Joe Hockey calls 'game over' on GST increase after state backlash
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Version 0 of 1. Joe Hockey appears to have gone cold on increasing the goods and services tax (GST), declaring that he will not waste political capital arguing for tax changes that the potential beneficiaries have repudiated. The treasurer signalled the government would look for other options, just hours after he revived debate about increasing the rate or base of the GST by noting that “many submissions” to the tax white paper process supported the idea. “I heard that the premier of Victorian [Daniel Andrews] today ruled out any change to the GST, just ruled it out flatly – no broadening of the GST, no increase in the GST,” Hockey said on Wednesday afternoon. “Well, let me be very frank. The federal government is not going to be arguing for a tax change that the beneficiary actually doesn’t want. You can waste a lot of capital, a lot of capital, in the debate on reform but if the beneficiary of that reform actually says ‘no, we don’t want it, you’re on your own’, well, it’s effectively game over.” Hockey made the remarks while answering questions at a PwC tax reform forum in Melbourne on Wednesday. During the question-and-answer session he was also challenged about the government’s decision to rule out certain other options for tax reform, such as reining in superannuation tax concessions and negative gearing. Hockey said it was “a common practice worldwide” for individuals to be able to deduct the expenses of a business or an investment against their primary income. But the Reserve Bank of Australia (RBA), in a submission to a parliamentary inquiry into housing that was established by Hockey, backed the need to review negative gearing. The RBA said Australia’s treatment of property investors was “at the more generous end of the range of practice in other industrialised economies”. “The bank believes that there is a case for reviewing negative gearing, but not in isolation,” the submission said. “Its interaction with other aspects of the tax system should be taken into account.” The government is developing tax and federation reform white papers, which will provide options for the Coalition to take to the next election. Business groups have been calling on the government not to drop the ball on economic reforms. The prime minister, Tony Abbott, will discuss the issues with state premiers and territory chief ministers at a Council of Australian Governments (Coag) leaders’ retreat in Sydney next week. In a lunchtime speech to the forum in Melbourne, Hockey called for “a sensible, mature debate about long-term tax reform” and matching state governments’ revenue raising capacity with their service delivery responsibilities. In extracts that were provided to media in advance and published on Wednesday morning, Hockey said many submissions to the tax review backed changes to the GST, but such a move would require “the unanimous agreement of state and territory governments and bipartisan support in the federal parliament”. The Coalition has expressed a similar formulation for several months but the federal Labor party seized on the remarks as a sign the government was trying to put pressure on the states to increase the GST’s 10% rate and broaden the base to include fresh food, health and education services. It prompted Andrews to declare on Wednesday morning that Victoria would “not support fundamental changes to the GST”. All the revenue from the GST is distributed to the states and territories. Hockey specifically referred to Andrews’s comment in his responses after the speech. “Well, the premier of Victoria just ruled it all out; unilaterally, under no political pressure, just ruled it all out,” he said. “This is the difficult environment in which we operate where we say, ‘OK, let’s have a long-term considered approach to tax reform’ ... and you have for-all-time unilateral rule-outs in relation to some of the structural change that may be necessary, and that’s quite frustrating.” But Hockey suggested it would be “a lazy approach” to simply advocate broadening or increasing the GST as the only possible tax reform. He said the GST was under increasing structural threat because of the mobility of commerce and might not exist in 30 years in any event. Related: Negative gearing should be phased out for all not just some, says economist Asked about the government’s reluctance to touch superannuation, negative gearing and capital gains tax, Hockey insisted the government was “addressing the entire taxation system”. He said the government did not have plans to increase superannuation taxes because of the need for stability. Abbott has previously been more definitive, saying the government had “made a very clear decision that we aren’t ever going to increase the taxes on super”. The federal opposition’s finance spokesman, Tony Burke, said the GST was a regressive tax. “There’s no way of increasing the revenue for it without hurting people who can least afford it and Joe Hockey shouldn’t be able to think he can get away with some sort of game with the states which is ultimately aimed at a massive hike, a massive hike in the base and the rate of the GST,” Burke said. State and territory leaders from across the political divide have criticised Abbott for his 2014 budget decision to cut about $80bn from long-term projected hospital and school funding payments. Premiers and chief ministers argue this will place an “unsustaintable” crunch on their budgets. They are expected to raise the issue at the Coag event next week. |