GST: Labor Should Grow Up And Join Reform Debate

THE SURPRISE of the GST on the reform agenda, partly due to an idea of NSW Premier Mike Baird that admittedly falls short, is encouraging: with rising public spending and an income tax base set to shrink for decades as the population ages, a rebuilt GST is key in fixing structural revenue issues. Labor must abandon its obstruction and empty rhetoric about “cruelty” and “fairness,” grow up, and help find the best outcome in the national interest.

First things first: until or unless his willingness to engage in meaningful discussion turns out to be a stunt or worse still, a subterranean strategy to scuttle meaningful change, South Australian Labor Premier Jay Weatherill deserves acknowledgement for apparently breaking ranks with the other Labor Premiers in being prepared to countenance changes to the GST; the push from some state Premiers to overhaul and bolster the GST may come to naught in the end, but it is refreshing — and surprising — to see a prominent identity from the “modern” ALP perhaps being prepared to actually set partisan politics aside in the interests of constructive policy rather than merely spruik an objective to do so as a way to harvest votes without ever delivering on it.

In fact, the fact a seemingly serious push for GST reform has emerged at all is surprising, for the combination of flat denials of willingness from almost every section of the ALP to even consider overhauling the tax and the reluctance of some Liberals to be the ones to raise the prospect of reform has to date killed any chance to even have a serious discussion around doing so.

The unprincipled charlatan that is ALP of the 21st century has seen to it that an increasing number of policy areas in urgent need of reform — taxation, welfare, labour market regulation and structural electoral reform, to name a few — are politically untouchable, and the GST fits within that subset; so concerned with winning elections at any cost is the Labor Party that it would rather see serious damage inflicted on this country than to permit its growing list of “sacred cows” to even be discussed, let alone reformed in any way.

But as ever, the ALP cares about power, not people.

The unlikely inclusion of the GST on the agenda for state Premiers to consider has come, in part, from an idea proposed by NSW’s Mike Baird that — to be blunt — fails to cut much ice when examined in even cursory detail, but Baird nonetheless deserves credit for getting the matter onto the table at all.

His idea for a straight lift in the GST rate from 10% to 15% without broadening the base (currently just 48% of all goods and services), with half the proceeds going to tax relief for low-income earners and welfare recipients to offset the impact and the remainder being carved up between the states, is at least a start.

But it fails to address the fact that the unhealthy reliance on PAYE tax is unsustainable, with an ageing population that sees that revenue base shrinking, which it will continue to do for decades; and as well intentioned as the Baird proposal undoubtedly is, it apparently places no emphasis on the need to match taxation reform with a program for winding back profligate, wasteful, recurrent government expenditure by past Labor governments — state and federal — that might have been well enough intentioned, but mostly is and was unaffordable.

It’s an unpleasant reality few in the ALP care to publicly admit, but every dollar of electoral bribery spent by a government is paid by a taxpayer — whether in business or a wage or salary earner — and for all the aversion to”cruelty” and infatuation with “fairness” Labor professes, there is little evidence it gives a stuff about the people who actually generate the tax dollars it so lovingly, and carelessly, doles out.

To say this largesse is out of control is an understatement; the line propounded by Liberal politicians (as well as a number of Treasury bureaucrats and economists) that the country has a spending problem rather than a revenue problem is true, and I saw at the weekend an article (a link to which I forgot to save — sorry!) that whilst headline revenues account for 27.3% of GDP, once the Medicare levy, superannuation contribution costs and other ancillary imposts are taken into account, the actual tax take is 33.2% of GDP — and bang on the OECD average, neatly exposing the myth that taxation in Australia is low by international standards.

Yet unless a switch in the focus of taxation is made from taxes on income to taxes on expenditure, that spending problem — if unaddressed, as Labor has gone to inordinate lengths to ensure it is — will soon enough be matched by a revenue problem as well, and it is only an irresponsible politician who can suggest there is no need to cut recurrent outlays or to take steps now to urgently fix the tax base.

