Tony Abbott just outlined what sounds like a policy on tax reform

Tony Abbott. Photo: Getty Images.

Tony Abbott is in South Australia where he’s expected to announce a multi-billion dollar commitment to the future of the state’s shipbuilding industry.

He was interviewed on FiveAA radio this morning and was asked by David Penberthy about last month’s talks with the leaders of the state and territory governments, where tax reform was on the agenda after NSW Premier Mike Baird suggested lifting the GST rate to 15%. Here’s what he said:

I’m speaking now, if you like, as an economist or someone with an interest in good economics rather than a serving prime minister. If you were going to undertake change in this area, it would have to be part of general tax reform, and the rules would have to be something like this: that the overall tax burden would have to be lower, that the system would have to involve not just lower taxes, but simpler and fairer taxes, and it would absolutely have to be directed towards maximising productivity and efficiency. And frankly, the most inefficient thing about our tax system is we’ve got more than 100 separate taxes in this country right now. Each one of them is costly to administer at the business and the individual and the governmental level, and yet only 10 of those taxes raise more than 90 per cent of the revenue. So plainly, we could abolish all of these petty taxes, and be smarter about the more significant ones. That would be better for our country overall.

This lines up with what Scott Morrison said last month when asked if people would wear an increase in the general consumption tax. Morrison said: “I am quite sure that Australians out there if they had to pay more for GST they would want to see things like stamp duties go, they would want to see land taxes go, they would want to see payroll tax go…”.

Even though the PM says he’s not speaking as a serving prime minister, he is the serving prime minister. And while it’s an elaboration of the existing policy of “lower, simpler, fairer” taxes, with the GST in play the discussion is starting to develop some detail, and sounding like a framework for significant tax reform.

The major obstacle remains in requiring agreement from the state and territory leaders, who would need to relinquish control over some major revenue lines and rely instead on the increased GST being handed over by Canberra. And an increase in the GST would likely come with a vast compensation package in the form of income tax reductions, especially for lower income earners. It is an enormous project – but clearly on the minds of government leaders.

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