Come clean on the GST, Mr Abbott
There is almost unanimous agreement among the many neoliberal economists, tax experts, Treasury, business and politicians (although the latter are very quiet about it and deny they will do it) that the Goods and Services tax will have to be increased and broadened.
The GST at the moment is at the rate of 10% and applies to about 60% of all transactions. For example fresh food, health, education and child care are exempt. These exemptions cost about $15 billion in ‘lost’ revenue.
The current consumption wariness among Australia’s workers means that the GST collections have slowed over the last few years. For example the ATO Statistics say ‘For the 2010–11 financial year, net GST liabilities totalled $46 billion, an increase of 2.4% from 2009–10.’ It was only a few years ago that collections were growing at 8%.
That $46 billion is distributed to the States and Territories. Evidently it is not enough to fund National Disability Insurance Scheme trials in Liberal states New South Wales (cost $70m) or Victoria (cost $40 m).
The integration of the Australian economy into the global economy, its dependence on capital imports to grow, its aging population, the expectation of workers for decent public health, public education and public transport systems all mean that the ruling class and their economists are looking for ways to increase tax on workers in the coming years, or to cut government spending enough to fund tax cuts for business and the rich. Or both.
The Henry Tax Review took the approach that if it moved (finance capital for example) tax it lightly; if it didn’t move (land, resources and workers’ consumption) tax it more heavily.
The bourgeoisie have been very loud in their support of an increase in the GST rate and a broadening of the base to tax fresh food, health, education and child care. John Hewson at a recent forum I attended mentioned a possible 20% rate.
Governments both State and Federal could then use the extra GST revenue and the gains from land tax to abolish inefficient state taxes like stamp duties and the exemption ridden payroll taxes (which are just consumption taxes under another name) and, here’s the main game, deliver tax cuts to companies and the rich.
The GST was deeply unpopular. Although John Howard won the majority of seats in the 1998 GST election he lost the popular vote. The Liberals and Nationals formed government with 48.1% of the vote on a 2 party preferred basis; the Labor Party won 51.9% but not government.
Any attempt to increase the rate or expand the base of the GST would produce an electoral backlash.
So 3 weeks ago Tony Abbott ruled out any increase in the GST. He has previously ruled out expanding its base to include fresh food, education, health and childcare.
But the plot thickens, because a few days ago Joe Hockey, the Shadow Treasurer, said:
If you are going to have a discussion about changing the GST, the states have to lead the argument because they are the ones that need the revenue. They have to take the community with them and they are not doing that.
Hockey is not ruling out increasing the rate or expanding the base. This is because business wants both and the Abbott Government will, like Labor, be a government of business.
The difference is that at this juncture they will be even more brutal in their attacks on workers. The attacks on jobs and government spending on the poor and less well off and workers in Queensland, in Victoria and in New South Wales will be magnified and deepened across the country by Abbott.
Abbott is not a fool. He knows a Labor scare campaign about the GST might cost him some votes. So his strategy is to promise not to touch it before winning government.
Perhaps Abbott should come clean and say ‘there will be no GST changes under any Government I lead.’ You know, just to provide that level of certainty we all crave.
But because the bosses and their capital accumulation process demand tax cuts for business, the Liberals need to let their rich mates know the issue is still on their agenda. Hence Hockey putting the pressure on the 4 Conservative run states to lead the push.
Abbott might be tempted to do a John Howard, and once elected and in the run up to the next election announce his intention to increase the GST rate and/or expand its base if his Government is re-elected at the 2016 election.
If the States by then have joined all the economists, tax experts, senior public servants and the like in publicly pushing for major changes to the GST there will be real momentum for increasing the consumption tax burden on workers by upping the rate and expanding the base.
Of course, as China slows and Europe and North America prove incapable of escaping the Great Recession, the Australian economy could take a dive before then.
The response of the parties of austerity from left and right in Europe to economic crisis has been, apart from sacking people and cutting government services, to increase their consumption taxes.
Given the electoral unpopularity of the GST in the 1990s, the Coalition will be careful about the way it deals with the tax. But make no mistake. Its goal is to increase the GST and expand it, probably in the longer term but possibly short term, especially if the economy tanks when they are in power.