Australian Politics Forum

GST key to tax reform, says Nick Greiner

by: DAVID UREN, ECONOMICS EDITOR
From: The Australian
November 03, 2012

THE former premier hand-picked to review the carve-up of the GST has warned the tax is failing to deliver the revenue expected of it and has called for a national debate about its rate and scope.    :-?

The GST review, led by Nick Greiner, was delivered to Wayne Swan yesterday and says the tax is becoming an unstable source of revenue for the states.

The review, which was called by the Treasurer in March following complaints by Western Australia about the fairness of the system for dividing the GST pool, was not designed to look at the rate of the tax or what it covered.

The former NSW Liberal leader said yesterday they were "a much more important issue" and the distribution of the GST was a "second-order issue".

"It's not in our terms of reference but the report does deal with the size and stability of the (GST) pool as well as its distribution, although I don't know that the Prime Minister or the Treasurer, who asked us to go do it, really wanted us to go there," Mr Greiner told the Securing Australia's Future conference sponsored by The Australian and Melbourne University.

Mr Greiner said that although the distribution of the GST was important to state treasurers, it did not go to the heart of the fiscal challenge they faced. "The overwhelming problem is that the size of the GST isn't growing the way it was intended to and not growing anything like the growth in health expenditure," he said.

The deal concluded by the Howard government before the 2001 introduction of GST included the exemption of food, health and education.

Mr Greiner's comments are likely to intensify the fight over the $50 billion in annual GST collections as sluggish consumer spending leads to a slowdown in revenue growth, forcing state treasurers to slash their revenue forecasts.

The big Coalition states are demanding a new approach to the way GST is allocated, including a bigger share for the major resource states, but are divided on whether to consider increasing the overall take.

NSW Premier Barry O'Farrell and Treasurer Mike Baird both declared in September that the base and rate of the tax could be up for debate, but Mr Baird told The Weekend Australian last night that his "first consideration" was the way many online purchases were exempt.

Queensland Treasurer Tim Nicholls said his government did not support a GST increase but instead wanted Canberra to close loopholes in the tax to prevent revenue being lost.

Business Council of Australia president Tony Shepherd and chief executive Jennifer Westacott have made the case for a shift in the nation's tax mix to collect more from consumption taxes, to ease other imposts on businesses and households.

Former Treasury secretary Ken Henry warned in July that states were at risk from slowing GST growth and that the nation needed to adjust to higher consumption taxes, while former Board of Taxation chairman Dick Warburton has urged a debate on increasing the tax.

Finance Minister Penny Wong said yesterday the government's opposition to increasing the GST was well known. "The Treasurer has made very clear he's ruled out changes to the base or the rate," she told the conference.    :)

Senator Wong conceded the budget did face long-term structural problems, with the tax base getting narrower as the ageing reduced the share of the population in the workforce.

"Without change and on current settings these factors will lead to a sustained period of fiscal imbalance," she said.

"This will require more than just policy. It will also require the polity to face up to these facts."

Grattan Institute director John Daley said the GST tax base appeared to be permanently damaged. He said budget forecasts anticipated that company and individual taxes would rise above the level of 2008-09, when the global financial crisis struck. He expected GST receipts would still be below that level by 2015-16.

"It's not that people are buying stuff off the internet," he said. "It is that they are increasingly buying things that are not subject to GST, particularly health and education.

"Also, people are saving a lot more and GST is an expenditure tax. Australian consumers are now saving about 10 per cent of their disposable income and that doesn't fall to the GST net."

Deloitte Access Economics director Chris Richardson said one of the reasons why GST receipts were falling was because economic growth was now being driven by business investment, whereas in the lead-up to the global financial crisis it was led by consumer spending. Investment spending was tax deductible.

Opposition finance spokesman Andrew Robb said that if successful at the next election, the Coalition's first priority would be removing the carbon and mining taxes. However, it would prepare a white paper on tax reform in its first term of office to take to the 2016 election. He said reform should be comprehensive, not a piece-meal change to a single tax such as GST.

Tony Abbott recently said the Coalition had no plans to change the GST - "none whatsoever". Mr Greiner said there needed to be a debate involving all levels of government about the scope of government and the preparedness of the community to pay for the services it delivered.

He said state governments had no choice but to cut public servants if they wanted to make savings, because that is where 80 per cent of their spending was.    :(

Mr Greiner said at it was naive to imagine that the funds raised by an increase in the GST could simply be directed to lowering other taxes. He said when the GST was eventually increased, funds would be directed to expenditure and to delivering compensation.

Reserve Bank board member and Keating government adviser John Edwards said he did not believe that raising the GST rate and extending it to food, education and health, and using it to lower the company and personal income tax rates, was politically feasible. "In fact, there is very little revenue to be gained in the net sense from health and education, which are very largely funded by government," Dr Edwards said.

