PM wants to spread GST pain
Tony Abbott has opened the door to making major changes to the GST - but only if the States are willing to share the political pain.
In comments that suggested he was willing to consider either lifting the rate of the GST or broadening its base, the Prime Minister said the Commonwealth and States should better align revenues with spending
"The Commonwealth would be ready to work with States on a range of tax reforms that could permanently improve the States' tax base - including changes to the indirect tax base with compensating reductions in income tax," Mr Abbott said in a speech on Saturday night.
He said talks on the reform of the Federation, including potential changes to the GST, would start after coming State elections, which suggests no earlier than April, after Queensland votes.
But Mr Abbott stressed he was not prepared to fight reforms unless the States were also willing to champion them.
"We're not going to have a pointless fight sponsoring change that the States aren't even prepared to consider - because, if it's to happen properly, reform of the Federation has to be owned by the States as well as by the Commonwealth," he said.
Mr Abbott said he wanted to make the GST distribution system more equitable between the big States while making the smaller States no worse off.
According to the Grattan Institute, extending the GST to fresh food, education and other areas that are GST-exempt would generate an extra $13 billion a year, even if 10 per cent of the extra revenue was used to increase welfare benefits for the least well-off.
The same amount could be raised by increasing the GST rate to 13 per cent.
The Henry Tax Review found that more than one-third of the exemption for GST-free food - worth about $6.1 billion a year - benefits households in the top 20 per cent of incomes.
Premier Colin Barnett, who has long supported extending the GST to fresh food, was yesterday insistent that any change to the GST's scope should be discussed only after a rewrite of the methodology that underpinned its carve-up among States. "I welcome the Prime Minister's comments, in particular around the need for reform to the GST distribution, recognising as I have always said that long-term change will involve some compromise," he said.
"WA remains willing to engage and contribute.
"However, we remain of the view that there can be no meaningful discussion on increases to the rate or base of the GST until the distribution model is fixed."
WA gets just 37¢ for every $1 of GST it generates, meaning that $3.7 billion is redistributed from WA to other States every year.
Mr Barnett has proposed distributing 80 to 90 per cent of the $53 billion GST pool on a per capita basis, with the rest shared by the smaller States.
