Monday, 19 January 2015
The Drum 11 January 2015:
It appears Tony Abbott will try to expand the GST by replicating the campaign blueprint used by John Howard to introduce the tax in the first place. But what worked then might not work now, writes Paula Matthewson.
More than a decade after the Howard Government introduced a goods and services tax, political pundits remain divided over whether the accompanying GST campaign was effective.
Some point to Howard's re-election after proposing the new tax as proof of the campaign's success, while others claim Howard almost lost because of it.
Despite the lack of consensus it appears the Abbott Government is using the same campaign blueprint, this time in an attempt to create public acceptance for increasing or broadening the GST.
Back then, Howard was saddled with an earlier promise to "never, ever" introduce a GST but was being pressured to introduce one. According to one account, senior members of the business community were openly questioning Howard's economic reform credentials, while the press gallery were asking why he wouldn't lead (or at least follow).
So the then PM created a situation where journalists and economists, business and welfare organisations and even voters called for him to "reverse" the never-ever promise for the good of the nation. Howard did this by focusing the numerous fragmented commentaries into one national discussion: one that centred on Australia's "broken" tax system and how it could be "fixed" by scrapping a bunch of inefficient taxes and replacing them with just one.
The mechanism Howard used to focus the conversation was a taxation taskforce (incidentally chaired by Treasury official and former Keating adviser, Ken Henry). It was established to prepare options for tax reform, and recommended that a consumption tax be part of the mix.
A year later, following much public discussion, the Howard government presented voters not only with a proposed GST but an entire package of tax reforms. The package included personal income tax cuts, increases in the tax-free threshold and pensions, and the scrapping of wholesale sales tax. Nine other taxes imposed at the state and territory level were also slated for elimination. Most importantly, all the money raised by the GST was to be provided to the states and territories, supposedly ending their dependence on the federal government's largesse.
Howard then blitzed voters with a controversial advertising campaign before immediately plunging the nation into a moderately early federal election, which he either cleverly won, or foolishly almost lost, depending on whose analysis one finds more convincing.
PM Abbott is clearly banking on the campaign having been a success for Howard, because his "increase the GST" campaign looks eerily familiar.
A bevy of Treasury boffins is currently developing a tax reform paper, while the general public's awareness is slowly being raised through discussion in the media about the need to broaden or increase the GST.
Comments such as those made last week by government backbenchers and ministers serve to kick along the public discussion while keeping the PM's hands clean of the debate until the Treasury report is released later this year…..