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Malcolm Turnbull’s plans to reform Australia’s tax system is facing a pushback from his own side with Liberal MPs demanding long-term structural reform and tax cuts to compensate for a potential rise in the GST to 15 per cent, or broadening of the tax to cover new items such as fresh food.
Debate within the Coalition about tax reform has ramped up against the backdrop of spiralling state health and education costs, $80 billion in cuts over a decade in these key areas from the 2014 budget and an ongoing federal budget deficit.
Reflecting fears in the Coalition government that tax reform could actually increase the overall tax take, an anathema to many Liberals, Senators Cory Bernardi and Ian Macdonald and MPs Angus Taylor and Bert van Manen warned off senior colleagues from simply raising the GST from 10 to 15 per cent.
The quartet all advanced the view, shared by economic dries across the Liberal party room, that any change to the GST must be accompanied by cuts to personal or business taxes.
Senator Bernardi said, “Tax reform means lowering taxes and every justification that I’ve seen for tax reform thus far entails an overall increase in government revenue. That’s not reform, that’s gouging.”
“There should be a flat rate of tax. Say, for example, a personal income tax that would not exceed 35 per cent … We need to have a higher tax-free threshold, lower marginal tax rates and ensure government ends the money churn,” he said.
Mr Taylor welcomed “genuine debate” about tax reform but cautioned the end goal had “to be about tax reform, not a tax hike and that means changing the tax mix, not increasing the tax burden, with some combination of personal and business tax cuts”.
“We should look at payroll and stamp duty too, we need to move from less efficient to more efficient ones,” he said.
Mr van Manen said tax reform was critically important but “we need long-term structural reform of the tax system for the benefit of the country, just focusing on the GST is not going to solve our problems”.
Senator Macdonald told ABC radio he was “opposed to any increase beyond 10 per cent of the GST rate” and suggested broadening the base instead.
The comments from the back bench come despite the Prime Minister promising last month that any change to the GST “certainly has to be a part of a suite of measures, it’s not doing it, no one I think is seriously suggesting doing it in isolation”. Mr Turnbull on Monday pledged any tax changes would be fair and there would be “no disadvantage to the most vulnerable Australians”.
Mr Turnbull and Treasurer Scott Morrison have left a raft of options for tax reform on the table, but Mr Morrison has shut down a proposal from the Queensland and Victorian Labor governments to instead increase the Medicare levy, which would raise about $18 billion.
The Grattan Institute has estimated that a GST rise from 10 to 15 per cent would raise an additional $30 billion a year in revenue, with state premiers including NSW’s Mike Baird and South Australia’s Jay Weatherill suggesting that money could, at least in part, be used to fund the rising cost of health care or to fund income tax cuts.
Victorian Premier Daniel Andrews and Queensland’s Annastacia Palaszczuk have publicly stated their opposition to a GST rise from 10 per cent to 15 per cent and instead backed a Medicare levy rise.
But privately, key political allies of the two Labor premiers confirmed to Fairfax Media on Monday the two state governments would respect Mr Turnbull’s mandate if he won the next election.