Prev
Next

Both the Coalition and Labor are bottling it on tax reform

Robert Jeremenko

by Robert Jeremenko

10 Aug 05:40am

Must Reads

The Punch is moving house - this is a caption

The Punch is moving house

385

Will Pope Francis have the vision to tackle this? - this is a caption

Will Pope Francis have the vision to tackle this?

122

Advocating risk management is not “victim blaming” - this is a caption

Advocating risk management is not “victim blaming”

251

Filed under: Economics, Election 2010, Henry Review, Joe Hockey, Politics, Tax, Taxation Reform, Wayne Swan

19 comments

In an election campaign marked by both sides saying as little as possible about tax reform, yesterday’s National Press Club showdown continued the pattern of inertia.

Same old story ... The Australian's Peter Nicholson in March

Treasurer Wayne Swan and Opposition spokesman Joe Hockey talked about stimulus packages, waste and costings. They talked around tax reform. They mostly avoided talking directly about it.

Coalition leader Tony Abbott had already flagged that a Coalition Government would re-visit the Henry Review, with a view to announcing a plan within a year. That’s just a plan for a plan.

On the other hand, Labor’s promises haven’t gone beyond creating a Tax System Advisory Board to oversee corporate governance, and re-shaping the Board of Taxation.

Those are worthy commitments that, in their own small way, would improve the administration of the tax system, but they’re hardly visionary reform. Close examination suggests that Labor would be giving with one hand but taking away with the other.

In fact Labor has now rejected another five recommendations of the Henry Review - without anybody noticing.

The ‘Reshaping the Governance of Our Tax System’ policy document released last week says: “Taken together, today’s package of governance (is) a re-elected Gillard Government’s response to the ‘A responsive and accountable tax system’ section of the A Future Tax System [Henry] review.”

Crucially, it added: “Other recommendations in this section are not supported.”

Treasury head Dr Ken Henry made 138 recommendations when his report was publicly released in May. Twenty-nine were rejected out-of-hand by Treasurer Wayne Swan in his response.

The five latest recommendations to be ruled out all go to issues of transparency or accountability.

First down was Recommendation 111, where Dr Henry pushed for the establishment of “a more transparent means of dealing with community ideas about the tax system by extending the Tax Issues Entry System website and further developing its use”.

That’s a relatively inexpensive and easy thing to implement, you’d think, but it would not proceed under a re-elected Gillard Government.

You can say goodbye to Recommendation 114, which would have required the ATO to make public information or advice provided to it by Treasury to assist it in determining the purpose or object of the law, or materials used by the ATO to determine policy intent.

This had the potential to enhance transparency about policy objectives, but it now won’t see the light of day.

Recommendation 116 would have required the Government to better define the role of the Inspector-General of Taxation.

At the moment there is a risk of overlapping responsibilities between the Inspector-General and the Ombudsman. It seems this will still remain a grey area.

Recommendation 117 would have required the Government to give the Inspector-General of Taxation, the Australian National Audit Office and the Commonwealth Ombudsman “sufficient funding” to do their jobs in maintaining a fair and efficient tax system.

Admittedly there’s scope for interpretation in what constitutes “sufficient funding”, but the intent was clear – Ken Henry was going into bat for taxpayers.

Lastly, Labor ruled out Recommendation 118, which would have allowed the Joint Committee of Public Accounts and Audit to examine reports of the Inspector-General of Taxation and the Commonwealth Ombudsman.

That would have extended to monitoring the ATO’s implementation of the recommendations in those reports. Alas, it seems this was a bridge too far.

Amazingly, all this seems to have passed without the Coalition noticing. None of this rated a mention in the debate.

Weeks before the election was called, the Taxation Institute tried to convince the major parties to commit to a genuine public debate on taxation issues – they are yet to formally respond.

While the media subjected both sides to scrutiny on broader economic questions yesterday, we’d welcome a second debate so that tax professionals can put their own specific questions. 

What’s most telling about the level of debate is that neither side of politics has enough commitment for the challenge of tax reform to risk ruling anything in.

Most commented

19 comments

Show oldest | newest first

    • Adam Diver says:

      08:02am | 10/08/10

      The opposition has not mentioned it because you can’t fit this into a 10 second sound byte and even if you do how many people are even going to care.

      I think the biggest issue is the lack of noise coming from Ken Henry, this is his report which both major parties have all but ignored and when he has spoken it has only been to defend the government.

      Reply

    • Snake Plisskin says:

      08:47am | 10/08/10

      As a tax professional I was disappointed with the depth of the Henry Tax Review. So-called root and branch “reform” was little more than turning over a few leaves.

