Before the last election Tony Abbott, like John Howard before him, promised there would be no change to the GST. Joe Hockey and Andrew Robb reiterated that promise in their final update on election commitments published on September 5, 2013.
It confirms once and for all that:
- There are no cuts to education, health, defence or medical research;
- There is no change to the GST
In the last few months of 2015 we had Scott Morrison and Josh Frydenberg both assuring us that the Commonwealth government had “no plans” to increase the GST.
It is now obvious that those assurances were cowardly crap.
The position now is that some states are supporting an increase in the GST to make up for the funding shortfall due to the Coalition ripping $80 billion out of their future health and education budgets. Scott Morrison, however, stated categorically in December that any GST increase will not be used for budget repair but will be entirely offset by reductions in income and company taxes. There is also talk of changing the composition of tax take given to the states with them giving up some GST in return for some income tax. We are now being assured that all will become clear well before the next election. So much for simpler.
It is going to be very hard to sell a 15% increase on food, education and health and a 5% increase on everything else, with the revelations of the extent of corporate tax evasion and the generous concessions available to investors. Fairer? I think not.
NATSEM modelling shows that a 15 per cent GST would mean a 3 per cent hit on the most affluent households, but a 7 per cent hit on the poorest households.
“A broadening of the base of the GST to fresh food, health, water and education would also be regressive, with people on lower incomes paying proportionately more of their incomes on these essentials. The relative impacts are clear: 4.6% of income for people in the lowest income brackets, 2.7% for people in the middle, and just 1.7% for the highest income earners.
NATSEM has also modelled the impact of raising the GST to 15% to pay for a cut of 5% in all personal income tax rates to demonstrate how this would change who pays what proportion of tax, in reference to their incomes. The results are stark: two thirds of households, on incomes up to about $100 000 would be worse off and the top 40% would gain at the expense of the bottom 60%. The lowest 20% of households by income would lose $33 a week (6.6% of income) on average while the top 20% would gain an average of $69 a week (2.1% of income).
Increasing the GST to fund income tax cuts is also a big, complicated revenue ‘churn’ that would do nothing to ease the pressure on State health, education and welfare budgets, particularly as it would clearly require a major compensation package to ameliorate its impacts on people who are hit the hardest. If it’s not about raising more revenue, the Government has to justify why this option is being considered at all.
Raising the GST to fund cuts to personal income tax across the board, as some advocate, is a recipe for more inequality, not a stronger economy.”
From 2012-14, members of the World Economic Forum listed income disparity as the greatest risk facing the planet. This has been taken over by interstate disputes, forced migration, and extreme weather disasters in 2015 and 2016 but the problem is getting worse as demonstrated by the recent Oxfam report which showed that 62 of the world’s richest people hold the same wealth as 50% of the world’s population.
“About $100 billion annually is lost to poorer nations because corporations put their money into low-tax jurisdictions. And once that happens it means that a fair share of tax isn’t being paid to support the social infrastructure that’s necessary to help people lift out of poverty like education, for example.”
The report noted some of the worst hit by global inequality are often women and that if the interests and welfare of women was not addressed, many communities would be let down.
In Australia, people in the top 20 per cent income group are receiving five times as much income as somebody in the bottom 20 per cent and there is 70 times more wealth for people in the top group, compared to people in the bottom 20 per cent.
Oxfam Australia chief executive Helen Szoke identified three key things that must be done to repair the global wealth gap:
- Address the issue of tax practices and clamp down on corporate tax avoidance
- Ensure that governments used that money to invest in social infrastructure
- The need for a living wage, rather than a minimum wage
The Coalition promised that removing the carbon and mining taxes would boost employment and investment. They were wrong.
They want to cut company tax to boost employment and investment. It is far more likely to boost dividends to shareholders.
They want to protect investors and entrepreneurs, whilst slashing funding and jobs in research.
Stagnant wage growth, increases to the GST, cuts to health, and the possible removal of penalty rates will leave low and middle income earners with less disposable income. Cuts to income tax mean little to someone on less than $20,000. Freezing of the superannuation guarantee and the abolition of the low income co-contribution will also have a significant long term impact on retirement incomes.
Less disposable income means less demand which, combined with technological disruption, will mean less jobs.
While climate change and forced migration may be more pressing problems at the moment, any move towards more regressive taxation will only exacerbate the growing problem of income disparity and poverty in Australia.
The Labor Party came into existence to represent the collective voice of the workers and the vulnerable. I sincerely hope they are crunching the numbers to offer a better alternative to the electorate that clearly demonstrates that the Coalition’s path is not simpler and it is most definitely not fairer. If you want jobs and growth then start looking after your workforce and getting the corporations who would wring us dry to fulfil their part of the social contract.
But what can we expect from a very wealthy Prime Minister who himself invests in vulture funds and family trusts and offshore tax havens and of whom Kerry Packer once said “I would never get between Malcolm and a bag of money.”
PS The Good Weekend published an interesting article in 1991 about the then 36 year old merchant banker titled Raging Turnbull. It makes for interesting reading.