The Commonwealth and some states, he said, had “always been in support of a situation where you achieve a change in the tax mix which isn’t done to simply see a flow of revenue go to the states to support increases in recurrent expenditure”.
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Mr Morrison said there was now a clear objective for reform, but any changes should not increase the overall tax burden.
“That is what will help the tax system be growth-friendly”.
Morrison will be meeting his state counterparts on Thursday to discuss the tax system and decide if the excess of state and federal taxes need to be put to halt. But he warned how GST was carved up amongst the states and territories was an issue for WA. So the Treasurer is right to insist that tax reform must include an economic growth dividend.
Mr Morrison said the heart of the South Australian proposal was that states “might have their tax base made up of, for argument’s sake – and these are arbitrary figures, they’re not a proposal in any way, shape or form – is that 80 per cent of their tax base may be GST and 20 per cent might be drawn from a share of income tax”.
The talks will examine a range of tax reform options modelled by Treasury for the Federal Government at the states’ request. The option of raising the GST to 15% and including food and non-alcoholic drinks, and water and sewerage would raise $45 billion annually, before compensation is provided.
Labor says it’s an obvious sign the government intends to raise the GST.
Similarly, in absolute terms GST exemptions provide much greater benefits to higher income households – about $32 a week in the top decile, some two and a half times that for those households with the lowest income.
Another modelled proposal is raising the Medicare levy to 4%, reaping $15 billion for Canberra’s coffers, and raising the GST to 15% but not changing what it applies to.
Former treasurer Peter Costello this week wrote that “some hotheads” in the Coalition wanted a 15% GST.
“Those calling for a 15% GST are the people who have no experience of what it is like to campaign for such a policy”, he said. “The commonwealth is having a discussion with the states and territories about how we make our tax system better, that’s what’s happening”, he told reporters in Melbourne on Wednesday.
The incoming secretary of the Department of Prime Minister and Cabinet, Martin Parkinson, this week said the GST should be broadened because there were too many items exempt, making the tax less efficient than it could be.
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He said there was certainly a different set of views around the room, with the states setting out their challenges and the Commonwealth setting out its own.
