The Goods and Services Tax (GST) was the talk of the town yesterday, as Federal Treasurer Joe Hockey again raised the notion of increasing the GST then, when faced with opposition to the proposal, all but ruled out the idea later the same day.
Speaking at the Pricewaterhouse Coopers (PwC) Tax Reform Forum in Melbourne, the Treasurer asked state and territory government leaders to rethink the possibility of increasing the GST in order to raise the necessary revenue to fund public hospitals and schools.
Mr Hockey did concede that GST isn’t a cure-all for the nation’s budget woes, and acknowledged that a GST increase may negatively affect poorer households and that they would need to be compensated.
“The silver bullet in tax reform is not increasing or broadening the GST, it’s about having a considered approach to the entire tax base,” he said. “If you were to increase the GST and the benefit went to the states, the commonwealth would have to find the money to compensate people.”
Victorian Premier Daniel Andrews said the state would “not support fundamental changes to the GST”. The Federal Opposition also said it will not support an increase, claiming that the Government is pressuring the states to not only increase the rate of GST, but also to broaden the scope of the tax to include fresh food, health and education services.
However, the Opposition has said it may back a new property levy proposed by the Grattan Institute as a way for state governments to increase their revenue. This levy would mean an annual fee of $772 on a median-priced Sydney home, and $560 on the median-priced Melbourne home, with lower average rates in other cities and the regions.
Grattan Chief Executive John Daley said that people with low incomes and little wealth would be exempt from the levy, and low-income retirees with high-value houses would not need to pay it until their house was sold.
State and territory leaders, along with Prime Minister Tony Abbott, will meet at the Council of Australian Governments (COAG) leaders’ retreat in Sydney next week. Mr Hockey has called on them to use the opportunity to engage in a “sensible, mature debate about long-term tax reform”.
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Instead of flatly rejecting the idea of increasing the rate of GST, wouldn’t it be more responsible for the states to at least hear Mr Hockey out? I agree with the Treasurer that it shouldn’t be too much to ask for state leaders to sit down and have a sensible discussion about long-term tax reform. In the real world, discussion often leads to the sharing of ideas and, dare I say, a resolution.
But this is politics.
Mr Hockey’s turnaround may have set a new record for dropping a policy change, with his proposal of increasing the GST announced at lunchtime and then all but ruled out by afternoon tea.
In all fairness to the Treasurer, his disappointment with the attitude of state leaders with regards to at least considering his proposal is somewhat warranted. To be met with consistent opposition from Labor and the states must indeed be frustrating.
But the Government’s reluctance to even look at superannuation taxes or reign in negative gearing has also contributed to this culture. It could set a good example by showing some flexibility and willingness to talk about all revenue-raising possibilities otherwise it really has no right to complain.
GST in Australia is currently set at a much lower rate than many other countries. And although Mr Abbott promised in his 2013 election campaign that he would not raise the GST, it would seem that if the states are to take over the management and funding of both the public health and education systems, then the money has to come from somewhere. Raising the GST is one option but, as Mr Hockey stated, not the only one that will sort out our financial issues.
According to a report commissioned by the Property Council of Australia, most Australians would support an increase in the GST up to 12.5 per cent as long as income tax was reduced or stamp duties were eliminated. So, it would seem that the people are willing to ‘play ball’.
The nation’s leaders must discard this juvenile playground mentality. After all, they are being paid quite handsomely to lead our country towards a brighter financial future.
The people of Australia deserve better. It’s time for our leaders to put the infighting and bickering aside. It’s time for them to stand up and lead.
What do you think? Would you be okay with an increase in the GST? What other options can you suggest to help raise revenue for the states’ public spending? How do you feel about the current state of politics? Would you like to see a more bipartisan approach to mending our economy?