I don’t propose to talk about cutting spending today, and in fact, this morning’s article is really only a curtain raiser to an enterprise in GST reform that I’m sure we will be talking about a lot more over coming weeks and months.

Aside from Baird putting the issue on the table — and Weatherill saying he is open to raising the GST and prepared to engage in rational and constructive conversation — Tasmanian Premier Peter Gutwein has said that whilst his state is disinclined to support changing the GST rate, he is prepared to listen to the arguments for change and reserve his government’s position on any reform proposals, whilst Western Australian Premier Colin Barnett (also nominally opposed to raising the GST rate) wants to examine the prospect of broadening the tax’s scope to apply to a far wider range of goods and services, including fresh food, the impact such changes would have, and the need for compensation for low-income earners and those on welfare and pensions.

I emphasise that any change to raise and/or broaden the GST comes with an obligation to do just that: it is the better-off who will contribute the bulk of the extra consumption tax dollars through higher spending, and those at the lower end of the social ecosystem would need to be compensated — just as they were when the tax was first introduced 15 years ago.

But broadly, there is considerable willingness among heads of government to contemplate tax reform. It is to be hoped some kind of consensus emerges.

Personally, I would like to see the GST doubled to 20% — in line with similar taxes in most comparable countries — with the income tax threshold lifted to, say, $25,000 per annum, marginal tax rates above that level flattened and reduced, and the GST base expanded to cover everything except healthcare, residential rents, education expenses and some financial transactions, with other government imposts like stamp duty and fuel excise abolished.

After increasing pensions and benefits to ensure welfare recipients are unaffected, some of the extra revenue could be ploughed into the states, with the remainder used to help fill the black hole left in the commonwealth budget by the Rudd-Gillard government that has been further exacerbated by the slowdown in Australia’s mining sector.

As a GST is a growth tax, these changes would set the country on a far more sustainable financial footing.

But as ever, the recalcitrant economic flat-earth types at the ALP refuse to have a bar of it.

So-called federal “leader” Bill Shorten refuses to discuss the GST at all, whilst he and others in the party claim their “policies” of cracking down on tax “evasion” by multinationals (read: punishing tax imposts on non-union businesses) and superannuation “reform” (read: punishing those who fund their own retirement without recourse to government benefits) would do the job instead.

But hitting big, offshore-based businesses is more of a pie chart concept than a practical, quantifiable, workable measure that could well do more harm than good if the usual hamfisted Labor way were to drive these companies — and Australian jobs — offshore.

And whilst Labor is obsessed with and racked by class envy and greed where self-funded retirees are concerned, I make the point that whilst Labor complains they don’t pay enough tax (not that there is an amount it would ever be satisfied with) but that these people save the government many billions of dollars annually by not claiming pensions.

You can’t have it both ways.

And as for Victorian Premier Daniel Andrews’ characteristically dumb-arsed call to lift the Medicare levy, all I will say is that this is an income tax rise that would have to be so large to make a meaningful difference to government budgets as to destroy the incentive to work. But Andrews — like so many of his Labor counterparts — is more interested in catchy sound bites than he is in serious, workable policy ideas.

It’s about time the GST occupied centre stage in any serious discussion about revenue and spending in this country, for it is the one measure that can be adapted to provide a fix to what, if left unaddressed, will become a permanent sea of red ink on state and federal budgets — and not all that far into the future.

Australia is not economically unassailable. Its prosperity cannot be taken for granted. Those leaders on both sides who have shown the courage and the stomach to start this debate deserve to be praised.

But as for the rest of the ALP which — as usual — would prefer to sit on the sidelines throwing populist stones in the hope it can be elected with as small a mandate for tough decisions as possible, it should grow up and take its responsibilities as a party to governance in Australia seriously, and stop trying to maintain a policy firewall contrived in its own petty electoral interests rather than focusing on the long-term good of the country.

 

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