Once upon a time, back when Tony Abbott was prime minister, the Coalition had hopes of using tax reform as a wedge issue against Labor by claiming it was the party of tax cuts while Labor was the party of tax increases.

Many months and a new prime minister later, the government is hopelessly adrift on tax reform, and fighting not with Labor — which has run what has turned out to be an effective scare campaign on a GST rise — but with its own business backers. The release of Treasury modelling today on the minimal benefits to economic growth of increasing the GST to 15% is primarily aimed at the business lobby and, in particular, the Business Council of Australia, which has been campaigning for companies to be given more tax cuts at the expense of consumers via a higher GST. So divided are the business lobby and their allies in the Liberal Party that Liberal powerbroker Michael Kroger this week launched a ferocious attack on the BCA on the issue.

The Treasury modelling merely confirms what many, including Crikey, have been arguing for some time — that changing the GST offers little in the way of economic benefits, but would be primarily useful as a way to raise revenue to fill the gap in state and territory health and education services created by Tony Abbott and Joe Hockey in the 2014-15 budget. Real tax reform would involve addressing superannuation tax concessions, curbing negative gearing, better infrastructure pricing and a switch from stamp duty to land tax as a basic revenue source.

If the Turnbull government is willing and able to address those challenges — and they represent a formidable political hurdle — it can truly claim the title of tax reformers.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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