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Issue #1718      February 10, 2016

Has the GST been pushed off the table?

Just when it looked as though the Coalition government was wedded to a 50 percent hike in the inequitable GST from 10 percent to 15 percent, Prime Minister Malcolm Turnbull appears to have gone cold on the idea. He is no longer saying that increasing and broadening the GST is being “actively considered by the government, as it should be”. Even the more intransigent Treasurer Scott Morrison appears to be backing off a little. But the changes in their approach or position have nothing to do with the tax being unfair.

It has more to do with growing public opposition, backbench rumblings, strong opposition from several National Party MPs and the government’s failure to gain unanimous support from the states and territories. The latter’s support is required to change the GST.

So far the only states to agree to an increase in the GST are South Australia, which ironically has a Labor government, and the Coalition governed NSW. Their support is conditional on receiving additional money for schools and hospitals. Federal Labor remains opposed to the tax.

Corporate tax cuts

But the federal government’s aim is NOT to compensate for the $80 billion cuts to hospitals and education in the 2014 budget. It is to fund company tax cuts and a lowering of the higher marginal tax rates on personal income. In particular, the present rate of 45 cents in the dollar on taxable income over $180,000 would be reduced.

The Coalition government has from the outset made it clear that an increase in the GST would be offset by tax cuts in other areas, that there would be no net increase in taxation.

Morrison, like his predecessor Joe Hockey, ruled out giving the states a single cent of the additional revenue from any increase in the GST. “It’s important,” Morrison said, “that when you believe that something’s right for the country that you remain focused on that.” And he believes that the GST is right for big business and the rich – what to him is “the country”. Workers and family households don’t count.

But Turnbull, keeping an eye on public opinion and the upcoming elections, last week did the rounds of the Press Gallery claiming that “what’s right for the country” is still to be determined.

Regressive tax

The government’s aims are to increase corporate profits and cut the taxes of the rich. The funding for these cuts would be ripped out of the pockets of working people, in particular, those on lowest incomes. They pay a higher percentage of their income on the GST.

The GST is a flat, regressive tax – the same rate in the dollar for everyone. The income tax schedule is relatively progressive – see table below. The higher your income, the higher the rate in the dollar that you pay. In other words, you contribute according to your ability to pay.

Our income tax system used to be far more progressive, but over the past three to four decades the higher marginal rates have been substantially reduced, flattening the scale. But, regardless of its shortcomings, the present personal income tax system is still by far more progressive than the flat rate GST.

If the GST were increased, then the purchasing power of people on low to medium incomes would be reduced. Many more of the “Aussie battlers” that politicians love to be seen with at election time would be hit hard by the tax.

But this is not why some of the Coalition’s backbenchers are in revolt. No, they have not suddenly gone soft-hearted towards the victims of their pro-big business policies. They are looking after themselves and their parliamentary seats.

Growing opposition

There are eight Coalition MPs who would lose their seat with a swing against them of less than 1,000 votes. At present opinion polls put the Coalition ahead of Labor – around 53:47 percent. Turnbull is not about to throw that away if he can help it by pursuing a policy that is becoming increasingly unpopular with the electorate. Such a lead requires a swing of just over three percent of voters.

Labor, which is as near as you can get to leaderless and ineffective as an opposition, has missed so many opportunities to make its mark. All Turnbull has to do to steer his ship to victory is lie low.

He is clearly tempted to go for a double dissolution on the issue of “trade union corruption” and the Senate’s failure to pass the Australian Building and Construction Commission Bill on two occasions. The Royal Commission and corporate media have done a real job on the trade union movement, branding unions and their leaders as corrupt (see Editorial).

A joint sitting of both Houses would be able to pass the bill comfortably if the Coalition had a reasonable majority in the Lower House. But it has to weigh that option against the likelihood of smaller parties gaining more seats in the Senate. (They would only require half the number of votes for a quota.)

While public opposition to an increase in the GST appears to be on the rise, big business and the corporate media on their part are becoming impatient. What was the point of getting rid of Abbott because of inaction (and being a public liability) over key issues including tax and industrial relations reform when his replacement, Turnbull, from their capitalist class perspective, has proved so far to be no better.

As Peter Hartcher writes in the Sydney Morning Herald (06-07/02/2016), “Tax reform proves to be a test of Turnbull’s courage.”

“What is the point of Malcolm Turnbull as Prime Minister if he is merely a more personable salesman selling the Abbott government’s policies,” Hartcher asks.

The government’s priority is to find the funding for cuts to corporate taxes – that is what taxes they do pay – and for the rich.

Now it is looking for alternative sources of additional revenue to fund tax cuts. These include cutting some of the concessions on superannuation or possibly changes to negative gearing. It is almost certain that there will be further cuts to the public service and social security spending in the May budget.

As far as the states are concerned, Morrison’s attitude is they can go find the additional funds themselves by such means as increasing stamp duty or land tax.

Chase the real villains

Corporate tax cuts (for those that actually pay tax) is not the way forward. The federal government has forgone billions of dollars as a result of previous cuts in company taxation. In 1980 the rate was 46 cents in the dollar, it is now 30 cents with smaller businesses paying 28.5 cents. The ongoing loss of revenue over those years more than explains the budget deficit.

Instead of sacking Australian Taxation Office staff, the government should be increasing their numbers and capacity to chase those companies who are not paying taxes and introducing tough laws and penalties.

Figures released last December by the ATO reveal that nearly 600 of the 1,500 largest companies operating in Australia did not pay a single cent of tax in 2013-14.

The government does not have a spending problem in the sense that it is spending too much, as claimed by Morrison and before him Hockey. It is a revenue problem. It is not chasing the big end of town where the big profits are.

In true bully-boy fashion, he cowardly hounds single parents, the unemployed, the sick and most disadvantaged. Instead of cutting funds to bulk billing of pap smears and saying there is not enough money for funding of schools or for the national disability insurance scheme, he should go after his ruling class mates.

He should get serious about Apple, Google, Lend Lease, Chevron Australia, Hutchinsom, ExxonMobil, and all the others who pay no tax on their profits.

The ATO should carry out an investigation into Transfield which holds multi-billion dollar contracts with the government to run Australian concentration camps, not to mention the urgency in closing those camps and bringing the company to justice for the inhumane conditions in the camps. It paid a token tax of just $16 million.

Companies with multi-billion and -million dollar turnovers would not continue to operate in Australia year after year if they were not making big profits on those operations. They are getting away with murder using a variety of schemes transferring their profits offshore to tax havens.

It is time to stop asking the people to pay with higher taxes and go after the true villains.

Current tax rates

Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

Next article – Ignored in commentary on Syria – 23 Million Syrians and the secular Syrian state

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