Malcolm Turnbull and his treasurer Scott Morrison will make the case for a significant overhaul of Australia’s tax system today, with the prime minister calling for a debate on establishing a “big national goal” and then devising policy to achieve it.
“Across government, business, the labour movement and the wider community, we need to have a grown-up discussion, a discussion which first clarifies policy goals and then identifies and removes any obstacles that may be hampering our capacity to generate growth, productivity, investment and jobs,” Turnbull will say, according to comments reported in The Australian.
Morrison, in what will be his first major policy set-piece, will describe the tax system as “inefficient and costly” and will argue that the tax system “will over time, limit jobs growth and make it less attractive to invest in Australia, affecting Australia’s continuing prosperity”.
Momentum has been building this year for taxation reform. Treasury launched a discussion paper on the issue at the start of the year and NSW Premier Mike Baird proposed an increase in the GST from 10% to 15% coupled with income tax cuts to compensate lower-income workers earlier this year.
An increase in the GST with some form of income tax relief has become increasingly discussed as the preferred option. For example, the Baird proposal would compensate people earning up to $100,000 in full for the increased cost of living under the GST increase.
“If you look at the competitiveness of the country, our income tax rates are relatively high on an OECD basis” Baird told Business Insider in September. “Our consumption tax, GST, is right at the bottom. There’s only about two or three OECD countries that have a lower GST than us at 10%. The average is 19.7% so just about 20%.”
There remains opposition to the proposal in many quarters. On ABC’s 7.30 Report last night Cassandra Goldie, CEO of the Australian Council of Social Services, pointed to their research which showed that if GST was increased to 15% and there was a 5% across-the-board income tax cut, “there’s no doubt people on low, modest incomes will be definitely be worse off, up to about $100,000 in terms of household income. The big winners will be people on higher incomes.”
Turnbull will reportedly say today that: “Reform should not be seen as a once in a decade or two convulsion of incumbent-threatening change accompanied by hyperbolic scare campaigns,” and argue that Australia needs to embrace change.
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