View from The Hill

View from The Hill

Government can’t just push GST issue on to the states

Prime Minister Tony Abbott is keen to shift responsibility for the debate on the GST. AAP/Alan Porritt

Given all we’ve been through in relation to political honesty, could we just set a “truth” baseline as we start another round of the GST debate?

Tony Abbott is trying to give the impression that the future of the GST has nothing to do with him, and that he wouldn’t be wanting to make it more burdensome.

Asked whether the conversation about the federation should include a discussion about the GST’s base and rate, he said on Tuesday that this was a matter for the states, because they get all the revenue from it.

“If they want to change the GST, that’s certainly something that they can put on the table as part of the federation white paper process.

"As far as I’m concerned, I have no plans to change the GST. I want taxes to be lower, simpler and fairer.”

He also said that “my opinion is that we pay more than enough tax already and we have got to, over time, get taxes down”.

It is certainly not correct that the future level and shape of the GST is just a state matter.

This is a federal tax, even though it all goes to the states. It was brought in as the centrepiece of a broad tax package, after John Howard took it to the 1998 election. Any discussion of its future – considered in the tax white paper – concerns the Commonwealth as much as the states. In tax policy everything is connected to everything else.

As for the line “I have no plans to change the GST”, you could drive Paul Keating’s proverbial tax cart through that. It seeks to leave an impression but says very little. As does his comment that “my opinion is that we pay more than enough tax already”.

The government’s tactic is to wear white gloves while it tries to manoeuvre everyone else, especially the states, into getting their hands dirty. It wants the GST debate back on the table, without having to put it there itself.

The states, with three Liberal premiers facing the people soon, are refusing to play along, but some federal Coalition backbenchers and non-politicians are stirring the issue. World Vision’s Tim Costello, concerned about cuts to foreign aid and the need to finance programs including the national disability insurance scheme, said last week that we need an “adult conversation” about the GST.

One problem for the federal government is timing. It is trying to force the states’ hands now, while its federation and tax white papers follow much later.

But the bottom line is clear. There is going to be, and needs to be, a major debate about getting more revenue from the GST. The federal government should be at the centre of that discussion because if there are to be changes to the GST, it must advocate them at the 2016 election.

The states will also have to take responsibility but the major weight will fall on Canberra. The federal government can’t shelter at the periphery and it is dissembling for it to suggest that is its place.

Reform of the GST will be a high hurdle if the Abbott government decides to take it on. Altering base or rate requires agreement from all states as well as the Commonwealth (one reason why the Australian GST has not changed), and the arguments against are easy for an opposition to run.

It’s no wonder Canberra is sending such mixed signals. But the risk is that if it does take the leap, its lines now will be seen in retrospect as another case of being loose with the truth.