PARLIAMENT HOUSE, CANBERRA
MONDAY, 9 NOVEMBER 2015
SUBJECT/S: Liberals’ plan to increase the GST
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning everyone. When it comes to tax reform, every problem for this Government seems to come back to the GST. It's said that to a man with a hammer, everything looks like a nail. For this Government, tax reform looks like raising or broadening the GST. The problem is, when you look at the big challenges Australia faces, the GST is exactly the wrong response.
If you look at inequality, which is now at a 75 year high, raising one of our most regressive taxes would hurt the most vulnerable. If you look at consumer confidence, it's very clear that with consumer confidence still fragile, jacking up the cost of spending could well do damage to the Australian economy. You've only got to look at Japan which raised its consumption tax and saw the economy slide into recession. If you look at the big challenge of housing affordability, it's very clear that putting the GST on mortgages as Dan Tehan has advocated today would just drive housing affordability further out of the reach of the typical household.
So whether it's inequality, consumer confidence or housing affordability, raising the GST is not the answer. And frankly, if you think that raising the GST to 15 per cent is the right answer for Australia, you're probably asking the wrong question.
JOURNALIST: What do you think is the right answer?
LEIGH: Labor has been ahead of the curve on tax reform. We were out in the first half of this parliamentary term with proposals to close debt deduction loopholes for multinationals. That proposal adds $7 billion to the budget bottom line but it still hasn't been taken up by this Government. Instead, they have a multinational tax package that raises no revenue according to Treasury’s own estimates. Then there’s our superannuation proposals that add $14 billion to the Budget bottom line over the course of the next decade. Labor has been out ahead of the curve on that debate; it's good that the Government is now talking about super tax concessions rather than closing down that debate. But we believe that the tax debate needs to be much broader than raising the GST or putting it onto things like wheelchairs, dentists, childcare fees and the like.
JOURNALIST: What about negative gearing?
LEIGH: Labor has said we're open to a conversation around negative gearing but we've said there are two important preconditions to that. We've said that it's important that any changes to negative gearing improve housing affordability and don't affect existing investors. Because tax reform has to be grounded on certainty for investors.
JOURNALIST: So does that mean that perhaps Labor might seek to limit the amount of [inaudible] and limit the amount of time an investment property could be negatively geared?
LEIGH: Well we'll put forward our negative gearing proposals, if we have them, before the next election. But we are open to that conversation and that's a conversation – as Bill Shorten pointed out in his speech to the Melbourne Institute conference last week – that goes to deductions which are skewed towards the top end of the distribution. Australia's tax system has been described by Saul Eslake as being like a giant Swiss cheese with its many loopholes and deductions. Looking at whether each of those deductions has a good economic purpose is sensible tax reform.
JOURNALIST: Do you agree that for negative gearing, because there needs to be certainty for investors, there really needs to be a level of bipartisanship so it's not changed from government to government?
LEIGH: Ideally you get bipartisanship on good reforms but that hasn't always been the case for tax reform in the past. You look at those important base broadening measures, like Capital Gains Tax and Fringe Benefits Tax in the mid-1980s – those were fought tooth and nail by the Liberal and National parties at the time. So sometimes parties need to put strong ideas on the table and be willing to back them in. Thanks very much.
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