THE GST isn't doing the job that was promised by the previous government. Wayne Swan would prefer not to talk about the GST at all, but the starting point for any reform discussion at this week's tax forum should be the faulty revenue base that Labor inherited from the Coalition. If the federal Treasurer can't raise this issue, someone in business or, better still, one of the state Liberal treasurers should, because the weakness of the GST is hurting mining and non-mining states alike.
Richard Highfield, a former second commissioner of taxation who is now with the OECD, says Australia is more dependent on income tax, from individuals and companies, than most rich nations. "On an OECD comparison basis, Australia ranks towards the very bottom in relative degree of reliance on a value added tax as a revenue source," he tells Inquirer. "And if you look at the four-year outlook, the relative share for GST gets worse and higher for personal income tax."
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The GST was supposed to abolish inefficient indirect taxes and take the weight off income taxes. It was also meant to leave the states better off, because the GST replaced the annual begging-bowl festival of the premiers' conference. The GST achieved all three goals for a while, but the past few years have seen John Howard's proudest reform lose its value to the nation.
The temptation on the Coalition side is to blame every red mark on fiscal policy since 2007 on Labor, but the GST is unarguably the Coalition's baby. At the peak of its revenue-raising powers in 2002-03, GST collections were worth 3.9 per cent of gross domestic product. The final Peter Costello budget in 2007-08 left them at 3.7 per cent. Next financial year, they will be 3.4 per cent. The gap of 0.5 per cent of GDP may well be the difference between federal surplus and deficit in 2012-13.
