Thursday, February 18, 2016
But not me. I've been expecting it since November 24. Why? Because everything has unfolded just as my colleague Peter Martin revealed in the column he wrote 12 weeks ago.
"The big GST decision, on whether to lift it to 15 per cent, is already as good as made. The Treasurer and Prime Minister won't do it. Nor will they extend the goods and services tax to food, to health or to education, although they might yet extend it to financial services," Martin wrote.
What was arguably the biggest political scoop of the year was ignored. Maybe the denizens of the House with the Flag on Top didn't believe it. What's an economics editor doing getting scoops? Why would you bury a scoop in a column? Why was he told when we weren't?
Or maybe it suited no one in the building to kill off the GST story so soon. Politics is like a drama, where each player sticks to his part. Labor didn't want to know there'd be no change to the GST because it wanted to keep running its scare campaign.
Similarly, the press gallery wanted to keep milking the story for scary headlines. As for the government, it would have wanted to manage expectations, gradually conditioning its backbenchers and business urgers to the idea that tax reform wouldn't be as radical as first thought.
When the time was ripe, ministers' offices would start leaking bits of the story to key journos – the proper way to get a scoop – preparing the way for the boss to drop a big hint on some TV program, before formally acknowledging the decision.
The trouble with Martin's scoop was it was out of sequence; it didn't fit the standard choreography; it was the media playing something other than their allotted role. When the play was only half-way through, a rogue journo stood up and read out the last page.
Better to pretend it hadn't happened.
But this means we've been given the sanitised, media-managed version of how the decision was reached. For a start, careful leaking has removed the demand for the government to explain why it rejected the options for broadening the GST base.
Fortunately, Martin gave us the unsanitised explanation. Extending the tax to fresh food "was never going to happen". It would hit low earners hardest, and these days it's almost impossible to compensate them, we were told.
Extending it to health and education was considered to be unfair. People who use public schools and hospitals would pay no extra, while those already paying for access to private schools and hospitals would pay extra, Martin told us.
Last week's official version of the government's reason for deciding not to increase the rate of GST was its Damascus-road experience on January 25 when Treasury surprised it with modelling showing that using an increase in the GST to cut rates of personal income tax would do nothing to foster "growth and jobs".
Two small problems. First, this should have come as no surprise to anyone who'd read the tax reform discussion paper issued last March, which advised that personal income tax and the GST were little different in terms of economic efficiency.
Second, it portrays the decision not to change the GST as a simple economic calculation, untouched by base political considerations. Yeah, sure.
For a start, Treasury's modelling also shows that big efficiency gains could be had by using an increase in the GST to cut the rate of company tax. The government's unwillingness to contemplate such a switch was obviously political.
But the really significant consideration glossed over by the media's sanitised version of events is Martin's revelation that, since the GST was introduced, it's become much harder and more expensive to compensate low and middle income-earners for the regressive effect of indirect tax increases.
These days, many low income-earners neither pay income tax nor receive government benefits. Labor excluded many part-time workers from income tax by trebling the tax-free threshold to $18,000 a year, while the Liberals made superannuation payouts tax-free.
When people neither pay income tax nor receive a benefit, how do you compensate them? How do you even know how much to give them?
This explains why Treasury now estimates that at least half the gross proceeds from a GST increase would be needed for compensation, leaving much less room for tax cuts – personal or company – and making the politics of tax reform much more daunting.