Goods and Services Tax

I have been in this chamber for most of the debate and I noticed Senator Lines' contribution. She is up for a conversation on tax reform. I welcome that position. 

But in the next breath she says, 'We rule out an increase in the GST in any form.' What is disappointing about that is that there is so much detail to any kind of tax reform. It is not right to say that you should be against something or for something; you need to know what the detail is and what the proposal is before you form a position. But the Labor Party are not interested in a conversation about our future. They are not interested in a conversation about a stronger tax system that can support a stronger economy, because they are just ruling out any change without seeing any detail or any specific proposal.

There is no proposal at the moment, for an increased GST, from this government. There have been suggestions and support for an increase in the GST by some state governments. Some former Labor state premiers have also given support to that increase. They have supported an increase, but the government has not yet taken that decision. But even before we see a report on a tax white paper, even before there is a particular position on tax reform, the Labor Party have come to their position. They have done no consideration of that. They are just reflexively opposing and blocking anything that might be better for our tax system in this country because they see a political purpose in it, not because they see the national interest in it.

I take Senator Lines's points about the potential impact of any tax change on lower- and middle-income families. I am very mindful to ensure that any changes in our tax system are done in a way that make sure that those who are less fortunate in our society are not made worse off. I am not usually down this end of the chamber. I usually sit down that end of the chamber, and in that little corner of the chamber, down there, is the National Party. We are not big in numbers but I think we are big in strength. The small number of us down there actually represent the poorest households in this country. When you look at the data on who votes for different parties in our political system, yes, the Labor Party also represent low-income households, but the National Party voters are actually lower in income. Next is the Labor Party, then the Liberal Party, then, of course, the Greens—they are up in stratospheric income levels that none of us could dream of. So we actually represent the poorest income households, and I am very mindful of any changes that might happen.

They have not seen a proposal yet. In the original introduction of the GST, low-income and middle-income households were substantially better off—thousands of dollars a year better off—because of the related changes to our income tax system and the removal of some inefficient taxes, like the wholesale sales tax. That is what we need to see, that is what is important and that is what I will be fighting for. I am sure my National Party colleagues will be making sure that that is a component of any tax reform, whatever that might be.

This is one of the fundamentally important attributes of any government in our nation. We really have two economic tasks. We should be making sure that everything we do strengthens our economy and that everything we do helps to spend our money appropriately and to, ultimately, balance the budget. On the latter part, the government has tried many things to rein in our spending and balance our budget, but at every step of the way the Labor Party have opposed. Indeed, they have opposed savings that they originally proposed themselves while they were in government. They did not get around to putting them in place but, coming to opposition, suddenly they had a change of view and blocked them as well. Now they are seeking to block changes that possibly could strengthen our economy as well. They are a party of blockers, at the moment, and that does a great disservice to our nation. They are not truly engaged in a conversation about how we can become a stronger country; they are simply reflexively opposing everything this government may want to propose.

In making a stronger economy, tax reform has to be the centrepiece. Our tax system is crucial to determining how strong our economy is because it dominates so much of what we do in our lives. Most of us would probably go to work Monday to Friday. Most of us end up in a job where we get paid by an employer and the employer pays a component of that pay to the tax office. We often do not see how much that is. We might know at the end of the year when we get our tax return from the tax office how much we have paid in tax but, generally, we do not think of it from day to day.

One way to think about it is that at the moment the average Australian would work for two and a bit days a week for the government. That is two and a bit days to pay taxes. The average Australian works five days a week, Monday to Friday. I know that is probably not the case for many people, these days, but for illustrative purposes let's say five days a week, Monday to Friday. You spend two and a bit days working, to pay taxes, to run the Commonwealth government. It is becoming increasingly concerning that some Australians—indeed, the average Australian—will be pushed up into tax brackets where it is even more than two and a bit days. They will be pushed up into the second highest tax bracket. Indeed, next year the average taxpayer, the average income earner in Australia, will pay 37 cents in the dollar as their marginal tax rate.

And taxing someone at that high rate is going to have an impact. To put that into perspective: 37c in the dollar is higher than the top tax rate in New Zealand, which is 33c in the dollar. We will have people earning the average wage in our country paying a higher rate than the highest income tax rate in New Zealand. That is going to have an impact on incentives, it is going to have an impact on entrepreneurship in this country and it is going to have an impact on how many jobs are created. One thing we should be focusing on in this country now is working out how we can bring that level down, unlock people's potential and allow them to keep a bigger proportion of what they generate. If they want to start a business, create wealth and make a go of it, and they make a return, we should not be taxing someone who is just making the average amount 37c in the dollar on the return. We need to find a way to bring it down.

As I said earlier, some have suggested that we should try to do this by increasing the GST. Of all the OECD countries, we are the second most reliant on income tax. Our direct taxation, which includes taxes like the GST, is a low proportion of our tax base. Some state governments—Mike Baird in New South Wales—and former premiers such as John Brumby, Peter Beattie, Geoff Gallop and Kristina Keneally have suggested that the GST is one way we can deal with the taxation issues this country faces. I welcome that discussion. I think it is an important discussion. But I return to what I said at the start, and that is that the devil will be in the detail. Before any tax reform will be successful, there are some important details which we must ensure we get right. That is why it is important that this tax system is developed. It is important that any tax changes also coordinate with broader strategies to bring the budget under control and create an innovative and competitive economy. All of these reforms are very important for economic growth in this country and to create more jobs.

There are lots of things to discuss and we should discuss them and get them right before we announce them. What we should not do is rule out any particular areas of change before any decisions or proper discussion. We saw that approach from the previous government. The Labor government had a big tax reform process that was chaired by former Treasury Secretary Ken Henry. And right through that process they ruled something out—and there are no surprises for guessing what that was. They ruled out all consideration of the GST from the get-go. They did not want to hear about it. They did not want to hear any recommendations to do with the GST the whole time. There was no report on the GST. If you look up the Henry tax review, there was not even a chapter on the GST. It is one of the biggest taxes we raise and they were not even allowed to look at it. And ruling out even considering changes to a really important part of our tax system led to a disastrous tax reform process where, because of an absence of other ideas, the government relied on the proposed mining tax—which in my view was ill thought through and was not going to work. And ultimately, of course, it did not work. It raised very little money and its compliance costs were very high. It has since been rescinded by this parliament, and there isn't any credible suggestion of bringing it back and reincarnating it. That was one approach to tax reform: close off areas of debate; do not even think about it; hear no evil, see no evil, speak no evil. That was one approach, and it did not lead to such a good outcome. The other approach is that we have a full discussion on all elements of our tax system so that we can promote growth and create jobs in this nation.

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