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States reject GST rate lift as Abbott pushes tax debate

Prime Minister Tony Abbott said on Monday that the GST was “a matter for the states” but should be looked at as part of the federation reform process and the tax reform process.

Mr Abbott’s push for a mature debate on raising the GST has stumbled at the first hurdle after the states rejected any ownership of the proposal, according to the Australian Financial Review.

AMP Capital chief economist Shane Oliver said that income tax cuts would need to be introduced alongside any hike in the GST to offset the impact on spending.

Deloitte Access Economics partner Chris Richardson said lifting the GST from 10% to 12.5% would raise an extra $12 billion a year, but that the government would need to give back $1.00 in every $6.00 raised, or about $2 billion a year, to make it politically palatable.

Treasury numbers show a 12.5% GST would cost a two-income ¬family with children an average $205 extra a fortnight.

Opposition leader Bill Shorten said the GST proposal was another broken promise from Mr Abbott.

Victorian Liberal Premier Denis Napthine, who faces an election on November 29, said he was not interested in having a “bigger discussion with the federal government about increasing the GST until they fixed the GST distribution”.

The Queensland Liberal National government, which expected to go the polls in March, rejected any move to increase the GST.

West Australian premier Colin Barnett said on Monday that he would not agree to a change in the “GST rate or coverage” unless the distribution model was changed.

South Australian Labor Premier Jay Weatherill said he was philosophically opposed to a taxation system that places the lion’s share of the burden on those who can least afford it.

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