Don’t confuse raising GST with tax reform, says Weatherill
South Australian Premier Jay Weatherill says raising the GST is a conversation the country has to have but should not be mistaken for tax reform.
“Politicians don’t like talking about taxation increase but it is unavoidable,” Weatherill told InDaily on Tuesday.
“Further reform at a national level is desirable but should not be confused with the need to raise additional taxation to meet the health funding shortfall.”
Weatherill is at odds with the federal Opposition’s Treasury spokesman Chris Bowen who said this morning that a hike in GST would not stimulate a sluggish Australian economy.
Bowen told a tax reform summit in Sydney a GST hike couldn’t be the linchpin of widespread tax reform because it wouldn’t be enough to pay for measures to boost Australia’s sluggish economy.
Bowen said increasing GST revenue had been touted as a way of paying states’ health costs, cutting personal income tax, abolishing stamp duty, reducing corporate tax or improving the federal budget bottom line.
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Weatherill told the Australian Financial Review today the GST was not the financial solution states had anticipated.
The Premier will address the summit on Wednesday where he is expected to outline a plan to collect GST through financial services, fresh food, education and health.
“SA has already engaged in taxation reform by removing a range of inefficient transaction taxes,” Weatherill said.
Bowen said the GST had failed to meet its primary objective of eliminating inefficient state taxes and warned that there was no way an increase could do everything suggested by the coalition, NSW Premier Mike Baird and business groups.
“It’s like when you get a raise in your salary and you think of five things you’d love to do with the extra money, but deep down you know you can only do one,” Bowen said.
“After compensating low and middle income earners, there is not enough money left over from a GST rise to do more than one of those things.”
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New Prime Minister Malcolm Turnbull has said all options are on the table when it comes to tax reform.
Bowen acknowledged the need for an overhaul, saying what growth there is in the sluggish Australian economy is driven by “extremely accommodative” monetary policy.
“We can’t rely on fiscal and monetary policy to spur growth indefinitely. We certainly can’t rely on our terms of trade to spur growth,” he said.
“And with our rollercoaster currency, it would be foolish in the extreme to rely purely on a continually depreciating dollar as a sustainable way to spur growth.”
But Bowen said raising GST constituted a tax increase rather than tax reform.
It was also it was a way of dodging issues such as the decrease in the real value of income tax revenue due to inflation.
“Are we really going to increase the GST every time the nation needs to deal with bracket creep,” he asked.
Bowen is open to applying GST to financial services but said it was “a fiendishly difficult task”.
He did, however, say extending it to fresh food was a non starter given the implications for a country with growing rates of obesity and diabetes, with 280 Australians developing the disease every day.
“There is a direct link between diabetes and diet. Sending a price signal to make fresh food more expensive would be very poor policy,” Bowen said.
“Taxing them would be to tax families with health challenges, often large families. It simply doesn’t make sense.”
– with AAP
