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Tax reform supporters ‘not real’, says Costello

Previous reform proposals, including the Henry tax paper produced under then prime minister Kevin Rudd and a white paper reform started by the Abbott government, have been abandoned or mostly ignored.


Mr Costello said he did not think there would be tax reform of the scale of the GST, largely because it had touched upon almost every element of the tax system. Those demanding reform now, he said, were unclear as to what they wanted or how they would achieve their aims.

Likening calls for reform to demands for people to “be nice to puppies”, those wanting change had to argue the policy and have a political plan to show voters they and the country would be better off.

“If you’re going to do tax reform, you need a policy. You need a political plan to implement it,” he said. “This is hard. If you think balancing a budget’s got a degree of difficulty of seven out of 10, try major tax reform, it’s about 17 out of 10.”

Mr Costello said the GST had held up remarkably well since its introduction in 2000, adding he was surprised neither the rate nor the coverage of the tax had been altered during its operation.

He said a requirement that all states and territories had to agree to any GST changes meant there was an effective “lock” on its settings. But they might have to change, particularly if business operations altered.

“The base has done unbelievably well, it has surpassed all imagination. Here we are 20 years later – the base is intact, the rate is intact. There’s been more changes to the company tax, the income tax, every other tax, the CGT, than the GST.

“But you do have to tend these things, particularly as the nature of commerce changes.

“What threatens the tax system, the integrity of the tax system these days, is companies which can sort of live in no jurisdiction and deliver goods and services from virtual locations.”

The government had to change its original GST plan to exclude fresh food in a deal with the Australian Democrats to get the tax through the Senate.

If you think balancing a budget’s got a degree of difficulty of seven out of 10, try major tax reform, it’s about 17 out of 10.

Peter Costello

Since its introduction, the share of goods and services attracting GST has fallen. The Parliamentary Budget Office is to look at this development, which has previously raised concerns within Treasury given the importance of the tax to the budgets of the states and territories.

Mr Costello said the original GST design would have worked better.

“It was a better design, it could have been a better delivery. Faced with that or no delivery, we obviously had to take what we could get,” he said. “That means over time, it’s not growing as fast as it was planned to grow.”


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