Labor needs to take on tax reform, say independent MPs

The Treasurer on Monday told a conference in Perth "our commitment to the GST has not [changed]".

"This arrangement better reflects the contribution you make to the national economy," he said.

The controversial deal, put in place by the previous government, guarantees Western Australia receives a minimum 70 per cent share of GST collected from its citizens (rising to 75 per cent in 2024-25).

Without the deal, WA's GST share would be much smaller because of its revenue windfall from soaring commodity prices. The arrangement is already estimated to have cost taxpayers across the country $10 billion.

The Albanese government's commitment to the arrangement comes against the backdrop of WA's importance at the last federal election in delivering a swag of seats to Labor, helping propel it into office.

But the release of the Intergenerational Report last Thursday has reinvigorated debate about the long-term sustainability of current taxation arrangements after projecting an increasingly heavy reliance on personal income taxpayers to fund future government spending, particularly spiralling demand for care.

Independent MP Allegra Spender, who has convened a series of roundtables on the tax system, said the country had "slept-walked" into the current situation and needed to pay greater heed to concerns of younger people.

The member for Wentworth said young people were rightly feeling their interests were not being taken in account.

Referring to Grattan Institute research showing older households had seen a 50 per cent increase in wealth while the wealth of those younger than 35 years had not moved, Ms Spender said younger people were "really being squeezed".

"I feel it is really strange that where we have significant shrinkage in the number of workers we are increasing our reliance on income taxes," she said.

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The Intergenerational Report revealed spending on health, aged and disability care, defence and interest payments will grow substantially over the next 40 years while the tax base will narrow and become increasingly reliant on personal income tax revenue to pay for governments services.

The government has ruled out major changes to the taxation system, at least for this term.

Assistant Treasurer Stephen Jones said there had been "no change" to the government's taxation policy, which has as its centrepiece the stage three tax cuts due to come into effect next financial year.

Mr Jones told ABC radio that the Intergenerational Report was a "warning to government and the population of the challenges, but also the opportunities we face".

The assistant minister admitted revenue was "an issue, but we've also got a lot of things going our way. Our superannuation system, for example, is ensuring that we're going to be smoothing the cost of retirement. Without that, the pressure on the budget would be unbearable".

Instead of further changes to income tax, the government has moved to tighten the taxation of multinationals, offshore gas and high superannuation balances.

But Ms Spender said the government needed to show much greater ambition.

She said current taxation arrangements were failing the nation on fairness and productivity grounds, singling out imposts like stamp duty as particularly damaging.

The independent MP said Labor was "burnt by the 2019 election", but urged the government to set up a "reference process to start the conversation" on tax reform.

"I am revenue agnostic. I think we can get agreement across Parliament that the tax system needs to work better and this is an opportunity for that conversation," she said.

Independent ACT senator David Pocock backed the call for a wide-ranging review of the tax system.

Senator Pocock said the Intergenerational Report confirmed the nation was "far too reliant on personal income tax".

"As a Parliament, we need to be able to have a big, open, conversation about revenue if we are going to be able to deal with the challenges we're facing," he said.

"As Allegra Spender and others have rightly observed, this is a discussion the major parties are too scared to have."

Senator Pocock said examining the GST should be part of any review, urging a "much sharper focus on taxing super profits".