Premiers to consider GST increase among other tax reform measures at meeting in Sydney on Friday

PAPERS prepared for Friday’s meeting of premiers with Prime Minister Malcolm Turnbull include options to lift the GST to 15 per cent, or broaden its base.

Considering options ... Australian Prime Minister Malcolm Turnbull and Treasurer Scott Morrison. Picture: AAP Image/Lukas Coch

A PROPOSAL to raise the GST to 15 per cent could be up for review when Prime Minister Malcolm Turnbull meets with state premiers this week.

Papers prepared for the Council of Australian Governments meeting on Friday reportedly include options to raise or broaden the base of the consumption tax.

Proposals to unify state and territory payroll taxes and an overhaul of property levies are also likely to be discussed when Treasurer Scott Morrison meets with his state counterparts on Thursday.

The papers prepared for Friday’s COAG meeting include options to lift the GST to 15 per cent or broaden the base of the consumption tax and raise it to 12.5 per cent.

Increasing the GST from 10 per cent to 15 per cent would raise an extra $32.5bn, in line with estimates from independent economists.

Lifting the GST to 15 per cent and broadening its base would raise about $45bn, according to options confirmed by The Australian.

One individual close to the talks on tax reform said the leak of the paper showed the potential attractiveness of a GST increase, although the states could also look at alternative tax changes and greater restraint on their spending.

The federal government is not calling for payroll tax reform, saying it is a matter for the states, but the papers prepared for tomorrow’s meeting of state treasurers highlight the potential for change at a time when state leaders are complaining of pressures on their budgets.

Piecemeal changes to payroll taxes have left employers paying different rates according to workers’ location, adding to costs on business and leading to calls for a simpler national approach.

Rivalry between states has also whittled away payroll tax revenue as each jurisdiction ­offered concessions to big ­employers to secure a national headquarters or other big facility, making the system even more complex.

The Australian has been told the federal analysis shows that a unified payroll tax with a 6 per cent rate — a middle ground compared with the rates applied today — would recover about $13bn a year. The change would also require abolition of the different thresholds set by each state and territory, which means more employers would end up paying payroll taxes.

The federal papers prepared for tomorrow’s meeting, distributed to the states last week, also map out the potential to reform land taxes such as stamp duty on property transfers.

Scott Morrison said this week he would not negotiate a change to the GST with his counterparts, saying all the treasurers had agreed months ago that they needed to examine state and territory revenue measures as part of any national tax reform.

“Changing the tax system isn’t just about federal taxes — I mean $85bn is raised every year through state and territory taxes,” the Treasurer said.

“And I would like to know how they think they could make those taxes work better. It is not just about federal taxes.”