GST increase looking increasingly unlikely

Malcolm Turnbull says the government’s modelling shows raising the GST would not ‘pass the first hurdle’ of being economically feasible.

As the prime minister briefed a joint party-room meeting in Canberra on Tuesday on the government’s tax reform work, state and territory leaders called off a meeting to discuss their position.

Mr Turnbull said it was the responsibility of a ‘grown-up government’ to examine tax and economic policy with great care.

‘We have looked very painfully and carefully at the proposal to raise the GST and it does not proffer the economic benefits that many have assumed,’ Mr Turnbull said.

MPs were told further modelling was being done, including more work on the GST.

The final decision on the coalition’s tax policy would be unveiled in the May budget, Mr Turnbull said.

Nationals MP David Gillespie, who wants the GST rate increased and its base broadened, urged the government not to make a ‘knee-jerk reaction’ and take the GST off the table.

Meanwhile, Northern Territory chief minister Adam Giles – who was to host a Council for the Australian Federation (CAF) gathering in early March to discuss tax reform – has written to his counterparts saying the meeting is off after Mr Turnbull effectively ruled out any change to the GST.

Mr Giles said in his letter to the premiers the national tax reform discussion had become ‘even more uncertain’ since he initiated the March 1 meeting.

‘Until such time the prime minister provides greater clarity with the commonwealth’s proposed tax reform package, any CAF discussion would only be speculative and add little to the national conversation,’ he wrote.

‘I therefore recommend that any further discussion around taxation reform is deferred.’ He added that the most immediate concern was funding health and education during the next four years.

‘A co-ordinated effort to close the fiscal gap through sensible and long-overdue reforms is paramount,’ he said.

And it is not just politicians who hope the Prime Minister changes his tune in the next couple of months with some business groups, including the Business Council of Australia, believing that economic growth is impossible without a GST increase.

It may well be that Mr Turnbull could be open to an increase if the State and Territory leaders presented him with a more attractive offer on how the spoils of a GST increase would be shared than those tabled to date, and it looks as if the uncertainty will remain at least until the budget comes down.

AAP and Inside Small Business