Joe Ludwig (Queensland, Australian Labor Party) Share this | Hansard source

What an extraordinary argument put forward by Senator Fawcett. I only want to touch on it briefly. The argument effectively is that there is no plan; the plan does not exist. The motion before us highlights the fact that the Senate opposes the plan by the Turnbull government to increase the goods and services tax rate to 15 per cent and broaden its base to include fresh food, education and health. Ultimately Senator Fawcett ended with the clear view that it is us over on this side, and perhaps the Greens, that are running a scare campaign.

How far from the truth this is. The truth is that the coalition are running their own scare campaign. Here are the words that were put on 3AW on 6 October. Neil Mitchell asked:

… everything is on the table—superannuation, negative gearing, capital gains tax—everything. The GST, everything is on the table.

The response from the Prime Minister, Mr Turnbull, was:

Everything is on the table. That's right.

The presenter, I think, was somewhat taken aback by that. He was asked the further question:

I think everyone understands that an efficient, incentivising tax system is the Holy Grail … even looking at increasing or broadening the base of the GST. Can you be clear with us now—

This was on the ABC RN on 1 October 2015. The answer from the Prime Minister to Fran Kelly was:

Fran, everything is on the table.

What we have now is quite clear: a backbench in revolt from their own scare campaign. It is clear you do not have to put everything on the table. You can have a tax review which is progressive and which talks about how you are going to deal with it. You do not have to put everything on the table. Of course, in putting everything on the table you have created a plan—a plan which effectively means that any review can come back and say, 'We should increase the GST.' How are you going to deal with that? You have let the cat out of the bag. You have put the dead cat on the table. Who is going to take it off? I dare Mr Turnbull to take the dead cat off the table, because you will be stuck with it. You have already run your own scare campaign. You have already started your scare campaign. How are you going to end a scare campaign that you have created amongst your own backbench?

But what is really damaging in this whole debate is that the Prime Minister, Mr Malcolm Turnbull, has refused, time and time again, to rule out increasing the GST to 15 per cent. He has also refused to rule out broadening the GST and charging it on fresh fruit and vegetables, education and university costs, medicines, grocery bills, child care, nursing home payments, rent and the cost of a new home. An increase in the GST would mean that every single Australian would suffer as the price of everything is pushed up. It would cost more to visit the supermarket, go to the doctor or buy your kids what they need to get a good education. But unlike the time the GST was first introduced, when wholesale sales taxes were withdrawn and there were reductions in other areas, this would be a flat, straight increase of five per cent in the GST without those moderating influences—and it would come at a time when low- and middle-income earners are already struggling to keep their heads above water.

The GST, in and of itself, is a regressive tax, which would see the lowest income earners paying 20 per cent of their income while the highest income householders pay a mere nine per cent of their income. This government looks like it is insisting on punishing low- and middle-income earners. All of those household bills that are already causing families much financial strain, including electricity, gas and grocery bills, would go up. The Australian public can rest assured: Labor does not support an increase in the GST rate or applying it to fresh food, health care or education. It is a regressive tax and would have a disproportionate impact on low- and middle-income earners. We will continue to fight the coalition on their plan that would see every Australian pay more.

I will give you an idea of how severe this GST increase could be. An average family with a household income of $86,000 would pay an extra $6,200 if the GST were broadened to apply only to fresh food, health care, education, water and sewerage. They would pay an additional $3,200 a year more if it were increased to the 15 per cent, with no change to the base. They would pay $3,000 a year more if it were applied to fresh food, health care and education but remained at the current rate of 10 per cent. They are leaving the GST on the table as part of the review and whichever way you cut it if it were picked up it would be a huge slug to low- and middle-income earners. The refrain from the other side is, 'There is no plan,' or, 'Even with a GST increase, we will provide offsets.' They might lower income tax rates and they might hold out a carrot, but they will never compensate sufficiently for a flat rise of the GST in the order of 15 per cent.

It seems that the Liberal Party under the leadership of Mr Malcolm Turnbull would be happy to see low- and middle-income earners pay more while refusing to go after multinationals. They would be happy to see low- and middle-income earners slugged with this tax while multinational companies get off scot-free. It is not fair, and this government wants those who can least afford it to effectively subsidise multinational companies' operations in this country. They could have taken the opportunity to close those tax loopholes for multinationals, but instead they wimped on that. I hate to say what the Greens also did on that. They could have been a little stronger, but as usual they rolled over.

The Liberal Party are also concerned with only looking after the big end of town, so it should come as no surprise that they have taken this view that they could increase the GST and slug low- and middle-income earners whilst at the same time ensuring that the big end of town and high-income earners are well looked after. That is how they intend to operate. Labor simply will not support Mr Turnbull's plan to hurt the families who can least afford it. Labor understands that families are finding it harder and harder to make ends meet. Wage increases are not keeping up with the rising cost of household bills—not to mention that those who are unemployed are finding it harder to find and keep a good job.

It is not only low- and middle-income earners that this GST would hit. Small businesses, which are the engine of growth in Australia, would suffer significant losses as a result of an increase or broadening of the GST. As business confidence and retail spending take a hit, supporting small business is crucial to driving growth and employment opportunities in this country. The role of small business in driving our prosperity has never been more important than now. However, it seems that this government does not understand what the knock-on effects of such a knee-jerk policy change would be. By merely allowing the issue to run, to not scotch it, but to let it float out there to be considered and be part of their overall strategy is poor form for small business. It knocks business confidence. It knocks consumer confidence and, as a consequence, small businesses are already feeling the effects of it.

