Malcolm Turnbull is facing calls from nervous coalition backbenchers to steer the tax debate away from the GST and onto state and federal tax cuts.
The calls come as Labor leader Bill Shorten rejected a suggestion from former prime minister Paul Keating that a modest hike in the GST to specifically fund hospitals could be justified.
Mr Turnbull is considering changes to the GST as part of a broader package of tax reform the coalition will take to the election.
But the prime minister has yet to say whether the government will jack up the rate from 10 to 15 per cent.
On Tuesday, facing questions in the coalition party room about the GST, Mr Turnbull said no decision had been made on the politically risky idea of raising the rate, but voters needed to know the government had properly considered all options.
Queensland Nationals MP George Christensen said the government needed to get rid of taxes.
“I didn’t come into federal parliament to increase taxes and increase the tax burdens on Australians,” he told reporters in Canberra on Wednesday.
“The number one aim is to make the tax system better to stimulate growth and job creation.”
Fellow MP Ewen Jones said he supported a tax system which allowed people to invest and improve business.
“If we remove those barriers like stamp duty and payroll tax – if we can get rid of those things – while looking after the most vulnerable, then we are moving in the right direction,” he said.
“Does that include an increase in the GST? I would be against giving one extra cent to any state government at the moment because I don’t think they are spending it well.”
Mr Turnbull told parliament on Wednesday the government had “not made a decision to change any element of the tax system”.
Treasurer Scott Morrison added: “We’re interested in things that will actually ultimately see taxes fall in this country, not see taxes ever higher to chase ever higher levels of spending.”
Mr Keating described as “fiscal folly” the prospect of the Turnbull government increasing the GST to 15 per cent.
The additional revenue – about $30 billion annually – would end up feeding government spending and lock the country into permanently high taxation.
But a rise of one or even two percentage points “purely and simply to fund public hospitals and hypothecated to that sole purpose” could be defended, Mr Keating wrote in Fairfax Media.
Mr Shorten said Labor would not support any change to the GST.
“Labor will stick to its guns,” he said.
Meanwhile, Assistant Treasurer Kelly O’Dwyer appeared to give the last rites to the coalition’s election promise of a green paper on tax reform options.
“I don’t think there is anybody sitting at home waiting for a green paper,” she told the National Press Club.
“What I do think they’re waiting for is … a very clear direction from government.”
Mr Morrison told parliament the government was going through a “very open process” and consulting widely.
Cabinet Secretary Arthur Sinodinos acknowledged there were concerns within coalition ranks about a GST rise.
“It would be natural – we had similar concerns previously in 1998,” Senator Sinodinos told Sky News on Wednesday.
“One of the tests in putting together our package will be to convince our colleagues that the package is viable, economically sustainable and fair.”
He said it was good that MPs were discussing the issue, but no final decision would be made until the cabinet and party room endorsed the reform package.