"What you are really suggesting ... is we are going to increase the price of fresh food by 10 per cent and we are going to give the proceeds to a reduction in corporate tax and to marginal personal rates. Politically, that has nothing going for it. It has no chance of being adopted by any political party."

Finance Minister Penny Wong said yesterday the government's opposition to increasing the GST was well known. "The Treasurer has made very clear he's ruled out changes to the base or the rate," she told the conference. :)

What about you Mr Abbott, will you rule out an increase in the rate of the GST????. :-?

wrote on Nov 3^rd, 2012 at 7:41am:

What about you Mr Abbott, will you rule out an increase in the rate of the GST????. :-?

he already has. Repeatedly.

but you prefer the word of the 'there wil be no carbon tax' party.

What about the never ever GST party?. :(

Several Interesting factors:

The states have been made dependant on a tax which is garanteed to deliver less when they need more.

The West Whinging and Whining about their share, they never held that view for all the decades they were heavily subsidised by the eastern states.

gold_medal wrote on Nov 3^rd, 2012 at 8:02am:

wrote on Nov 3^rd, 2012 at 7:41am:

What about you Mr Abbott, will you rule out an increase in the rate of the GST????. :-?

he already has. Repeatedly.

but you prefer the word of the 'there wil be no carbon tax' party.

he already has.

Yes he already voted to increase the GST.

between 1998 and 2000 he voted to take it from 0% to 10%.

There is plenty of money in the high end superannuation schemes, political pensions and share-market portfolios for the Government to source for revenue for the common good...its not as hard as they think to take back some of the bounty from filthy capitalism - stand down the military and scrap the defense budget FFS...
:) :)

wrote on Nov 3^rd, 2012 at 7:39am:

Why haven't Labor rolled the GST back as promised if they are so against it? :(

Another broken promise from the pathological LieBor party....... :D :D

Greiner is right. If you Pinkos want free education and universal healthcare increasing the GST would be the logical thing to do.

Everybody spends so everybody pays even the black economy pays GST.

Remove all the exemptions and increase the GST to 15% just like DR Hewson planned. Pump the extra money into hospitals and schools and infrastructure.

If Hewson's policy was implemented in 1993 hospitals & schools wouldn't be up schitt creek and we just might still have a manufacturing industry.

Stupid Lefties shot themselves in the foot with that one didn't you. Blame the Grim Reaper for selling his soul for "the sweetest victory of all".... >:( >:( >:( >:( >:( >:( >:( >:( >:( >:( >:( >:( >:( >:(

Nick Greiner for PM.........

Swagman wrote on Nov 3^rd, 2012 at 8:52am:

wrote on Nov 3^rd, 2012 at 7:39am:

Keating came up with a GST well before Howard who opposed it when he was in opposition ;D
PS..I agree..Nick Greiner for PM

adelcrow wrote on Nov 3^rd, 2012 at 8:59am:

Swagman wrote on Nov 3^rd, 2012 at 8:52am:

wrote on Nov 3^rd, 2012 at 7:39am:

Keating came up with a GST well before Howard who opposed it when he was in opposition ;D
PS..I agree..Nick Greiner for PM

.......as I said Keating "sold his soul"

Quote:

He said state governments had no choice but to cut
public servants if they wanted to make savings,
because that is where 80 per cent of their spending was.

There are too many public servants & my idea of reducing their wages is correct.
They can always get real jobs in private industry if they don't like a pay cut.

Tax problem solved overnight by Bobby!

Swagman wrote on Nov 3^rd, 2012 at 8:52am:

Why haven't Labor rolled the GST back as promised if they are so against it?

Another broken promise from the pathological LieBor party.

Greiner is right. If you Pinkos want free education and universal healthcare increasing the GST would be the logical thing to do.

Why haven't Labor rolled the GST back as promised if they are so against it?

Another broken promise from the pathological LieBor party.

Removing the GST or rolling it back has not been Labor policy since about 2003.

Greiner is right. If you Pinkos want free education and universal healthcare increasing the GST would be the logical thing to do.

The Lieberals also pretend to not be in favour of increasing the GST.

Bobby. wrote on Nov 3^rd, 2012 at 9:11am:

Quote:

He said state governments had no choice but to cut
public servants if they wanted to make savings,
because that is where 80 per cent of their spending was.

Very true you can run with Nick Griener. The public sector needs to mirror the private. It cannot be immune from a declining economy where private sector workers are losing thier jobs or where the income of business is declining (AKA taking a pay cut) due to a drop in business.

Dnarever wrote on Nov 3^rd, 2012 at 9:16am:

Swagman wrote on Nov 3^rd, 2012 at 8:52am:

Yes they haven't got the balls either.

They would prefer to cut spending or selling something to proposing increasing taxes. Increasing taxes is suicide to political parties which is why Julia had to blatantly lie to impose her CO2 tax.....

wrote on Nov 3^rd, 2012 at 8:05am:

What about the never ever Carbon Tax party?. :(

You mean the ALP?