      Although Henry was hamstrung because he couldn’t look at the GST.

      This would have been the ultimate reform. The best way to make a fairer system for all would be to have a higher consumption tax (with input credits) and very low income tax imposed at a flat rate.

      The problem would be the timing difference in collection and the government might have to do without revenue during the transitional phase.

      Also, Gillard, last night, indicated that she was opposed to such a thing. She hinted that higher income earners should be made to pay more tax at a higher rate.

      This is most “unfair” of all. There is no logical reason why a person should be excessively penalised because they pulled their finger out and did what was necessary to get a good job and be more productive.

      Reply

    • Brian says:

      10:37am | 10/08/10

      I disagree - there is certainly a logical reason for a person who earns more to pay a higher rate. At low levels of income, a higher proportion of your income is required for ‘essentials’ - money which the government cannot tax or take from you without seriously adversely effecting your well-being. As your income increases, a marginal increase in paid taxation has a decreased impact on your quality of life than a similar increase for someone on minimum wage.

      There is a limitation on what is ‘excessive’, certainly, but higher income earners should pay more. Oh, and for the record my taxable income last year was a touch over 110K (and is expected to be higher this year and each subsequent year) so I’m not arguing this from the position of a low income earner.

    • Duff says:

      11:40am | 10/08/10

      Snake, you assume that everyone who earns more money does so simply because they’ve ‘pulled their finger out’.  That’s not true.  Their are plenty of people who work very hard and earn less.  Also, there are plenty of people who earn lots of money but don’t contribute very much at all.  Please don’t make the mistake of forgetting that a lot of life is simply about luck.

    • Snake Plisskin says:

      01:23pm | 10/08/10

      @Brian

      If people are finding it hard to get the basics then that should be enough of an incentive to climb the ladder and earn more.Right now there are disincentives in the tax system to do this. This is not good for anyone. When people earn more they either spend more or save/invest more. Either way, this is good for the economy.

      It is purely unreasonable to force one sector to pay a higher rate of tax over another.

      @Duff

      If you think luck has anything to do with it then you are completely wrong. The only time luck plays a part in someone’s wealth or income is if they win Lott. Any other time it is work and persistence.

      It wasn’t luck that I went to uni and did post grad study. It wasn’t luck that I work a demanding and high paying job. It was work and persistence pure and simple.

      PS Most of the hard-working smart people know the difference between their/there/they’re. Maybe you should learn, too.

    • Evan Findlay says:

      03:01pm | 10/08/10

      Just because you have a good paying job does not automatically reciprocate into higher productivity. Your comments are naive and shallow.

    • Charles says:

      08:53am | 10/08/10

      At least the opposition is still talking about it, which is more than the ALP can say.

      However, the bigger issue is the fact that it was done by Ken Henry.  To hand tax reform to a public servant would have to be one of the most stupid ideas ever.  Ken Henry was always going to put his perspective on it, as opposed to the true creators of wealth and business in this country, the workers and business owners.

      Thye best idea would be to tear it up, and start again, and that would be the best thing a government could do.  We know the ALP won’t, so who will??

      Reply

    • Betelnut says:

      11:02am | 10/08/10

      “Dr Henry was born in Taree NSW on 27 November 1957. He completed a first class honours degree in economics at the University of NSW in 1979. From February 1980 to September 1984 he was a lecturer in the economics department of the University of Canterbury (Christchurch, New Zealand), where he completed his PhD in 1982. In September 1984 he returned to Australia, accepting a position in Treasury’s Taxation Policy Division.  He was a member of the Treasury team that put together the Government’s draft White Paper on Tax Reform (published in June 1985) and contributed to the development of the Government’s tax reform package (Reform of the Australian Taxation System, September 1985).

      From September 1986 to June 1991, Dr Henry worked as a senior adviser to the Treasurer, providing advice on taxation policy and administration, retirement incomes policy, industry policy and microeconomic reform (including telecommunications reform). In June 1991 he returned to the Treasury, becoming head of the Microeconomic Modelling Unit. In July 1992 he took up the position of Minister (Economic and Financial Affairs) in the Australian Delegation to the OECD in Paris.

      Dr Henry returned to the Treasury in January 1994 as head of the Taxation Policy Division. In August 1997 he was appointed Chairman of the Government’s Taxation Task Force, responsible for providing advice to the Government on tax reform options. In October 1998 he was promoted to the position of Executive Director (Deputy Secretary) of Treasury’s Economic Group, and a member of the Treasury Executive Board. In that role he had executive responsibility for domestic macroeconomic policy advice, domestic economic forecasting, and advice on international economic issues (including Australia’s relationship with the multilateral international financial institutions).

