Australia's GST debate and the ministry of silly talks

These columns represent different parts of the population. Monty Python / YouTube screengrab

One of the genius elements of Monty Python’s Flying Circus was its take on aspects of current affairs coverage that are still relevant forty years later. Take this, from a spoof show called Spectrum, which opens with Michael Palin as the anchor.

“Good evening,” he says, excitedly. “Tonight’s Spectrum looks at one of the major problems in the world today: the whole vexed question of what is going on.

“Is there still time to confront and let alone solve it, or is it too late? What are the figures? What are the facts? What do people mean when they talk about things?”

This is followed by Graham Chapman as an economist pointing to parts of a bar chart explaining the various parts of the chart represent different parts of the population, and John Cleese as a professor who has spent “many years researching into things” saying “it’s too early to tell”.

“The whole vexed question of what is going on” is particularly relevant to the current debate in Australia about taxation reform, badly needed to rebuild fiscal strength as the structure of the economy evolves after the mining boom, and as it becomes increasingly apparent that some tax settings are hurting our ability to compete for skills and investment.

As for “What are the figures? What are the facts?”, all we know so far is tax reform is likely to be a central battleground in the next election and that Treasury has undertaken modelling for the government on a range of options, including increasing the GST to 15%, and that the prime minister has said this would not happen without a compensation package for poorer households and welfare recipients.

That didn’t stop the Labor party announcing this week that it was opposed to a rise in the GST. Bill Shorten tweeted on Tuesday:

This was a blunt attack. Though the government clearly fired a starter’s gun on a tax reform debate – and it emerged that Treasury had worked up options for the Coalition including a favoured increase in GST from 10% to 15% coupled with income tax cuts to cushion the blow – nothing had yet been announced as a policy.

Bill Shorten was opposing something that didn’t exist. Speaking to Michael Brissenden on ABC radio yesterday morning, treasurer Scott Morrison was delighted to point this out. This exchange followed:

MICHAEL BRISSENDEN: I know, we’re in this ridiculous situation where you’re not putting anything, ruling anything in or ruling anything out, but the GST has become…

SCOTT MORRISON: You think that’s a ridiculous situation?

MICHAEL BRISSENDEN: Well no because the GST is the one thing people are talking about, and if we can’t have a discussion about…

SCOTT MORRISON: Well it’s what you’re talking about.

MICHAEL BRISSENDEN: The Government’s talking about it too.

SCOTT MORRISON: I’m talking about personal income tax, I’m talking about state taxes that are actually retarding growth.

In effect Morrison was on the national broadcaster taking questions on the GST while saying he wasn’t really talking about the GST. That was other people.

Deep breaths all round.

Economists and policy experts like consumption taxes because they are extremely efficient. The biggest problem with them is they increase daily living costs and the biggest challenge for policymakers is devising an effective – and politically palatable – way of ensuring that people on low incomes or on welfare are adequately compensated.

So whenever (in fact, if) there is a GST proposal, it will have to explain what the rate will be, how the money will be spent, and how other taxes will be reduced and welfare benefits increased to it doesn’t blow up the family budgets of people who are on low incomes. It will be a complex reform package and any proposal will need to come hand-in-hand with a huge range of measures that answer community concerns about increases in the cost of living.

A slide showing Australia’s high corporate tax rate presented by Treasury’s Roger Brake in a presentation to a tax forum last month.

Turnbull emphatically said this week that there would be no increase in the GST without compensation. “It is pretty obvious that, if you were to increase the GST, without any compensation, without any other arrangements, households on lower incomes would be disadvantaged,” he said. “That is why it would never be done. That is why it wasn’t done in the past. That is why it’s inconceivable.”

Even before he became treasurer, Scott Morrison always wanted to have a look at a raft of other taxes — reducing income taxes or convincing states to ditch land taxes, payroll tax and stamp duties — if there was to be any increase to the GST. This was the “lower, simpler, fairer” mantra on tax reform within the Abbott administration.

Morrison clearly wants the focus to shift to other taxes. Today it’s reported that Treasury has been tasked with looking at the tax breaks wealthy people get on their retirement income. This is a much easier sell, politically: it both raises more revenue and targets the small number of people at the higher end of the income pyramid. And we still have yet to hear anything on the company tax rate, which even Treasury has said in public forums is becoming problematically high compared to other countries.

Note that under Turnbull, the emphasis has been on “fairness” in the tax system. Gone are the references to “lower” and “simpler”.

This is really only getting started. There’s still a Green Paper to come from the Treasury’s tax consultation, started by Joe Hockey earlier this year. And then a White Paper with policy proposals should follow that. But there’s nothing stopping Turnbull and Morrison wheeling out proposals in the meantime that they could take to an election before that whole troublesome process is completed.

Really what’s happening right now is a range of taxation options are being raised with the public, and this is a platform for researchers, economists and academics to have their say on taxation reform.

And perhaps this part of the battle. Getting a robust conversation going about tax reform and the myriad options that are available will help surface and address community concerns better than any Treasury consultation. It creates a better environment for knowing “what people mean when they talk about things” when it comes to tax reform.

Here’s that Spectrum clip.

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