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Morrison Clarifies Aus Govt's Position On GST Reform

by Mary Swire,, Hong Kong

19 February 2016

Australian Treasurer Scott Morrison has said that "the times are not right" for an increase in the goods and services tax (GST).

In a speech to the National Press Club in Canberra, Morrison said: "This Government will not be taking a GST increase to the next election. The times are not right for that, and this Government would never seek to change the GST unless we put it to the Australian people first."

Morrison explained that the Government had modeled a scenario in which the GST is raised to 15 percent, the level of personal income tax cuts "maximized," and the compensation package for low earners set at AUD6bn (USD4.3bn). According to Morrison, the "growth dividend" in this scenario is at best between zero and 0.3 percent.

"In implementing the arrangement, of course the compensation bill would have had to be higher than AUD6bn, just to deal with independent retirees and others directly not influenced by the tax or transfer system. That would have been another AUD2bn to start with. By the time you got through the Senate, by the time everyone else had lined up for compensation, you would have been at a figure approaching AUD16bn or so, and that's one percent of gross domestic product (GDP) on top of outlays," he added.

Morrison said that, "on balance, the Prime Minister and I and the Cabinet decided that this was not a goer, and that it was not go for launch, it was something that had to be put away."

Morrison's comments came after Prime Minister Malcolm Turnbull announced that the Government "will not be taking a proposal to increase the GST to the election." He told reporters that the Coalition had "looked very carefully at every angle, every possible change to the tax system," including cuts to company tax and income tax rates and an increase in the funding given to state governments.

Turnbull said: "We are not a Government [that has] said 'oh it is all too hard, we are putting it into the political too hard basket.' We have looked at it carefully and diligently, as Australians expect us to do."

TAGS: tax | gross domestic product (GDP) | corporation tax | goods and services tax (GST) | Australia | tax thresholds | tax rates | tax reform | individual income tax | services

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