Bill Shorten (Maribyrnong, Australian Labor Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. I refer the Prime Minister to his previous answer. The Prime Minister has said that he wants the government to have a conversation with Australians about tax, including the GST. How can Australians possibly have a national conversation with the government if the Prime Minister refuses to answer our questions in the national parliament?

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

Mr Speaker, it is hard to keep him happy! He is unhappy when I speak for three minutes and he is even less happy when I speak for 30 seconds. So I will give you three minutes, Bill!

The honourable member would be well aware that the tax system needs to raise the money that government requires, but it needs to do so in a way—

Mr Champion interjecting—

Tony Smith (Speaker) Share this | Link to this | Hansard source

The member for Wakefield has been warned!

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

that imposes the least break on economic activity—so, it distorts economic activity as little as possible.

Some taxes, such as transaction taxes—like stamp duties—are obviously very distorting because they discourage trade. That is why years ago the states took off the stamp duty on share transactions—the stamp duty there. And, of course, the very large stamp duties on property transactions discourage trade in real estate transactions. Income tax, which is progressive, is very important, because it is the largest source of revenue. Also, because of it being progressive, it means that the burden of tax is carried disproportionately in accordance with income. So those with the highest incomes pay more of the tax, because they can best afford it. That is understood.

The GST itself is a very efficient tax. It is widely regarded as such, and is regarded as such by just about any economist and, of course, just recently by the OECD. The problem with the GST, of course, is that it affects households with lower incomes—

Terri Butler (Griffith, Australian Labor Party) Share this | Link to this | Hansard source

And middle incomes!

Tony Smith (Speaker) Share this | Link to this | Hansard source

The member for Griffith has been warned!

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

because they will spend a larger proportion of their income on goods and services that are subject to the GST. So its advantage is its efficiency—it does not distort economic activity. Its disadvantage is that it is seen to be regressive, although it is fair to say that recent studies indicate that it is not as regressive as was once thought years ago. But, nonetheless, we accept that it has a certain regressive nature. It is not a progressive tax, like income tax.

Therefore, there have always been advocates for having less of our tax revenue—'our' being all governments—levied from personal income tax, from direct taxes, and more from an indirect tax, a GST, or VAT or call it what you will. The challenge with a GST or a VAT is to ensure that lower-income households are properly compensated. That was clearly part of the design in 2001. It was part of Labor's own government design when they imposed a similar broad-based tax on energy—the carbon tax. And, of course, if there were to be in the future any change to the GST, equity and fairness would be absolutely foremost.