Treasurer Scott Morrison has signalled income tax cuts are squarely in the federal government's sights as part of a sweeping review of the tax system, while warning the states they will not simply be handed a "bucket of money" under an overhaul of the system.
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And Victorian Premier Daniel Andrews, one of the most vocal opponents of raising the GST, publicly confirmed on Sunday his government would respect the Turnbull government's plans if it wins a mandate from voters at the next election.
The comments came as Mr Morrison prepares to sit down with state treasurers to discuss tax reform in an expected December meeting and as former Liberal treasurer Peter Costello called on the current government to "name the problem you want to solve".
Mr Costello said the debate had become a "tax free for all for everyone who wants to raise the tax" and said the federal government should clarify its plans, while singling out the need to tackle income tax bracket creep, which pushes people into higher tax brackets as their wages rise with inflation.
Mr Morrison also turned his guns on Labor for being unwilling to engage in political debate about tax, while asserting they have made $62 billion in spending commitments but set out just $5 billion in savings or revenue raising measures to pay for them.
The Treasurer said the federal government would continue to engage with state governments, the welfare lobby, business groups, unions and anyone else willing to talk and that "the only people who have made it pretty clear they are not going to engage is the opposition".
Mr Andrews said he would "never" support a rise in the GST but in a concession that will give heart to advocates of a rise in the tax, admitted his government would not stand in the way if the concept was endorsed by voters.
"If that plan is endorsed by the Australian people, we won't stand in the way of that," he said. "You can hardly be talking about mandates and then not actually respect the mandate the federal government might well be given."
Mr Morrison said the Harper competition report was "inextricably linked" to tax reform and that Australians expected to receive "better services, more choices, better spending" as a result of any tax changes adopted.
"The Australian people, I don't think, will cop any changes in the tax system just to give the states a bucket of money to spend it as they are now," he said.
"When you have the situation where the average wage earner in this country next year is going to be in the second-highest tax bracket, you know you have a problem.
"We need to have this conversation with Australians saying you are getting taxed more than you should be, I would like you to take more of your pay home."
He dismissed suggestions that the federal government had a revenue problem, arguing that"a revenue problem I would define as not taxing people enough and that you need to tax people more to lift your revenue – I don't think we have that problem".
Mr Morrison hit back at Labor's claims the government would not examine superannuation tax breaks that benefit the most well-off, promising the government was looking at the issue, while declaring "we are leading the world on making sure that income earned here in Australia by multinationals will be taxed here".
"To suggest otherwise … I think is just to blatantly lie to the Australian people."
"They [Labor] are hanging out there with about $62 billion worth of commitments over and above our books and they have come up with about $5 billion to pay for them."
But Labor finance spokesman Tony Burke dismissed Mr Morrison's suggestion the opposition had dealt itself out of the tax debate, highlighting his party's plan to tackle superannuation tax concessions and multi-national tax avoidance.
"Tax reform shouldn't mean slugging people who can't afford it and that's what expanding the GST always does no matter which way you look at it," he said.
In comments that will reassure the economic dries within the Liberal Party, Mr Morrison said: "We don't want to see the tax burden increased on Australians, we don't think the way you grow your economy is by increasing the tax burden.
And with mid-year economic update to be handed down in December, Mr Morrison said he was confident the government would maintain its debt reduction trajectory"which it is currently projected at about 0.5 per cent of GDP every year".
Last week, Treasury Secretary John Fraser revealed a downgrade in his department's growth forecasts, cutting expected improvements in government revenue and potentially pushing out its estimate of the date the budget returns to surplus.
Greens Treasury spokesman Adam Bandt, meanwhile, said his party wanted a "fundamental rethink" of how tax worked in Australia and advocated the restoration of a price on pollution.
