Tuesday, 14 October 2014

How will Abbott fund his costly war?

This quote from an article in The Sydney Morning Herald on 3 May 2014 is well worth remembering as the Abbott Government’s penchant for living beyond its means sees government borrowings grow to over $355 billion last month:

Figures from the Australian Tax Office and federal government show the average Australian can expect to pay about $4600 in indirect taxes this financial year....
The Henry Tax Review, which reviewed Australia's taxation system after the global financial crisis, found Australians pay "at least" 125 taxes each year.
Of these, 99 are levied by the federal government, 25 by the states and one by local government (council rates).

If readers are wondering where from among all these taxes Treasurer Joe Hockey and Finance Minister Mathias Cormann will find the billions required to also sustain Tony Abbott’s desire to strut the world stage as ‘war’ leader, then this article in The Australian on 10 October 2014 may offer a clue as to the direction in which some of his political troops might start looking to raise the money:

In a GST reform-shy political environment, the Wednesday evening meeting almost felt like the gathering of a secret society, according to one MP who was present.
One attendee told The Aus­tralian: “Please don’t write this, because if you do it will give the command-and-control structure more reason to clamp down on ­debate.”
Of course it was nothing of the sort: some MPs received written invitations; others were informed of the meeting by word of mouth. But the sentiment speaks to the difficulties Liberals interested in pursuing GST reform face. 
Fear of a scare campaign has made all sides of politics wary of opening a debate on the GST, with the ­former Labor government, for ­example, putting the consumption tax entirely off-limits from Ken Henry’s review of the tax system in 2009.
Former West Australian treasurer Christian Porter, now a federal MP, had used the party room weeks ago to announce that WA Liberals planned to submit their own recommendations to the government’s taxation white paper process, due to report next year, outlining their hopes that GST equalisation could be amended.
The Prime Minister said he thought that was unwise. Joe Hockey used the comments to attack Barnett’s fiscal competence, drawing a rebuke from deputy leader Julie Bishop, the most senior West Australian MP, who was not at Wednesday’s meeting.
“The message in the party room to Christian was pretty clear, but I think everyone decided they were interested enough in getting informed”, said an MP who was in attendance.
A senator said: “Most people were very surprised by the ­turnout.”
Among the Liberals in attendance were: Smith, Porter, Simon Birmingham, Steve Ciobo, David Coleman, Sean Edwards, Ian Goodenough, Peter Hendy, Steve Irons, Nola Marino, Don Randall, Luke Simpkins, Rick Wilson, Zed Seselja, Ken Wyatt, Scott Ryan, Mitch Fifield, Kelly O’Dwyer, David Fawcett, Rohan Ramsey and Melissa Price.
John Howard’s long-time chief-of-staff Arthur Sinodinos was there too, although absent were Hockey and his Finance Minister, the West Australian senator Mathias Cormann.
It wasn’t just Liberals in attendance; Nationals senator Bridget McKenzie and lower-house MP Kevin Hogan attended, as did crossbenchers David Leyonhjelm, Bob Day and West Australian Palmer United Party senator Zhenya Wang. “Their attendance was very interesting,” another MP who was present said.
Leyonhjelm said the meeting struck him as a growing sign of interest in reforming the GST among federal Liberals.
The sense of purpose that something needed to change when it comes to the GST was “in the air”, as one senator put it……
More interesting than the well-worn complaints in Nahan’s speech was the question-and-­answer session that followed.
Liberals appeared to recognise that the only way to equalise the GST, which meant getting other states to agree to lose surplus receipts they were currently enjoying, was by making wider changes to the tax, indeed to the Federation, which could mean broadening the base and increasing the rate.
In a sure sign that Liberals are concerned about “retribution” from Abbott’s office, as one MP put it, no one contacted by The Australian was prepared to name those who asked questions of Nahan about how best to reform the GST in a way that might bring most premiers along for the ride.
Adjusting the GST is a sensitive topic. Abbott has been permanently scarred by his experience as John Hewson’s press secretary before the “unlosable” 1993 election, in which the then Liberal opposition argued the case for a broadly applied 15 per cent GST.
The discussions around the room on Wednesday evening broached a range of reasons that reforming the GST might be necessary: to lift government revenues; to tax currently untaxed parts of the cash economy; to pay for ballooning spending in areas such as health and ageing, not to mention costly initiatives just over the fiscal horizon such as the ­national disability insurance scheme; to lower inefficient taxes that stifle international competitiveness; to restore the structural soundness of the budget, and in turn return it to surplus; to bring consumption taxes in this country into line with other developed ­nations; and, of course, to ensure a fairer distribution of the GST, along the lines West Australian MPs have long been complaining about.
Just as well for Hockey that Ciobo, his parliamentary secretary, was present to take notes. [my red bolding]

The Prime Minister has been careful in recent days to state that he won’t be introducing “new” taxes to fund this second war in Iraq. Of course raising the Good and Services Tax (GST) would not be introducing a new tax.

This was Abbott in The Coffs Coast Advocate in May 2014 on the subject of raising the GST:

Mr Abbott told the ABC this morning that it was up to 'grown up governments' to find ways to fund their own areas of responsibilities.
He would not be drawn on whether he would support a GST increase, saying that was a matter for the states, even though the Commonwealth collects it.
Mr Abbott said that would be discussed as part of white papers on taxation and federation.

According to The Guardian, the subject of the GST was raised again at the Council of Australian Governments (COAG) meeting on 10 October 2014:

The West Australian premier, Colin Barnett, agitated over the “broken” system for carving up revenue from the goods and services tax (GST) – a perennial topic of frustration – by emphasising that the current system was bad for the stability of state budgets.
In an attempt to broaden the argument rather than simply complain about WA being a net provider of funding to smaller states, Barnett argued Queensland and New South Wales would be “next in the firing line” to lose funding under the existing formulas and this could lead to ongoing “chaos” in state budgeting.
Abbott pointed to a forthcoming tax white paper as the vehicle to address these concerns and achieve a “transparent and fair system”. He noted that the present GST system may well be fair “but it is certainly not transparent”.

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