View from The Hill

View from The Hill

The government is considering whether to scrap or delay its tax green paper

Malcolm Turnbull will need to allow himself plenty of time to spruik tax reform before an election in 2016. AAP/David Moir

Call me naïve, but I can’t see why Malcolm Turnbull would rush to an election early next year after flagging he will go full term.

Speculation in the last few days has suggested Turnbull would be or should be tempted to seek a mandate in the first months of 2016.

But Turnbull himself on Monday said: “I would say around September, October next year is when you should expect the next election to be”.

It is true that prime ministers can’t necessarily be believed when they talk about election timing. But Turnbull has cause to stick by what he says, even if it does contain a let out (the word “expect”).

As Cabinet Secretary Arthur Sinodinos said on Sunday – when talking about the government trying to undertake major tax reform – it is vital that the Coalition win back the trust of voters. Tony Abbott absolutely squandered trust and, while people are welcoming of Turnbull and like him, the electorate’s general cynicism runs deep.

Imagine the politics of Turnbull presenting an elaborate and challenging tax package, with an increase in the GST, and then calling a snap election before the budget.

The voters’ questions would be obvious. What are you hiding? Why did you say one thing about election timing and do another? How can we believe you on tax when we couldn’t believe you about the election?

One might say that the performance of Opposition Leader Bill Shorten is so bad that Turnbull’s apparent deception on election timing wouldn’t matter.

But campaigns can turn out oddly. In 1984 the popular Bob Hawke – he enjoyed an approval rating of 75% – went to an early election against Andrew Peacock, who was almost on the political floor. Peacock, campaigning on Labor’s pension assets test, did unexpectedly well in a result that gave the government a sharp reality check.

In politics, trying to be too clever can bring trouble. This year in Queensland Campbell Newman, on the nose with electors, tried to bury the state poll in the January holiday season. That just turned voters off even more.

If Turnbull decides to put up an ambitious tax plan, he will need time both to establish his bona fides, and to prepare and sell the policy.

The argument that the next budget will be very difficult, and so it would be best not to have it before the election, has flaws. Apart from anything else, it is harder to pull the wool over voters’ eyes these days, because under the Charter of Budget Honesty, updated official fiscal numbers come out within 10 days of the issue of a writ for the election.

Similarly if the economy were tanking, that would probably be pretty obvious.

An election early next year would have the substantial handicap that it would, in practical terms, have to be a double dissolution, which reduces the quota for the Senate, making it easier for minor parties and independents. This would be a problem even if the government managed to make some changes to the Senate voting system to disadvantage micro-players.

Turnbull needs to quash the speculation of an early election. The government is desperate for business confidence to revive and there are signs the ascension of Turnbull is helping that. But election speculation is always a downer for confidence.

Meanwhile the government is finding managing the tax debate is becoming a tricky operation. It is useful for it to have options, such as a 15% GST, out there being discussed. But it can be dangerous if the discussion gets too far ahead of the government’s capacity to respond.

Turnbull on Monday was juggling keeping options open while providing reassurance. “It’s premature to say that the government has landed on one particular change or another,” he said.

But “any changes to the tax system have got to be ones that ensure that there is no disadvantage to the most vulnerable Australians, to less well-off Australians. We’ve got to … be absolutely clear that any changes to the tax system or the transfer payment system are ones that are fair, that are seen to be fair across the board.”

On Monday Queensland Liberal senator Ian Macdonald strongly opposed an increase in the GST rate – recalling a very old promise. He said that John Howard and he himself had pledged when campaigning for the GST’s introduction, that “there would never be any increase beyond 10%, and that is a promise that I intend to fulfil”. He indicated he would be happy to see the GST – which currently doesn’t apply to fresh food, health and education – go back to the originally planned broader base.

Among the current uncertainties is whether the government will go ahead with its earlier plan to have a tax green paper before Christmas, followed by a white paper next year. Alternatives are to scrap the green paper and just have a white paper, or to delay the green paper until the new year.

The government’s tax Re:think website says:

The government will reflect the community’s views in its options (green) paper. A white paper setting out the government’s tax policy will then be prepared and released. Upon receiving the community’s views on the options paper, we will propose our plan for a better tax system in the tax white paper prior to the next election.

But now it seems the fate of the green paper stage is up in the air. Or, like everything else, on the table.