Tony Abbott says there’s a “powerful” argument for raising the GST: Is a price hike on the way?

A concession by Prime Minister Tony Abbott that those in favour of increasing the rate of the goods and services tax are making a “very powerful point” could be the strongest indication yet of a push to raise the tax, a tax expert says.

During an interview on Macquarie Radio in Sydney yesterday, the Prime Minister said he understood the argument for a GST rise from advocates such as NSW Premier Mike Baird and South Australian Premier Jay Weatherill, who have been calling for a debate to lift the GST from 10% to 15%.

“There is an efficiency argument for taxing earnings less and taxing spending more,” Abbott said.

But while the Prime Minister said he accepts there is a “strong argument” for raising the GST, he stressed it would have to be seen in the context of “overall lower taxes”.

“It’s a very powerful point you make… this is something we’ve been looking at as part of the tax reform white paper and we’ll have more to say about this in the months ahead,” he said.

Craig Whatman, a tax expert at Pitcher Partners, told SmartCompany this morning he believes Abbott’s comments add to the momentum to moves to raise the GST.

“I think that it’s strongest indication yet of clear discussion in his government that the option is worth taking to electorate,” Whatman says.

According to Whatman, the comments could be seen as a “deliberate strategy to keep the conversation going” despite “vehement opposition” from some states.

“There definitely seem to be more of a concerted effort in recent weeks by members of the government to speak favourably about GST,” he says.

While the government has previously said it won’t alter the GST without the unanimous consent of the states and there would be “serious political issues” associated with changing it without their consent, Whatman says the federal government could still do it.

“Commonwealth legislation could be changed,” he says.

Whatman suggests there may be a move towards taking a GST rise to the next election with “sufficient support” following the release of an options paper later this year as part of the tax reform white paper process.

“There’s a very good chance a rise in GST rate is one of the options canvassed in that paper,” he says.

“The government would probably want to see what reaction that provides in the lead-up to next year.

“Depending on when the election is, it could well be the option that will be government’s preferred platform.”

But Whatman says SMEs would likely want to see details about corresponding cuts in other taxes amongst a broad discussion about the GST rising.