Dnarever wrote on Nov 3^rd, 2012 at 8:06am:

Very true. For most of the time since Federation, WA was heavily subsidised by the rest of the country. And if the mining boom really ended (not the govts version of it!) they would need subsidy again. Its time for WA to pay into the COUNTRY'S bank account. At last count, they still owe the rest of us.

Dnarever wrote on Nov 3^rd, 2012 at 8:08am:

gold_medal wrote on Nov 3^rd, 2012 at 8:02am:

wrote on Nov 3^rd, 2012 at 7:41am:

What about you Mr Abbott, will you rule out an increase in the rate of the GST????. :-?

he already has. Repeatedly.

but you prefer the word of the 'there wil be no carbon tax' party.

he already has.

Yes he already voted to increase the GST.

between 1998 and 2000 he voted to take it from 0% to 10%.

Since you want to play the pedantry game I will join you.

There never was a 0% GST rate therefore he didnt INCREASE it. He IMPLEMENTED it.

Thats how you pla the pedantry game and in you case, how you lose.

adelcrow wrote on Nov 3^rd, 2012 at 8:59am:

Swagman wrote on Nov 3^rd, 2012 at 8:52am:

wrote on Nov 3^rd, 2012 at 7:39am:

Keating came up with a GST well before Howard who opposed it when he was in opposition ;D
PS..I agree..Nick Greiner for PM

And now for the facts...

Keating proposed a GST at a tax summit but was rejected by cabinet and his own party.

Howard had been in favour of a GST for a very long time as part of his 1983 tax reform suggestions (which he didnt get the chance to implement)

In the meantime, Keating OPPOSED his own preferred option sfor short-term political gain while Howard - the principalled PM - implemented it,

Howard for PM... AGAIN!

gold_medal wrote on Nov 3^rd, 2012 at 12:07pm:

Dnarever wrote on Nov 3^rd, 2012 at 8:08am:

gold_medal wrote on Nov 3^rd, 2012 at 8:02am:

wrote on Nov 3^rd, 2012 at 7:41am:

What about you Mr Abbott, will you rule out an increase in the rate of the GST????. :-?

he already has. Repeatedly.

but you prefer the word of the 'there wil be no carbon tax' party.

he already has.

Yes he already voted to increase the GST.

between 1998 and 2000 he voted to take it from 0% to 10%.

Express it however you like - the fact is he took it from 0% to 10%.

gold_medal wrote on Nov 3^rd, 2012 at 12:10pm:

Howard had been in favour of a GST for a very long time as part of his 1983 tax reform suggestions (which he didnt get the chance to implement)

His support actually went back to the seventies.

Keating proposed a GST at a tax summit but was rejected by cabinet and his own party.

In the end Keating backed out himself - the problem was that they could not find a fair implimentation path.

In the meantime, Keating OPPOSED his own preferred option sfor short-term political gain while Howard - the principalled PM - implemented it,

You were going OK till this point where you departed from fact. Labor opposed this implimentation for the same reason that they shot their own proposal down. the implimentation was faulty.

Dnarever wrote on Nov 3^rd, 2012 at 1:55pm:

gold_medal wrote on Nov 3^rd, 2012 at 12:07pm:

Dnarever wrote on Nov 3^rd, 2012 at 8:08am:

gold_medal wrote on Nov 3^rd, 2012 at 8:02am:

wrote on Nov 3^rd, 2012 at 7:41am:

What about you Mr Abbott, will you rule out an increase in the rate of the GST????. :-?

he already has. Repeatedly.

but you prefer the word of the 'there wil be no carbon tax' party.

he already has.

Yes he already voted to increase the GST.

between 1998 and 2000 he voted to take it from 0% to 10%.

Express it however you like - the fact is he took it from 0% to 10%.

not by even the most liberal interpretation of the word can you 'increase' something that formerly didnt exist. Like I said, I can play the pedantic game all you like. But apparently you arent quite aware of the rules or even what 'increase' means.

Swagman wrote on Nov 3^rd, 2012 at 9:17am:

Bobby. wrote on Nov 3^rd, 2012 at 9:11am:

Quote:

He said state governments had no choice but to cut
public servants if they wanted to make savings,
because that is where 80 per cent of their spending was.

There are too many public servants & my idea of reducing their wages is correct.They can always get real jobs in private industry if they don't like a pay cut.

Tax problem solved overnight by Bobby!

Good - I have one convert.

Australian Politics Forum
http://www.ozpolitic.com/forum/YaBB.pl General Discussion >> Federal Politics >> GST Key To Tax Reform, Says Nick Greiner. http://www.ozpolitic.com/forum/YaBB.pl?num=1351892269 Message started by imcrookonit on Nov 3^rd, 2012 at 7:37am