Coalition smarts as Premier stirs GST

THE Coalition is struggling to contain expectations from its promised tax review.

THE Coalition is struggling to contain expectations from its promised tax review, with NSW Premier Barry O'Farrell yesterday calling for the 10 per cent GST rate and exemptions for food, education and health spending to be on the table.

Treasury spokesman Joe Hockey said any increase or extension of the GST would be a matter for the states and emphasised that any proposals would be taken to the people for a mandate.

However, the Coalition's commitment to the review is being seized upon by the government as a threat to living standards.

"Mr Abbott has put broadening the base and increasing the rate of the GST squarely in front of everyone," Julia Gillard said yesterday, adding: "So it's definitely there on their agenda for consideration. It is not on ours."

The Prime Minister said the government was happy to go to the election on its record of tax reform, including raising the tax-free threshold, the mining tax and the tightening of company tax rules in last week's budget. "We have delivered tax reform that makes a real difference," she said.

While there is irritation within the Coalition frontbench at Mr O'Farrell's intervention, which was seen as unhelpful, the Coalition is attempting to frame the early announcement of the tax review as an exercise in political honesty.

"We're the only party that has had the courage to go to the electorate to seek approval on changes, major changes to the tax system," Mr Hockey told the ABC yesterday.

Mr O'Farrell said his support for broadening the GST base and increasing the rate were not about raising more revenue, but rather designed to finance the abolition of inefficient state taxes like payroll and land stamp duties.

"We should have a fair-dinkum and honest discussion, nationally, about what we can do to get rid of inefficient state taxes . . . and see whether the best way to replace that revenue stream . . . is through changes to the GST," he told Sky's Australian Agenda.

Mr O'Farrell's comments brought a cool response from other states. A spokesman for Queensland Premier Campbell Newman said any review should clarify the responsibilities of the commonwealth and state governments so "we can put an end to the overlapping bureaucracies and blame shifting that just wastes taxpayers' time and money".

South Australian Premier Jay Weatherill said the Coalition wanted to cut GST funding to smaller states like his and "put the burden on ordinary mums and dads by lifting the GST".

Western Australia's Colin Barnett said after more than 10 years it was appropriate to review the GST.

Tax experts are surprised by the Coalition's preparedness to raise the prospect of tax reform four months out from an election. "It allows us to have a conversation that none of us thought we would be having when the Henry review came out and the government ruled out so many of its 138 recommendations," University of NSW tax specialist, Professor Neil Warren said.

Professor Warren said choices had to be made about what people wanted from government, which level of government would do it, and how it should be funded.