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Increasing the GST rate to
12.5% and expanding the base to include all food and
non-alcoholic beverages ($25bn)
Increasing the GST to 15%
and expanding the base to include food, non-alcoholic
beverages and water and sewage services ($45bn)
Increasing the rate of the
Medicare levy from 2% to 4% in one step ($15bn)
The federal Labor party
seized on the revelations as proof that Turnbull was
“not being upfront with Australians about his plans for
a 15% GST”.
All the Treasury’s
estimates are for the 2017-18 financial year, and they
point to the total yield before accompanying
compensation for low- to middle-income households is
taken into account.
The resulting document,
obtained by Guardian Australia but first revealed by
Fairfax Media, shows four other options “are also being
considered” but yet to be modelled. These are:
Expanding the GST base to include health services;
Expanding the base to include education services;
Introducing a GST-equivalent financial sector tax;
Phasing in an increase in the Medicare levy from 2% to
4% by increasing the levy by 0.25 percentage points a
year for eight years.
The document suggests the financial sector tax changes
proposed by the South Australian Labor premier, Jay
Weatherill, could also be progressed through the tax
white paper process, which is running in parallel to the
federation reform talks.
Treasury has also been
asked to provide distributional analysis of all options
under consideration – or a breakdown of the effect on
different household income types – and advice on
assistance packages that could be provided to accompany
GST changes. The Abbott government’s first budget in
2014 was widely criticised because of the
disproportionate impact on poorer households.
“Initial indications are that broadly offsetting the GST-induced
price increases faced by households earning less then
$100,000 and half of the increased prices faced by those
earning less than $155,000 would use at least half of
the extra GST revenue,” the document says.
It notes the Medicare levy has an in-built low-income
threshold and phased rates “which mean that the greater
tax burden is placed on income earners with a greater
capacity to pay it” such that “providing no offsetting
assistance could be considered”.
The Medicare levy options without assistance would
generate about $15bn to $16bn per year, which was
similar to the first GST option once compensation was
taken out. However, further modelling would be needed to
quantify the impact of the Medicare levy changes on
middle-income households who could be worse off than
they would be if they were partly or fully compensated
under the first GST option.
The document suggests the household assistance provided
for the former Labor government’s carbon price,
including welfare and tax changes to help low- and
middle-income Australians, “offers a useful example of
the form that compensation could take for a change in
the GST”.
“Public commitments around which households would be
fully compensated should be avoided. Decisions about
compensation will be more informed once the impacts of
various options have been modelled. Making commitments
now risks overcompensation for households and adding
significantly to the cost of household assistance.”
The New South Wales Coalition government led the charge
for increasing the GST to help fund the shortfall in
health funding, while the Victorian and Queensland Labor
governments suggested the Medicare levy as a fairer
alternative. Abbott said in July that he favoured a GST
increase over a Medicare levy increase.
Turnbull has refused to rule out any options, but
insisted any reform package would be fair. The federal
Labor party has been campaigning against an increase in
the GST on the basis that it would have a bigger
proportionate impact on poorer households.
The shadow treasurer, Chris Bowen, said the passages in
the document about not committing to specific assistance
package exposed “a tricky and misleading Liberal
government that is trying pull the wool over the
Australian peoples’ eyes when it comes to any GST
compensation”.
Bowen said Turnbull should “stop hiding behind the
‘states made me do it’ alibi”.
“For families already struggling to keep their heads
above water, increasing the GST will push up the cost of
living, make everything more expensive and leave
families worse off,” Bowen said.
“Every time they have to pay a bill, visit a
supermarket, take the kids to the doctor, buy new school
books – it will all cost more.”
The federal treasurer, Scott Morrison, said the
government wanted “a growth-friendly tax system” and the
proposals had been modelled at the request of the
states.
“They are not proposals by the commonwealth government;
nor are they proposals necessarily by state and
territory governments. But I think it’s just good
information to facilitate the discussion that we are
having,” he said on Wednesday.
Morrison said the federal government was “not interested
in raising taxes to chase ever higher levels of
expenditure”. This suggests the federal government wants
any GST increase to fund cuts to other taxes rather than
meeting rising health and education costs.
The Australian newspaper reported details of separate
modelling by the Treasury showing $13bn could be raised
by harmonising state and territory payroll taxes, which
would lead to higher costs for some employers currently
enjoying more generous thresholds in certain
jurisdictions.
Morrison said he would speak to state and territory
treasurers about the $85bn of state taxes and charges
that they collected every year, arguing reforms should
occur at both levels of government.
Source::
The Guardian, dated 08/12/2015. |