GST will change: not in this three-year term, but change it will. We're a long way from the end of the story. The pressures for reform are mounting, and will keep mounting. And we need to understand why.
The GST story is essentially about three issues. The first, and most important, is the one Barnett raised: the states do not have the revenue they need to meet our expectations for schools, hospitals, transport infrastructure and the myriad other services state governments provide.
That gap will only widen as rapid population growth and an ageing society increase the demand for services.
The second issue is one Tony Abbott does not want to buy into, for good reason. The four biggest states, all now under Coalition governments, are demanding an end to the long-running system by which the better-resourced states are forced to subsidise services in states with fewer resources and/or higher costs. But it's a zero sum game, in which one state's win is another state's loss. Don't expect action here.
The third is a smaller issue: the campaign by retailers, backed by the states, to slash the $1000 threshold for exempting online purchases from the GST. With online purchases now making up 6 per cent of retail sales, former treasurer Wayne Swan asked Treasury to produce options for change, and his successor, Joe Hockey, says that work will continue.
But the first issue is the big one, and the one we must face up to.
If it means scrapping three state government taxes, then I’m all for a GST increase:
Payroll tax: a financial disincentive to employ people -why the hell would you do that?
Stamp duty: well documented already.
Gambling tax/ revenue: a horribly intertwined conflict of interest with a rotten industry.
These 3 taxes combined make up about 2/3 of the current “taxation” revenues of each state government (a bit less in WA because they have less gambling).
Wouldn't it just be better to scrap State governments altogether? Why do we need so many elected officials and their minions for a country of 22 million people?
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