The GST is inefficient and inequitable so why raise it? - RN Drive




MONDAY, 20 JULY 2015

SUBJECT/S: Tony Abbott’s plan to raise the GST; Bronwyn Bishop.

PATRICIA KARVELAS: Andrew Leigh is Labor's Shadow Assistant Treasurer and he's with me now. Andrew, welcome to the program.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Thanks Patricia, good to be with you.

KARVELAS: State Labor leaders are not all singing from the same song sheet: you've got Jay Wetherill not ruling anything out, the ACT Chief Minister saying he'd accept a broadening of the GST base now, and Chris Bowen and Bill Shorten now saying no. Why won't you engage in a discussion at the federal level?

LEIGH: Patricia, we're happy to engage in a conversation, but it's really important that we do that based on the evidence we have on the equity and efficiency of the GST. Normally when you're looking at tax reform, you look at things like simplicity, equity and efficiency. If you look at the efficiency of the GST – in other words, the amount of economic activity that is destroyed for every dollar you raise – the Government's latest tax discussion paper says it is just as inefficient a tax as the income tax. It's much less equitable though. The income tax is paid disproportionately by those further up the distribution and the GST hits those down the bottom.

KARVELAS: But Mike Baird has already proposed that all households at a cap of $100,000 would be compensated if there was an increase like this. So he has built in, in his proposal, a compensation measure to deal with what you rightly point out – that it's a tax that affects some people more than others.

LEIGH: Certainly if you were going to raise the GST you'd have to spend a considerable amount of the revenue on household compensation. When he brought it in, Peter Costello used 55 per cent of the revenue on household compensation. But these days you'd imagine you'd have to use even more. So this is no magic pudding. But I go back to the main economic argument: on the Government's own numbers, the GST is not more efficient than income tax. So why you'd raise the GST and cut income taxes is beyond me.

KARVELAS: How about a Medicare levy increase? That's the proposal that has been put forward by Daniel Andrews, the Victorian Premier. Is that something you'd look at?

LEIGH: The proposals Labor has on the table, which – if you're speaking about mature and sensible tax debates – have been entirely ruled out by the Government, are things like fairer superannuation tax concessions and –

KARVELAS: Yes, I know what you've already said but I'm wondering what you think of the proposal by the Victorian Premier?

LEIGH: Our view is that there are fairer ways of raising revenue. We've put significant measures on the table; they raise $20 billion over the course of a decade. In the case of superannuation tax concessions, we know the Government was looking at this right up until when Labor announced our policy. In the case of multinational taxation, the Government brought down in their budget a policy that raises just one-sixtieth of what Labor's multinational tax plan raises. Both our proposals are carefully costed by the Parliamentary Budget Office and they're fair and sustainable. I don't think you can say any of that for the GST.

KARVELAS: So never ever with the GST? This is the rate it is going to be stuck on forever under a Labor Government?

LEIGH: You can use whatever phrases you like. I'm just giving you the clear economic argument why I don't think there's a strong case for raising the GST. I've been frankly surprised that so many commentators haven't engaged with this basic question of efficiency. They seem to be running off an old hymn sheet in which the GST is claimed to be a far more efficient tax than income tax. But that's not what Treasury has been saying. If you look at it from a state perspective, I think it's fairly clear that a tax reform such as Andrew Barr has put in place, in which you make a switch from stamp duty to land taxes, is textbook economics. You move from a tax on moving house, which is stamp duty, and that's a pretty inefficient way of raising taxes, to land taxes which are among the most efficient taxes we have.

KARVELAS: Jay Wetherill won't rule it out, he's a Labor Premier. Do you think there seem to be different views in the ALP about how to progress these conversations?

LEIGH: I understand that there's a range of different perspectives, and if you look at it from a premier's perspective they're being squeezed hard by Tony Abbott and Joe Hockey. This Government is raising more revenue than any other government; receipts as a share of national income are going up to 25 per cent at the end of the forward estimates, compared with a low of 21 per cent under the Labor Government. This is one of the biggest-taxing federal governments in Australian history, and yet they're squeezing down on the states with these billions of dollars of cuts to the states.

KARVELAS: On RN Drive my guest is Andrew Leigh, the Shadow Assistant Treasurer in federal Labor. I want to move on to this ongoing issue with Bronwyn Bishop. Why are you pushing this issue of her stepping aside now? Doesn't it make sense that first the Finance Department completes its investigation?

LEIGH: That certainly wasn't the perspective that Tony Abbott took when he was Opposition Leader and there were allegations being made against Peter Slipper. He said at the time that the Speaker was entitled to the presumption of innocence, but in order to ensure the integrity of the Parliament, the Speaker should step down. Tony Abbott said then that this was vital in order to maintain the respect and reputation of the Parliament.

KARVELAS: But with respect, Andrew Leigh, I didn't ask a question about what Tony Abbott has been saying. I asked why you don't think natural justice should be served, or that the Finance Department should report and then a judgement can be made?

LEIGH: It's normal for people to step aside while an inquiry is ongoing, where the matter is of sufficient seriousness. I find it surprising that Tony Abbott is not applying the same standard to the Speaker that he appointed that he said ought to be applied to the previous Speaker when he was Opposition Leader. I don't think it's unreasonable, Patricia, to ask the Prime Minister to be consistent from 2012 to 2015.

KARVELAS: So it's about politics?

LEIGH: It's about maintaining the integrity of the Parliament. We believe that this is a matter of the standing of the entire Parliament. We would like to see the form that was signed, which says very clearly on it that making a misleading statement is a breach of the Crimes Act. So this is an important matter. You can't use Parliamentary entitlements just to go to a fundraiser, and so this looks like an inappropriate use of parliamentary entitlements if the facts are true as reported.

KARVELAS: Thanks for joining us on RN Drive, Andrew.

LEIGH: Thanks Patricia.



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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.