GST reform: Malcolm Turnbull confirms he remains sceptical

A PROPOSAL to raise the GST to 15 per cent to deliver big personal income tax cuts is dead until 2020 unless Treasury officials can convince the Prime Minister it will drive economic growth.

A PROPOSAL to raise the GST to 15 per cent to deliver big personal income tax cuts is dead until 2020 unless Treasury officials can convince the Prime Minister it will drive economic growth.

But Malcolm Turnbull has pledged a Plan B to offer modest income tax cuts for average earners without hiking the GST could still be considered by reforming superannuation and work-related tax deductions.

While he stressed no final decision to kill the GST ­option had been taken, the Prime Minister has confirmed he’s still a GST sceptic in an exclusive interview with The Sunday Telegraph.

The Prime Minister said if his cabinet and party room could not be convinced of the merits of the change by hard economic data before the May budget it was off the agenda for the next term.

“If we did not take a GST change to this election then we could not try to ­implement that in the next term,’’ Mr Turnbull said.

“The bottom line is I would not and I don’t think any government could, contemplate making a change of the kind we are talking about to the tax system without taking it to an election.”

His GST warning came as Victorian Premier Dan And-rews and Queensland Premier Anna Palaszczuk con-firmed they would boycott a “talkfest’’ in Darwin next month to get the states on a GST unity ticket. “Why would we attend a talkfest on a policy we don’t support?’’ Mr Andrews said.

“There are a lot of proposals that have been floating around. Work-related deductions is obviously one. Concessions on super is another.”

But the PM laughed at suggestions a GST retreat would make the government look as if it was running scared over Bill Shorten’s GST campaign.

“We’ve never said we were going to implement a GST. Bill Shorten’s the one that has been haunting greengrocers holding up lettuces. I’ve never said that,” Mr Turnbull said.  

However, he conceded that a 15 per cent GST would provide scope to deliver bigger personal cuts and address the plight of average earners being pushed into the second highest tax bracket.

“If you want to invest a large amount of money as in $15 or $20 or $25 billion dollars then obviously raising the GST is the way to find that. But you’ve got to take into account this: that if you get a tax cut you’ve got more money in your pocket after tax.

“The point I am simply making is that if you get a tax cut and at the same time have to pay more in GST are you better off in net terms?’’

Economists argue governments may get more bang for their reform dollar by cutting corporate taxes, an option that the Prime Minister conceded would be a hard sell to workers without tax relief.

“That’s a political judgment but there’s no doubt that cuts in company tax ­reduce the cost of capital ­because it means an investor will get to keep more of the return. It is certainly widely accepted and I think it’s clearly right that reductions in company tax will encourage investment,’’ he said.

Mr Turnbull said there was a Plan B in place to ­develop options to provide income tax relief without a GST increase but it would be more modest.

“There are a lot of proposals that have been floating around. Work-related deductions is obviously one. Concessions on super is another,” he said.

WHERE THEY STAND ON TAX

SCOTT MORRISON: Treasurer is a believer that a GST increase could deliver bigger income tax cuts.

MARTIN PARKINSON: The top bureaucrat has pushed for GST reform to deliver income tax cuts for average earners.

JULIE BISHOP: GST sceptic who recalls fighting the 1998 election on the GST.

TONY ABBOTT: Doubter who wanrs any reform must deliver fairer tax.

BARNABY JOYCE: Has warned against GST hike in leadership pitch to replace Warren Truss.

ARTHUR SINODINOS: Key strategist and Liberal frontbencher who insists no final decision to kill the GST increase has been made.

Originally published as GST reform: Malcolm Turnbull confirms he remains sceptical