Tax reform cannot be a deal struck behind closed doors on GST

Ahead of Thursday’s Council of Australian Governments’ meeting, ACOSS is warning leaders against striking any behind closed doors deal on GST, adding this risks compromising the public’s confidence in genuine tax and federation reform.

“While we welcome the debate and have agreed that all options should be on the table, we are concerned at the current fixation on changing the GST as some sort of panacea,” said ACOSS CEO Dr Cassandra Goldie.

“The states are rightly seeking to secure their long term budgets, particularly to pay for essential services such as health, education and community services into the future. However, it would be foolish to rush to an option when the reform processes in tax and federation have barely begun.

“A number of options for reform have been floated by State Premiers. These range from the South Australian Premier’s proposal to increase the GST to 15% with states relinquishing that revenue source for a share of national personal income taxes, to the Victorian Premier’s proposal to increase the Medicare levy to fund the growing costs of services.

“Any such proposals need to be considered in the broader context of the tax and federation reform agenda, rather than standalone reform proposals. In assessing options, leaders must ensure that reform is structural not piecemeal, addresses long-term revenue problems, improves fairness and efficiency, and ensures adequate funding for health, education and welfare services into the future.

“A shift in the tax mix away from progressive income taxes to regressive consumption taxes will not result in a fair or balanced tax reform package.

“A better starting point for tax reform is to curb tax shelters and broaden the base of the personal income tax system. If we are keen to foster greater investment in new innovative enterprises, we should be closing down generous tax shelters and concessions that are distorting current investment decisions, including through superannuation, private trusts and companies and tax breaks which drive investment into existing real estate, particularly negative gearing and capital gains discounts. This should be our priority rather than giving further potentially poorly targeted tax breaks to help drive innovation.

“We urge the COAG Leaders to focus on these areas as well as ways to shift to more efficient tax bases, such as removing inefficient stamp duties for more efficient land taxes. This was a key area of common ground at the recent National Reform Summit and should be at the heart of these COAG discussions, not the GST.

“Any reform should provide a guarantee that people will have access to quality services regardless of their income and where they live in Australia. A guarantee, underpinned by Commonwealth, State and Territory legislation, could replace tied funding models, provide some greater flexibility to the states while increasing accountability for outcomes achieved.

“We believe that essential community services should be funded mainly through the tax system and paid for according to people’s ability to pay, and have flagged the possible earmarking of tax revenues to expenditure in community services as a way to secure these vital services into the future.

“The current federation and tax reviews offer an opportunity for us to achieve long sought after and urgently needed reform. It would be a mistake for leaders to look to strike a premature deal while these important processes are underway, especially when there are better and fairer policy options available,” Dr Goldie concluded.

Media Contact: Fernando de Freitas 0419 626 155

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