Prime Minister Scott Morrison has shot down calls from a backbench Liberal senator to expand the goods and services tax.
West Australian Dean Smith has challenged the Morrison government to broaden the GST or increase the rate to 12.5 per cent in return for eliminating state-based payroll taxes.
“Well, we’re not doing it,” Mr Morrison told reporters in Sydney on Monday.
Senator Smith has encouraged state and territory treasurers to lobby their federal counterpart in support of the “politically courageous” tax shake-up.
“They could abandon their calls for a boost in infrastructure spending and increases to Newstart and instead stand united in a call for tax reform, which starts with the removal of payroll taxes in exchange for a broader-based consumption tax,” Senator Smith wrote in the Australian Financial Review.
“Payroll tax is universally regarded as a drag on economic activity and is ultimately paid by employees through lower wages and higher prices for consumers.
“Compensating state and territories for lost revenue could be achieved by broadening the GST or by a modest (but politically courageous) lift in the GST from 10 to 12.5 per cent.”
When he was treasurer, Mr Morrison is understood to have pushed internally for the government to consider reforming the GST, but was shot down by then-prime minister Malcolm Turnbull.
Finance Minister Mathias Cormann has also indicated he has no appetite for broadening the GST.
Senator Cormann said the coalition considered expanding the consumption tax a few years ago, but economic analysis showed it would have “negligible, if any” benefit.
Meanwhile, the watchdog overseeing the Australian Taxation Office is launching an investigation into a $7 billion blowout in unpaid taxes.
Taxation Ombudsman Karen Payne wants to understand why the total undisputed tax debt has grown from $19.2 billion to $26.2 billion over the past four years.
“Where is it accumulating in the system? Is it in big business, small business, or other specific sectors within the economy?” Ms Payne told The Australian.
“We want to try and understand if there are particular taxes it is associated with — GST, income tax, CGT (capital gains tax) or BAS-type (business activity statement) taxes.
“And then to use that scoping study to do a better, and more targeted, deep dive.”