House debates

Monday, 8 February 2016

Questions without Notice

Goods and Services Tax

2:28 pm

Photo of Malcolm TurnbullMalcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Hansard source

The government is carefully considering a whole range of proposals for changes to the tax system.

Let me say something about the GST. A rise to the GST obviously increases the price of the 47 per cent or so of all of the goods and services in the consumer basket that it covers, so an increase in the GST reduces the purchasing power of an Australian consumer. Were you to increase the GST, as many people argue, and apply that money to reduce personal income tax, then of course to a greater or lesser extent that reduction in purchasing power would be counteracted—in other words, the taxpayer would have more money in their pocket after tax, and that would ideally be greater than or at least equal to the amount of extra money they would have to pay at the store. The argument in favour of this, in terms of the economic efficiency, is that taxes on income apply to income that is both consumed, spent and saved. That is why there is an argument that a tax-mix switch provides a net economic benefit.

Opposition members interjecting

As I have said, the government is not yet persuaded that in the context of Australia today such a tax-mix switch would give an adequate improvement in economic activity—but those are the trade-offs. Honourable members opposite can scoff as much as they like, but those are the trade-offs. It is a question of balancing the increase in GST on the one hand and an offsetting reduction in income tax on the other and the extent to which that is fair and gives additional impetus to economic growth depends on the design. There is a considerable amount of complexity there. I believe that all Australians expect this government to approach this issue not with slogans or with scare campaigns but with careful analysis.


No comments