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"Fiscal folly in the extreme": Jay unfazed as Keating joins GST fray

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Jay Weatherill has welcomed Paul Keating’s foray into the GST debate, with the former Labor Prime Minister slamming a proposed increase from 10 to 15 per cent as “a fundamentally bad idea”.

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The former Labor Prime Minister, who as Treasurer pushed for a consumption tax only to later win an election by vehemently opposing John Hewson’s GST, warned to give such additional money to any cabinet would be “fiscal folly in the extreme”.

“An increase in the GST is not tax reform, it is tax penury,” Keating wrote in an opinion piece published by Fairfax.

“There is nothing reformist about it… the GST is just a flat, bang you over the head, tax.

“It changes nothing; no behaviour, other than to put the tax weight onto the wrong people.”

But Weatherill, who has advocated increasing the consumption tax rate if the states receive a direct share of income tax receipts to offset health spending demands, said he “actually welcomed [Keating’s] remarks”.

“He said there is a fiscal cliff in terms of healthcare funding… he also suggested that a more modest form of GST may be appropriate if it went to healthcare funding,” Weatherill told reporters today.

Keating acknowledged that Weatherill and NSW Premier Mike Baird’s arguments against health cuts were “right”, saying the quality of our public hospitals is an important part of the social contract”.

“But the remedy might be to hypothecate a modest increase in the GST to hospitals – and only to hospitals, with back up agreements between the Commonwealth and the States to guarantee the expenditure,” he wrote.

Weatherill said this was “the very same point I’ve been making… that the GST actually collects too much money in the first instance, and not enough in the long term”.

“That’s why I suggest we should have a share of national income tax which better approximates the rate of growth of our healthcare system,” he said.

“But these are the big discussions we need to be having on a national basis.”

The Premier has come under sustained fire from his own party federally, having dramatically altered his pre-election stance on raising or broadening the GST.

Federal Opposition Leader Bill Shorten today ruled out supporting even the small GST rise Keating suggested, saying: “We will not support an increase in the GST.”

“Labor will stick to its guns,” he said.

Keating’s column warned that Australia would be “on the way” to becoming one of “the highest taxed countries in the world” if it increased its GST to 15 per cent, arguing the move would “in all likelihood” lead to “a 20 per cent tax into the indefinite future”.

“When a country gets locked into such permanently high taxation, there is no way out of it,” Keating wrote.

“Were the public to agree to give the political system such a load of money, the political system would simply go and spend it.”

He said bolstering the public sector would make the private sector relatively smaller, an outcome at odds with good public policy.

“People should remember that a GST or a value-added tax was the invention of the socialist parties of Europe; a flat tax levied to pay for larger systemic social programs,” he wrote.

“It has always been a wonder to me why so many conservatives in Australia have found themselves wedded to such a socialist tax.”

-with AAP

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