The latest Fairfax-Ipsos poll results have been released and reveals that Australian voters remain lukewarm about raising/broadening the GST, with just 52% supporting the move provided it is accompanied by adequate compensation for the poor and other taxes are trimmed. From Fairfax:
…when asked if they would support an increase to the GST if it were accompanied by other tax cuts and compensation for households with income less than $100,000, “a slim majority”, at 52 per cent, would support the change.
…a higher GST is backed by just 28 per cent of voters. But when other sweeteners are included, such as lower income tax rates, and perhaps changes to stop the wealthy from exploiting superannuation tax breaks as a kind of legalised tax haven, that 28 jumps to more than half.
That gives the government something to work with…
It is unfortunate that the whole tax reform debate has been hijacked by the GST. Rather than raising/broadening the GST being a bit part of tax reform (or ignored altogether) it has instead become synonymous with tax reform, in the process diverting attention from far more pressing issues.
And with only around half of voters supporting an increased GST, even when accompanied by other measures, and Labor, the Greens and some cross-benchers opposed, it appears that the Turnbull Government faces a near impossible task of getting GST reform through both houses.
As argued last week, Malcolm Turnbull should well consider ruling-out GST reform now to give the Government clear air to discuss more pressing tax-related issues. These include, but are not limited to:
- Unwinding the many tax concessions that are broadly inequitable, cost the Budget significant sums in revenue foregone, and reduce the progressiveness of the tax system, including: negative gearing, the capital gains tax discount on investments held for more than one year, along with FBT concessions on cars ‘purchased’ under a novated lease for private use.
- Taxing superannuation contributions/earnings at a progressive but concessional rate, as advocated by Deloitte, MB and the Henry Tax Review.
- Taxing superannuation earnings in the retirement phase, thus extending the 15% tax rate to fund earnings in that stage (perhaps with an offset for people earning below the tax-free threshold).
- Reducing superannuation contributions limits.
- Placing a lifetime cap on superannuation nest eggs.
- Tightening means testing of the Aged Pension by including one’s principal place of residence in the assets test, supported by an expansion to the Pension Loans Scheme, so that asset-rich retirees can continue to receive income support via a government-run reverse mortgage.
- Eliminating inefficient taxes like stamp duties in favour of a broad-based land tax and greater taxes on resource rents.
- Extending the 2% Medicare Levy to incomes sheltered from tax by the above tax concessions (e.g. the CGT discount).
- Cracking down on discretionary trusts and private companies, which allow relatively well-off individuals to avoid tax by diverting and ‘sheltering’ their income or income producing assets.
- Abolishing the private health insurance rebate (which, less face it, is inflationary and hasn’t reduced pressure on public hospitals).
- Similar treatment for different types of savings.
- Implementing an inheritance tax (death duty), as exists across many OECD countries.
The above measures would go a long way to improving the sustainability of the Budget, whilst also improving equity. But it is difficult to have a conversation as long as the GST is sucking all of the oxygen.
Therefore, it’s time to move beyond the GST.
