WEDNESDAY, 9 DECEMBER 2015
SUBJECT/S: Government options to raise the GST; Tony Abbott becomes the Australian Donald Trump.
ALISON CARABINE: Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning Alison.
CARABINE: Now we learned today that the Treasury has modelled eight separate options for increasing the GST and/or extending the base – where does that take the debate on tax reform?
LEIGH: Alison, the Prime Minister has spent this week talking about the importance of being innovative and agile, but I don't see anything innovative or agile about whacking up the GST to 15 per cent and putting it onto bread and bananas. If you're raising $45 billion then that is effectively saying to every Australian household: you're going to pay $4,500 more tax every year. It's a bit strange given the Treasurer was telling us we don't have a revenue problem.
CARABINE: But the Government is not increasing the GST to 15 per cent. The Government commissioned this modelling at the behest of the states, and as Scott Morrison has put it: the debate is still in the discovery process. It's all about the provision of information and the Government is not signing up to any of these options at this stage.
LEIGH: I don't think Malcolm Turnbull and Scott Morrison need much arm-twisting in order to start looking at raising the GST. It's been pretty clear that this has been their number one tax reform option. What troubles me, Alison, is that there's nothing particularly innovative or agile about raising the price of a loaf of bread by 50 cents. Labor has a range of reform options which would see us meet the gap between what the Government brings in and what it spends – which is currently running at about 1.5 per cent of GDP – but without slugging those at the bottom.
CARABINE: There is also, Andrew Leigh, this option of re-jigging some taxes levied by the states, in particular payroll and property taxes. That seems to be emerging as the Government's preferred option at this stage, would Labor support harmonising state taxes?
LEIGH: This is really interesting, actually. If you look over recent years, the most serious tax reform in Australia has been the shift from stamp duty to land tax that is occurring in the ACT and which South Australia is currently working on. Those two Labor jurisdictions are recognising that stamp duty is effectively a tax on moving which means that people don't move for new jobs, commute too far or end up in houses that are the wrong size for their families. Stamp duty is an inefficient tax; land tax is an efficient one. But I don't see a whole lot of momentum from the Federal Government to assist the states in doing away with insurance taxes and stamp duties and payroll taxes, which we know to be among the most inefficient taxes.
CARABINE: But this particular option, according to other modelling that has emerged today property taxes are worth about $16 billion; harmonising payroll taxes would raise an extra $13 billion. Wouldn't that go some way towards meeting the shortfall in state budgets, which is the whole point of tax reform?
LEIGH: Absolutely. This whole problem began because the Abbott-Turnbull Government cut $80 billion out of funding for schools and hospitals and the states are struggling to work out how to deal with that environment. But Labor's proposals, I believe, are fairer and would raise significant amounts of revenue without hurting the economy. We know that, for example, when Japan raised its consumption tax last year, the economy fell into recession. That's a real risk for Australia where consumption is fragile. I was in Blackburn yesterday chatting away with a cafe owner who was really concerned that if the GST goes up and the number of pensioners that come into the cafe goes down – as it would if they're not compensated, as Scott Morrison is suggesting – then that would mean a big hit to that small business.
CARABINE: But the Prime Minister has been very careful and very clear that if there was an increase in the GST people would be compensated; fairness would be a bedrock of any tax reform. Is it fair for you to put it out there that we could have a GST increase without adequate compensation?
LEIGH: Certainly what Scott Morrison has been saying is that there would be an increase in the GST but without any increase in the tax share. That automatically means that you don't give anything to pensioners; you don't give anything to people on fixed incomes. It's just a simple mathematical truth. So either Scott Morrison needs to say: I'm sorry, I screwed up on that and I'm wrong, or else he needs to be clearer about why it is reasonable to ask low and middle-income Australia to cop a 50 cent increase in the price of a loaf of bread without any compensation for it.
CARABINE: It will be the states and territories that will be meeting with the Prime Minister and Treasurer over the next couple of days so they'll be mounting the arguments for and against various options. If agreement can be reached – not necessarily this week but if the states and territories can reach a unanimous position on tax reform – will federal Labor support that position even if it is an increase in the GST?
LEIGH: Alison, we're driven by our basic values. Those are that we need to make sure the economy continues to hum along without a hit to growth, which a GST might represent. We're concerned about inequality, now at a 75-year high and we don't want to see a tax reform that hurts those at the bottom. We're absolutely concerned about housing affordability and we know that a higher GST would make it more expensive to build the new houses Australia needs. Contrast all of that with Labor's sensible plans on multinational taxation, which don't damage the economy, are fair and add to the budget bottom line.
CARABINE: Andrew Leigh, if I could take you to Tony Abbott's opinion piece this morning. He's calling for a 'religious reformation within Islam', and also saying that Australians have to start proclaiming what he calls the 'clear superiority' of our culture to the one that justifies killing people in the name of God. How widely-held do you think these views are in the Australian community?
LEIGH: It was a strange contribution from Tony Abbott, Alison, and I think it does reflect where he's at right now. Frankly, I think Tony Abbott does have a lot to offer Australia but it is likely to be in the area of sport – he is easily our sportiest Prime Minister since Federation – or in Indigenous affairs. The time that he has spent engaging at a personal level with Indigenous Australians was important. But I don't think the right role for Tony Abbott is to be an Australian Donald Trump, and I don't think anyone imagines that if there are sensitive conversations to be had within the Muslim community, that our most divisive Prime Minister is the right person to lead those conversations.
CARABINE: But that's not a fair comparison. Tony Abbott isn't calling, as Donald Trump is, for Muslims to be barred entry into this country.
LEIGH: No, he's not. But I don't think Tony Abbott's contributions to this conversation are particularly helpful. We’ve had David Irvine, the former head of ASIO, saying that our most important allies in the fight against extremism are moderate Muslim Australians. It's really important to remember that message every time our leaders are out there.
CARABINE: Just finally Andrew Leigh, Tony Abbott has deferred any decision on his future until April, he does however see himself as still having a contribution to make. You've acknowledged that yourself. But you've lived through the interminable internecine battles between Kevin Rudd and Julia Gillard – if Tony Abbott stays on, what kind of trouble could he pose for Malcolm Turnbull?
LEIGH: Tony Abbott is really nothing more than a symbol of the division that exists within the Liberal Party. The moderates and the extremists are poles apart and there's a strong wing within the Liberal Party who hold views on race and on economic affairs which are badly out of step with the Australian public. I just think in general we don't use our ex-Prime Ministers particularly well, and I would really like to see Australia find a good way of making use of Tony Abbott's skills. As I mentioned before, his sporting contributions and his ability to work on issues like healthy lifestyles in Indigenous communities play a uniting role, and I think Australians across the board would admire him if he was to choose to work in that space.
CARABINE: Andrew Leigh, thanks for your time.
LEIGH: Thank you, Alison.
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