Colin Barnett says Tony Abbott must show leadership and consider raising GST

Updated

Western Australian Premier Colin Barnett has reignited the debate over the Good and Services Tax (GST), calling on the Prime Minister to show leadership and consider lifting the tax rate.

The Federal Government intends to set up a wide-ranging review of the tax system, but prior to the election Prime Minister Tony Abbott ruled out changes to the GST.

Mr Barnett, whose state lost its AAA credit rating on Wednesday, has long campaigned for an increase to his state's share of GST revenue.

He told Lateline that revenue from the GST, which is currently 10 per cent, is not growing fast enough to fund basic services like health and education.

Mr Barnett says that while Mr Abbott made a political promise not to lift the GST, he thinks the Prime Minister will have little choice but to address the issue.

"I understand the political point obviously, but I think I'd pose the question: 'Do Australians really mind that much if the GST was 10 per cent or 12.5 per cent, if it means maintaining high-quality health and education and disability services?'" he said.

"I suspect the Australian people are mature enough to say: 'We'll cop that'."

Barnett says other states increasingly relying on gambling revenue

Mr Barnett says that while Western Australia has income from the mining industry, other states are increasingly reliant on gambling revenue.

"I don't think that's a good thing from a social perspective for Australia," he said.

"One of the tough jobs Tony Abbott is going to have is to step up to the plate, as they say, and take some leadership on the federation. Front and centre in that will be the GST issue."

Mr Barnett says there are members of the Federal Government who would like to see the GST addressed.

"There's no doubt there are a lot of people in Federal Parliament and in the Cabinet that understand the issue and are responsive," he said.

"Whether they're going to argue it in the Federal Cabinet, I don't know.

"If you look at fixing some of the issues in the Australian economy, federal-state financial relations are important."

Federal Labor dashes ACT Government hopes of GST rethink

The acting Labor leader, Chris Bowen, says the Federal ALP will not be backing any changes to the rate or the base of the GST.

The ACT Labor Chief Minister, Katy Gallagher, has echoed a call from the West Australian Liberal Premier Colin Barnett for changes to the GST to boost revenue for services like health and education.

She is urging her federal Labor colleagues to support the discussion.

"I think if there is to be any rational discussion about the GST, all states and territories need to back any Federal Government that's prepared to examine it and look at whether the rate does need to go up, or exemptions needs to change," she said.

But Mr Bowen says the Federal ALP does not back Ms Gallagher's call.

"Our federal position is very, very clear. No increase in the GST, no expansion to the base of GST to food and other exempt items," he said.

"We believe that an increase in GST or applying it to food would impact those who can least afford it."

A spokesman for the Prime Minister says there will be no change to the GST.

But Mr Bowen insists Tony Abbott invited the debate by including the GST in his planned tax review.

"If you are not going to increase the GST then why include it in the review?" he said.

"This is the fundamental inconsistency and illogicality of Tony Abbott's approach during the Federal election.

Over a period of time, we believe that there is a case for the Commonwealth Grants Commission to move to what's generally called an equal per-capita share. Queensland Treasurer Tim Nicholls

"He got himself caught up on several occasions, said he'd have a review of it but he'd never increase it and that makes no sense at all. Now we're seeing that play out for all to see."

Queensland Treasurer Tim Nicholls says he is not advocating a rate increase, but he wants the GST applied to more online transactions made to overseas companies.

"Let's address that low-value threshold which actually disadvantages some of our traders and business people here in Australia," he said.

Mr Nicholls says Queensland, like Western Australia, wants to see changes to how the GST revenue is distributed between the states.

"Over a period of time, we believe that there is a case for the Commonwealth Grants Commission to move to what's generally called an equal per-capita share," he said.

"That would generally see the states receiving back the amount proportionate to their population."

Mr Barnett says more of the GST revenue needs to be flowing back into Western Australian coffers.

"Western Australia is the strongest economy," he said.

"It is a very prosperous and wealthy state and all Western Australians accept we are prepared to cross-subsidise the Northern Territory, Tasmania, and South Australia, but there is a limit to that," he told Lateline.

Meanwhile, Tasmanian Premier Lara Giddings is worried that any move to change the GST formula would disadvantage her state.

She has written to the Prime Minister seeking a reassurance that he will not support the per-capita distribution method.

More on politics from The Drum: Prime Minister Tony Abbott's predecessors were clearly overexposed, but he should consider the cautionary tale of Ted Baillieu before he stops feeding the chooks altogether, writes Barrie Cassidy.

With their power over the Labor leadership more or less gone, Labor's factional mini-moguls will find their survival and prosperity now depends on the whole party doing well, writes Annabel Crabb.

New South Wales is distancing itself from the debate.

A spokesman for the Premier Barry O'Farrell says the Government will not comment on whether there should be an increase.

Unions New South Wales secretary Mark Lennon says lifting the GST rate or broadening the base would hit lower income earners hardest because it is a flat tax.

The Federal Government is already proposing a fresh look at the entire tax system and Mr Lennon says that provides scope for re-examining other taxes like the payroll tax.

"I think there's a question of stamp duty and the distorting impact that has on the property market, so there's a whole range of issues out there, many of which have been raised already and discussed and debated in the Henry Tax Review.

"Let's put all of those back on the table for discussion rather than trying to hike up the GST."

Accountancy firm calls for tax revamp, warns of growing debt

Before the election campaign, accountancy firm Price Waterhouse Coopers (PWC) tried to make tax reform an election issue.

In a 52-page research paper, the firm argued that shirking reform would enshrine deficit budgets for years to come, leading to government debt piling up and ultimately harming Australia's growth prospects.

"There is a major gap in the revenue side to the expenditure side and whether you're a government, a small business or a family, you can't spend more than you earn forever," PWC tax and legal partner Tom Seymour said.

He said the Australian economy over the past decades has been driven by the resource sector, which exports almost all of its products and therefore pays little GST.

"You need to include the GST in a holistic review of our tax system and the community needs to be prepared to have a conversation and politicians on either side ruling GST out of any review, we think, is wrong."

Topics: government-and-politics, tax, federal---state-issues, federal-government, australia, wa

First posted