Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Prime Minister. Why does the Prime Minister consider a 15 per cent GST a very constructive idea and a very strong and constructive proposal, when it would hit the average household budget by over $2,900 a year?

Joe Hockey (North Sydney, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I will just say to the honourable member for McMahon: if we are about to have a fair dinkum debate about tax, it is important that we properly engage with the states. As the Prime Minister said, one of the states suggested that there should be changes to the GST and compensation for lower income Australians as part of it, as part of the broader tax reform discussion.

We have had a process underway for a number of months. We have received hundreds of submissions. I and a number of other people have chaired forums right around the country. We want to have a taxation system for the 21st century economy. We want to have a taxation system that gives people the opportunity to compete with the best businesses in the world. Jobs are global, money is global and retail trading is global and we are competing with tax rates much lower in other countries, particularly our near neighbours like New Zealand, and we have no choice but to find ways to reduce tax rates on everyday Australians. We want to do that. Unlike Labor, we do not believe that tax reform can be defined by simply increasing taxes. We do not believe that. That is not good enough. The Labor Party believes tax reform is increasing taxes. The Labor Party believes that introducing new taxes without getting rid of any of the old taxes is tax reform.

The last time we embarked on tax reform, when we went through the process of getting the Australian people's support to introduce a GST and lowering personal income tax we abolished financial institutions duty, we abolished the bed tax, we abolished financial services taxes, we abolished a range of wholesale sales taxes and we made the system simpler. The goodwill displayed by states now—not always, but now—illustrates the fact that when you get into government you know that you have to have sensible discussions about the future of the tax system otherwise, if you do not, Australia will lose jobs and Australia will lose business opportunities. Companies and individuals will move over time. For example, 10 per cent of Australian workers pay almost half of all personal income tax and 12 companies in Australia pay over 30 per cent of all company tax and sooner or later it is going to be unsustainable for the Australian economy. We are going to do the right thing on tax.