Abbott sees tax rise as answer to funding hole PM backs GST hike

PRIME Minister Tony Abbott has backed an increase to the GST as his preferred way to plug the nation’s looming health funding crisis – while shoppers are expected to be whacked with a new $ 550 million levy for online purchases.

In his strongest comments on the subject to date, Mr Abbott said increasing the GST was his first choice to attack the massive deficit in health and education spending that is forecast to balloon to $ 45 billion by 2030.

Labor leaders, including Victorian Premier Daniel Andrews took an alternative proposal to increase the Medicare levy into yesterday’s COAG meeting of state and territory leaders.

A one percentage point increase in the levy would raise an extra $ 7.5 billion a year. “We have put things on the table for consideration and all of us have preferences,” Mr Abbott said, while stressing it was still early in the reform process. “My preference would certainly be for consideration of GST issues rather than consideration of a simple increase in the Medicare levy because just increasing taxes is hard to see as reform.”

The Prime Minister did not rule out taking a GST increase to the next election. But that remains a possibility – with a national report on the issue expected within weeks, followed by a white paper setting out a list of firm options next year.

“We’ve abolished the carbon tax, we’ve abolished the mining tax, we’ve reduced company tax for small businesses … my commitment is to try to ensure that taxes are lower, simpler and fairer,” Mr Abbott added.

Premier Mike Baird has claimed increasing the GST from ten to 15 per cent would raise an extra $ 30 billion a year in 2015 dollar terms.

Half the new revenue would com- pensate lower income households with small income tax cuts and small increases to welfare payments.

Mr Abbott prefers increasing the GST because he said the tax is a “joint exercise” between the Commonwealth and states, whereas the Medicare levy was “simply a Commonwealth tax”. The Federal Government cannot act on GST unless there is unanimous support from the states and territories. And that remains the stumbling block, with Queensland Premier Annastacia Palaszczuk reiterating her opposition to increasing the GST yesterday. Mr Andrews is also opposed.