Tax reform needed, not a circus

by | Aug 19, 2013 | Business

‘If there were a shred of credibility left in either party they would put everything on the table.’ Photo: Andrew Meares

It’s the circus of a thousand sideshows. ”I believe in the Territory, I love the Territory,” Kevin Rudd proclaimed last week as he took everybody by surprise, again, including his own party, and flashed his latest policy, a special economic zone for northern Australia.

Not that old chestnut. Didn’t they say it was wacky?

The stage lights focused on Tony Abbott, who lampooned Rudd for being a copycat. It was our idea first, said Abbott, omitting the inconvenient detail that, while the Coalition had coyly ventured the idea of a special economic zone a while ago, it soon performed a triple backflip with pike.

As soon as the Labor government ridiculed it, that is. But now, apparently, it’s back on. Gina Rinehart was ”ecstatic” that both parties had embraced her special northern economic zone.

The election circus rolls on. The political acrobats flip and fudge their way around proper tax reform while they perform their incredible spending feats.

A failed mining tax, the acrimony of the carbon tax, the recent fringe benefits tax kerfuffle and now the special northern zone, again – sideshows all. When it comes to tax, voters have the choice between the lame policies of the government and the invisible policies of the opposition.

Under Rudd Mark I, the Henry Tax Review was commissioned then mostly ignored. Under the Coalition, who knows? They are hardly inclined to spook voters by announcing a credible policy. It would be shot down in a scare campaign, a la their own efforts on the carbon tax.

If there were a shred of credibility left in either party they would put everything on the table. That means the GST, a financial transactions tax – everything.

Privately, most agree there will need to be radical reform to fund the nation’s future. Yet governments are increasingly cowed by lobby groups and the spectre of their scare campaigns. Look no further than the admission of the superannuation industry over the weekend that it has geared up for a media blitz at the first suggestion anyone might dare to adjust the world’s most generous middle-class welfare system.

This from an industry that would not exist but for government decree.

Lobby groups are increasingly the enemy of democracy. Try to tax the big miners, they eject you from office. Try to tax the finance industry, try even to tighten the loopholes. They are yet to try.

Two news events in recent days illustrated the challenge for governments and their tax regimes.

On the one hand we saw the federal budget deficit billow to $30 billion, thanks to the end of the mining boom and falling tax receipts. On the other, we saw Commonwealth Bank’s bottom line billow to $7.8 billion a few days later.

CBA’s sharemarket value now towers at $118 billion. It nets $21 million a day – even in a climate of low credit growth – and, like its peers in the banking oligopoly, it is underwritten by taxpayers.

We stand behind them with our taxes, we guarantee their deposits, we own their risk. Even so, the banks vow to pass on the cost of any deposits tax, should it occur, straight to depositors. That is cheek for you.

While there is no doubt the luxury of taxpayer protection should come at some price, particularly in light of the heady profits made by banks while the economy merely trundles along, a deposits tax should be Plan B.

Plan A should be a financial transactions tax, a so-called tax on speculation or a ”Robin Hood” tax. It would not undermine investment, or core revenues of the banks. But it would tax useless derivatives and high-frequency traders, and ironically – as they have been drained by the financial crisis and the actions of speculators in the first place – refill government coffers.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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