From Fairfax:
Massive increases to the GST that would raise up to $45 billion annually will be on the table when Malcolm Turnbull and state premiers meet on Friday, according to a leaked document obtained by Fairfax Media.
The Council of Australian Governments document, marked “for official use only” and titled “Reform of the Federation”, reveals modelling prepared by the federal treasury at the request of the states in July, and will help frame the crunch tax meeting, which will be led by NSW Premier Mike Baird, Queensland Premier Annastacia Palaszczuk and Mr Turnbull.
…The document confirms that a rise in the goods and services tax remains a live option and raises the prospect of a federal election in 2016 fought over the issue if the federal government adopts a plan to hike the GST and can strike a deal with the states, whose support will be needed for any increase.
Offsetting GST price rises for households earning less than $100,000, and half of the price rises for households earning less than $155,000, would use “at least” half the extra GST revenue, it states.
MB supports sensible GST reform but I must say that this has “unintended consequences” stamped all over it. If not handled correctly the retail sticker shock will be material and the big rise in the cost of a new home will almost certainly accelerate the already locked-in downturn coming from mid next year.
This looks like more of a 2017 story, when we expect all Hell to be breaking loose in the economy, so it will add considerable uncertainty to what are already tumultuous times. For a government to be simultaneously jacking up the GST and providing stimulus will not make for a smooth economic narrative. Peter Costello gets it:
Former treasurer Peter Costello has warned the federal government to steer clear of taking an increased GST to the next election just two days before the Commonwealth and states meet for two days to try to reach agreement on tax reform.
Mr Costello, who introduced the 10 per cent GST in 2000, said an increase in the rate to 15 per cent would swamp every other election issue and blunt any cost-of-living campaign the Coalition might mount over the impact of Labor’s ambitious greenhouse gas reduction targets.
Mr Costello, a frequent source of advice for Treasurer Scott Morrison, said those in the Coalition calling for a “50 per cent increase in the GST” were “hotheads” who “have no experience of what it is like to campaign for such a policy”
That said, as the mining crash ruins the Budget outlook, something must be done and there is no easy answer.
