Over the weekend Tony Abbott gave a speech flagging major changes to federal/state relations and the way state services are funded. I joined Marius Benson on ABC NewsRadio to raise concerns about this simply being a stealth move to raise the GST.
MONDAY, 27 OCTOBER 2014
SUBJECT/S: Tony Abbott’s plans to increase the GST
MARIUS BENSON: Andrew Leigh, can I risk losing all listeners by beginning with asking you about vertical fiscal imbalance, which is the gap between the federal government gathering taxes and the state government spending them. The recommendation to the Government is that this makes no sense and a lot of people agree with that. Do you?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: One of the concerns, Marius, is not just that taxes are raised at the level they’re spent, but that they’re raised in efficient ways. When economists look at Australia’s tax mix, I think we look at taxes like income taxes and corporate taxes as being fairly efficient tax bases and so some transfers from the federal government to the states make sense. Frankly that’s what you see in other federal systems such as the United States and Canada.
BENSON: Well, Nick Greiner, for example – the former New South Wales Premier – takes a less sanguine view. He calls the present system ‘close to dysfunctional’ and says the federal/state system is a shambles where you’ve got all levels of government sort of doing everything.
LEIGH: I don’t think I would agree with that description and I am worried about the turn that the federalism debate is taking. Mr Abbott seems to think that Commonwealth money is a magic pudding and that he can give more to one state but not have to take away from another state in the process. In a way, federalism is fundamentally an egalitarian institution. When states aren’t doing so well, we give them a helping hand, and if you hack into that element of federalism then you make us again a more unfair country. That’s a road that the Abbott Government unfortunately seems keen to walk down.
BENSON: But can’t you make the tax system more efficient, without making it less fair?
LEIGH: It’s certainly possible and that’s what we focused on in the Henry Tax Review. Let’s not forget that one of the biggest tax reforms of recent years was to increase the tax on carbon pollution and reduce the tax on work. That was an environmental measure, sure, but it was also a measure which was designed to encourage people to work and which was supported by a range of economic evidence. I want to see tax reforms backed in by strong evidence – rather than tax reform which is entirely contrary to the position that Mr Abbott took before the last election and which is unfair, which is what a rise in the GST would be.
BENSON: In broad terms, is there merit in shifting the tax load to some extent towards indirect taxes to allow a reduction in income taxes? To increase things like –not necessarily the GST but those other indirect taxes – to allow an income tax drop?
LEIGH: Let’s be clear about what we’re talking about with indirect taxes. We’re talking principally about fuel taxes, car taxes, wine taxes and the GST, and of those of course the lion’s share is the GST. Really when the Abbott Government says that it wants to have a debate about income taxes and it wants to increase the states’ revenue capacity, it’s resorting to code words. Because Mr Abbott doesn’t want to be clear with the Australian people that he’s getting ready to break yet another promise and do something that is yet again unfair when this is so much from the playbook of the last budget. It breaks promises, and also takes from the most vulnerable. Again, that is what a change to the GST would do Marius. We’re up for sensible debates about tax reform in the Labor party, but we are not up for more broken promises and more measures which are unfair on Australian families.
BENSON: You say you’re up for sensible debate, but you reduce all propositions to arguing the Government is really just trying to increase the GST by stealth.
LEIGH: Which indirect tax do you think they’re trying to move Marius?
BENSON: I don’t know, I’m not speaking for the Government. But is there no scope for discussing taxes without simply insisting that the GST is the nub of the Government’s concerns?
LEIGH: The GST is the principal indirect tax and so this seems to be the agenda that the Government is pursuing. You can see that in the budget which took $80 billion of health and education funding out of states, effectively starving them into the invidious position of now in some cases, coming out and arguing for an increase in the GST, as Mike Baird seems to be doing.
BENSON: Andrew Leigh, thank you very much.
LEIGH: Thank you, Marius.
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