IN A U-urn, Treasurer Joe Hockey says he will explore changes to the base and rate of GST in examining possible reforms to Australia’s tax system, and whilst this is commendable — and shows a more realistic approach to budget reform — the probability Labor will scuttle any constructive proposal remains high. Hockey, nonetheless, deserves praise for finally confronting the crucial link in any serious attempt to fix the budget revenue base.
What a difference a few weeks can make.
Today’s post really is a quick one, on the run this morning as I am, but I wanted to revisit the issue of GST reform — something near to my heart where matters of budget policy are concerned — and the apparent about-face the Treasurer has performed on this critical point.
Not three weeks ago, I lambasted Joe Hockey in this column for ruling out anything to do with trying to change the rate or base of the GST — it was all too hard, he said, and there was “no point” — but now, apparently on the pretext that all of the current round of state elections are out of the way, Hockey says he wants to have “fair dinkum discussions” with state Treasurers about broadening and lifting the GST.
A little extra reading from today’s press can be accessed here and here, and whilst these articles may not perhaps address the critical point at the heart of any sensible debate over GST reform, the points they add go some way to fleshing out the case as to why it is this particular tax that potentially holds the key to remedying a gaping (and growing) structural hole in government sector revenue receipts.
Quite simply — and as we have also discussed — the federal government’s reliance on income taxes has become an unhealthy one, to say the least; with an ageing population and a third of the total population dependent on some form of government handout, the capacity of income taxes to contribute adequate revenues to fund government service delivery is shrinking: and the only way to redress this, in isolation, is through bracket creep and lifting marginal tax rates.
In other words, the tax burden is increasingly shouldered by a disproportionate and shrinking contingent of the population: hardly fair, to use a term beloved of Labor, or conducive to savings and wealth accrual (any discussion around “the rich” not on my radar today).
A lifting and broadening of the GST, however — a growth tax that will rise as the economy expands and consumption increases — can fund cuts in income tax and increases to pensions to insulate the less well-off from its effects, whilst also switching the tax mix from emphasising income to expenditure: and partially alleviating the issue of repeated taxation of the same income as savings accrue interest, for example.
It is true that irresponsible Labor and its Treasury spokesman Chris Bowen have flatly refused, at the outset, to countenance any overhaul of the GST; this is entirely consistent with the ALP’s thoroughly irresponsible approach to its politics in the present day and its bloody-minded populism of opposing anything remotely unpalatable in the naked pursuit of winning power for its own sake.
It’s not the behaviour of a party with a well-earned reputation for economic reforms in the 1980s, and is an insult to the Hawke-Keating legacy. But even so.
My point is that tough measures like the GST must be examined if a reasonable and effective solution to the structural hole in the federal budget is to ever be addressed.
Yes, Senate intransigence might very well see any attempt to legislate change sabotaged.
But this government — which to date has mostly slunk away from such defeats, with vague references to the crossbench Senators — needs to play hardball rather than letting the ALP off the hook for its wanton vandalism of responsible government measures.
Yes, it is true the crossbench holds the balance of power. But for it to defeat bills in the Senate, the ALP must first line up against those initiatives as well — and rather than attempt a public discussion over the minutiae of Senate process, the government really needs to be pinning a lot more of the blame for such defeats where it belongs — on the ALP.
I simply note this morning that the GST (and changes to it) are back in prospect: as they rightly should be.
There are other, past discussions on the matter readers can access through the GST tag in the tag cloud to the right of this article.
But if the case for change is adequately made, it should be Labor — and not the government — that is forced into the perennial defence of its handiwork or, in this case, for the ritual sabotage of measures aimed at fixing the very problem Labor presided over and exacerbated whilst in government.
I will be back with something else (and a little more time to talk about it) this evening.