tip off

Crikey says: circuit-breaking in GST debate

We’ve got Aunty in the gun. She’s dumping Clarke and Dawe at 7.30, and axing TV production in Tassie (though Bernard Keane thinks it’s a good idea). Rebekah Brooks disappoints her mentor again. Mark Latham v Andrew Bolt (round 3). And Guy Rundle on Hillary Clinton’s 2016 hopes.

Rob Oakeshott is quite correct in complaining we have a problem in our politics if we can’t have a serious debate about the GST. Indeed, the letters “GST” appear to cause a profound terror in any party politician confronted by them.

The GST, the best economic reform of the Howard government after the independence of the Reserve Bank, was damaged right from the outset by the stupidity of the exemptions imposed by Meg Lees as part of the deal for her support — a deal that, as if to demonstrate there is indeed some justice in politics, destroyed Lees’s leadership, not to mention the rest of her party.

The case for restoring fresh food to the GST is now stronger than ever. The once-high growth tax has fallen back to earth and is now cramping the capacity of the states simply to maintain their levels of basic services. That is partly because Australian consumers have not merely stopped spending as much, but they are spending more on food compared to other goods and services. The result is strong consumer spending growth in an area substantially exempt from the GST.

Treasury’s most recent estimate is that restoring fresh food would recoup nearly $6 billion in additional revenue, which would flow directly to the states, or be split between offsetting state taxes and topping up state coffers.

But no political party will touch it: Labor and the Coalition both prefer to suggest their opponents have a secret agenda to raise the GST. Even the Greens won’t go near it.

What we need is an independent initiative to break this deadlock. A Productivity Commission reference would require government support, which is problematic. The Parliamentary Budget Office could examine the matter, but only confirm or dispute Treasury’s costing; the PBO is not equipped to offer full-scale economic advice. But a bipartisan proposal from the states to remove the food exemption (which should be the first reform proposed, certainly ahead of lifting the rate) could initiate some rational debate.

16
  • 1
    Davies Alexander
    Posted Wednesday, 21 November 2012 at 1:47 pm | Permalink

    Surely including fresh food would be a dispropotionate burden to the poor?

  • 2
    Posted Wednesday, 21 November 2012 at 1:51 pm | Permalink

    Crikey, big business and the other gst champions can have your $6 billion from extending the gst once you have removed housing’s exemption from the capital gains ($36 billion), removed the regressive tax treatment of superannuation ($29 billion) and removed the capital gains tax discount ($4.7 billion).

  • 3
    Ian
    Posted Wednesday, 21 November 2012 at 2:25 pm | Permalink

    Gavin,

    Absolutely, we need more progressive not regressive taxation in an era where inequality is on the rise.

  • 4
    oliver moran
    Posted Wednesday, 21 November 2012 at 2:46 pm | Permalink

    You have got to be daft to think that increasing the cost of food by 10 % is worthy of considering. The cost of fresh food to the low income earners /their own health/ etc.
    any politician especially Labor won’t go near it.
    Nuts!
    Tax the high income earners more on their increasing expenditure on fuel burning 4 wheel drives and top end machines Get em back to low fuel consumption vehicles with incentives

  • 5
    michael crook
    Posted Wednesday, 21 November 2012 at 3:44 pm | Permalink

    jesus christ crikey, are you stark staring bonkers. Or is it a joke. we are spending a fortune on health care as a result of failure to rein in junk food (the new tobacco) and you want to increase taxes on fresh food. how about a wealth tax for f.cks sake, aren’t we sick of the wealthy creaming off the excess and paying no bloody tax.

  • 6
    Bill Hilliger
    Posted Wednesday, 21 November 2012 at 4:08 pm | Permalink

    Tax increase on alcohol, tobacco and junk food is the way to go. Fresh food must remain GST tax free, leave GST as is.

  • 7
    zut alors
    Posted Wednesday, 21 November 2012 at 4:50 pm | Permalink

    Strongly agree with all comments by the first six posters.

    Quadruple the airport departure tax - travellers flying internationally must be comfortably cashed-up to afford the airfares.

    And isn’t it time to kill off negative gearing?

  • 8
    Philip Hunt
    Posted Wednesday, 21 November 2012 at 6:11 pm | Permalink

    Like some of the other commenters, this is a disturbing opinion and atypical (in our experience) of Crikey’s concern for equity and social concerns. Let’s have a debate on GST for sure, but let’s not provoke it with this kind of bugger-the-poor economics.

  • 9
    Posted Wednesday, 21 November 2012 at 6:19 pm | Permalink

    wrong

  • 10
    jmendelssohn
    Posted Wednesday, 21 November 2012 at 8:01 pm | Permalink

    Keep fresh food tax free. Healthy food needs to be encouraged.

    As well as Gavin Moodie’s sensible suggestions, what about a death duty for the seriously rich? Say for estates over $10 million. And do something about trust accounts which provide a tax avoidance hole you can drive a truck through. They should have been dealt with years ago.

  • 11
    AR
    Posted Wednesday, 21 November 2012 at 8:21 pm | Permalink

    spending more on food compared to other goods and services and that is a problem… WHY?
    I was furious at this piece of nonsense and was glad to see that I wasn’t the only one with more than two functioning neurons.
    The Democrats were destroyed because of Lee’s acquiescence to the indefensible.
    A GST/VAT/MOMS is applicable in Europe because of their historical failure (esp the Latins - italy, France, Spain et al) to have an enforceable INCOME TAX so, rather that fart arse about they simply said “if ya got it, ya tend to spend it so we’ll tax it” - simple.
    The idiocy of our GST was that it not only did it not obviate income tax but did not include a super tier, for highly enriched product and(mostly)services.
    Increase the GST by all means on such upper echelon items but leave basic food alone. Tax the bejasus out of fast/junk food, to extinction if possible.

  • 12
    Posted Wednesday, 21 November 2012 at 8:52 pm | Permalink

    I support jmendelssohn’s proposals to join the rest of the OECD in restoring probate duty and to remove the favourable tax treatment of trusts. However, I don’t know the cost of these tax expenditures.

  • 13
    Carbonbasedlife
    Posted Wednesday, 21 November 2012 at 9:07 pm | Permalink

    Crikey, you guys are crazy … come out from behind your little notebook computers and blind internet research and venture into the real world. If it was 1 April I could overlook the stupidity of today’s editorial. But sadly it’s not 1 April. We, the working class, already pay a substantial portion of each dollar we earn in tax. And we already hand over 10% on almost everything other than fresh food … we spend. We will not accept an increase in the 10%. And did anyone stop to think that maybe if the percentage of spending allocated to fresh food has increased, that might be because it’s a damned necessity. On the scale of needs … need air to breath, water to drink, and then .. food. Get into the real world. Or become irrelevant.

  • 14
    klewso
    Posted Thursday, 22 November 2012 at 12:35 am | Permalink

    Make (fresh) food dearer”?
    There’s a limit to the number of “luxury goods” we can consume, but we all need to eat, even the poorest of us.

    Revisit those “Fend for Yourself Peasants! Tax Cuts” (with their affect on subsidised/affordable necessary infrastructure funding - education/health/care/dental) Howard used to buy votes.

  • 15
    Jim Moore
    Posted Thursday, 22 November 2012 at 1:03 am | Permalink

    I’m giving up reading the editorial as it seems to now be written by a member of the Young Libs.

  • 16
    Posted Thursday, 22 November 2012 at 8:22 am | Permalink

    I second zut’s motion for negative gearing homicide.

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