You do not have to go far. You only have to go to the coalition backbench to see how this impact is playing out. They talk to their constituents. They know their constituents are revolting against their plan to increase the GST. They are hearing it loud and clear, just as we hear it. We have heard from families, from workers and from fixed income earners. They all understand how an increase in the GST to 15 per cent will hurt them so much. Small businesses do not need the complexity that this will create. They are already weighed down by red tape and cash flow pressures. A recent NAB SME survey showed that a lack of consumer demand is the No. 1 constraint on small business profitability. Labor understands that times are tough and that the Australian economy is in transition. The last thing small businesses need now is another blow to consumer confidence created by this government and bigger BAS payments. They need to let small businesses get on with their job of working hard, running their businesses and turning a profit.

Coming back to how they might structure their package, modelling has shown that, even if the carrot of a five per cent income tax were offered, as suggested by those opposite, the lowest 60 per cent of households will still be worse off and the top 40 per cent would gain at their expense. It seems that the government cannot escape punishing low- and middle-income earners. If history has taught us one thing, it is that the coalition government cannot be trusted to implement any promised tax cuts. Some of the taxes they promised to scrap when the GST was introduced are still in place 15 years later, and voters have not forgotten about that. There have been plenty of opportunities for state governments of Liberal persuasion to follow Mr Howard's lead, but they have never taken it up. Families do not need to be slugged with more tax. This government should stop frightening its own backbench and focus on going after those big companies that are avoiding paying tax in this country.

The Prime Minister simply cannot be trusted on the subject of the GST. Even in parliament, you can look at Hansard and see that Mr Turnbull has refused to rule out an increase or a broadening of the GST. When asked in parliament, Mr Turnbull refused to rule out increasing the GST to 15 per cent not once, not twice but three times. He has also refused to rule out broadening the GST and charging it on the cost of fresh fruit and vegetables, education and university, medicines, grocery bills, child care, nursing home payments, rent and new homes. It is an enormous scare campaign that this coalition government are running against themselves, if ever I have seen one. It is an extraordinary that they would contemplate such an outcome. It shows their inability to manage the economy and provide leadership for small business and consumer confidence, and it demonstrates once and for all that this government are only looking after the interests of big business. If they were serious about looking at how they could lead this debate, they certainly would not do it the way that they have led this one.

Of course, it does not stop there. Families do not need to be slugged with a 15 per cent tax. This government, as I said, should be more focused on managing the economy, but the Prime Minister has already belled the cat on this issue. The cost of living is already at an extreme high, and every time a person pays a bill, stands at the supermarket checkout or takes their kid to the doctor, they will pay more. Absolutely everything will cost more under this government. Mr Turnbull's plan—he only has one plan—is to raise the GST, which will slug families and those on fixed and lower incomes.

If you look at the seriousness with which this issue has been taken—for example, by ACOSS in Tax Talks 5: The effects of a higher GST on householdsI do not think this coalition government can simply argue, 'We don't have it as a plan.' What are they doing? Maybe it is a thought bubble. Well, ACOSS take your plan very seriously. They have commissioned a report from NATSEM to see how would impact the Australian economy. Their summary states:

Increases in the Goods and Services Tax … are being advocated to help fund services provided by the States such as health care; to replace other indirect taxes such as Stamp Duties or Payroll Taxes; or to pay for income or company tax cuts.

It goes on to say:

Many people are concerned about the impact of a higher GST on low and modest income households …

So they did the work that this government should have done before it started a thought bubble which crystallised into a plan. They looked at how they could assess the equity impacts of changes to the GST. ACOSS commissioned the National Centre for Social and Economic Modelling, with support from the Carnegie Foundation, to model the impacts of a number of scenarios. The scenarios provided a key insight into how this would impact those on low and modest incomes:

The GST is regressive, raising almost twice the share of household income from the lowest 20% of households compared with the top 20% (13.4% compared with 5.9%).

That says it all. In short, if you are on the lowest 20 per cent of household incomes, you will pay a disproportionate share of the tax burden through the GST. You will not and cannot be compensated sufficiently for that tax slug that you will pay. For those on higher incomes, bigger incomes, in dollar terms it has less of an impact. So of course it is not surprising that you find those on the other side thinking it is a good idea.

The modelling reports that extending the GST to health or water would make it even more regressive and points out that extending the GST to education would have a similar impact across the income distribution for all groups. So it negatively impacts students, those who are on modest incomes and those on low incomes. Under 'policy implications', they highlight that this:

… confirms that while the current GST is needed to help fund State Government services, it is a regressive tax. Raising more revenue from consumption taxes rather than income tax would reduce the overall progressivity of the tax system.

So what the coalition are advocating for ultimately is a less progressive tax system by increasing the GST burden on the ordinary low-income or modest-income person.

I have to say that the ACOSS modelling could not find much joy in an increase in the GST no matter how hard they looked and no matter how many scenarios they went through. It would of course impact differently on many different households but there were always going to be significant losers out of this system, and those losers—(Time expired)