      On 27 April 2001, Dr Henry was appointed Secretary to the Treasury. Dr Henry was reappointed for a further 5 years from 27 April 2006. He is an ex-officio member of the Board of Taxation, member of the Board of the Reserve Bank of Australia, Alternate Governor (for Australia) of the International Monetary Fund and Chairman of the Advisory Board of the Australian Office of Financial Management.

      Dr Henry was awarded a Companion of the Order of Australia General Division (AC) in the Australia Day Honours 2007.”

      Yep, he certainly sounds totally unqualified to chair a review into taxation.  Sounds like you should throw your CV into the ring next time Charles.

    • iansand says:

      09:05am | 10/08/10

      Interesting.  The Liberal Attack Bloggers have been told to go silent on tax reform.  What does this mean?

      Reply

    • Duff says:

      11:54am | 10/08/10

      I think it stems from the fact that Abbott is now trying to position himself as a tax reformer, based on the Henry Review, when only a few months ago the Liberals were saying that Henry was the devil incarnate and would no longer have his job if they were elected.

    • Evan Findlay says:

      03:17pm | 10/08/10

      In the words of Peter Costello as stated in Time Magazine and evidenced by his time as Treasurer ” The Liberal Party has never been, and never will be, a party of reform”

    • Daryl says:

      03:54pm | 10/08/10

      And yet Evan the biggest piece of tax reform since 1936 was the GST which the Howard government implemented! It’s a shame the Labor states have p!ssed much of it away!

    • Evan Findlay says:

      04:33pm | 10/08/10

      Daryl,
      You mean the only piece of tax reform by the Liberal party. Whilst the GST was welcomed it was only of moderate significance.  It’s benefits were that it consolidated a range of indirect taxes and that it covered services. When Howard introduced the GST he claimed that it would reduce the black economy, increase employment and promote exports. These claims along with the significance of the GST to the performance of the economy are grossly overstated. You could easily find a number of reforms initiated by the Hawke/Keating governments which were more   beneficial to the economy.
      It was good that they managed to get it through but after the 1998 election Howard and Costello went very cold and timid on tax reform. It’s such a pity because we were in a period of unprecedented prosperity and the climate was right for serious reform. Unfortunately Howard and Costello were just not big picture politicians and lacked the ticker.

    • Tax Questor says:

      09:15am | 10/08/10

      If tax is lowered, where does any government get their money?

      Reply

    • papachango says:

      02:25pm | 10/08/10

      Simple. They spend less. Government spending as a % of GDP has been steadily creeping up for decads, fastest under Labor but under the Libs too. It’s now about 25%, whereas it should be about 10%

      Look at how many billions Labor have wasted - a few compulsive shoppers aside, individuals are much, much better than government bureacracies at spending money wisely.

      Let individuals keep their money and decide how to spend it best.

    • Daryl says:

      01:52pm | 10/08/10

      As an accountant, the Henry tax review was very very disappointing and the government’s response even worse! The government instructed Henry not to consider the GST. Therefore the review was A. not independent and B. not a “root and branch” review. NZ showed us how to do it recently. They increased the GST to 15% and reduced marginal tax rates. Their top marginal rate is only 33% companed to our 45%. The government needs to reduce the difference between the corporate rate and the top marginal rate. It also needs to broaden the tax base by increasing the GST. And it needs to address the inequality between PAYG payers and corporates (e.g. the ability for corporates to split their income, the ability for corporates to operate in the cash economy). Henry looks like nothing more than a lapdog to the government. And the government missed the opportunity for true reform. All taklk and no action from Labor AGAIN!

      Reply

    • The King says:

      02:28pm | 10/08/10

      Exactly Daryl
      A consumption tax is a far more equitable tax system than an income tax - and income tax is a disincentive to earn/save/invest.

    • iansand says:

      07:03pm | 10/08/10

      Anything that disappoints an accountant can’t be all bad.

    • Shane From Melbourne says:

      08:16pm | 10/08/10

      Actually the best reform would be a finacial debits tax on companies and individuals withdrawing from their bank accounts. This would be an incentive to save which would reduce overseas borrowing and stop the kind of thing that happened with the Myers float (huge embarassment for the ATO) The GST was an absolute disaster since it abolished the wholesale luxury good tax which made it cheaper to import overseas luxury items such as plasma TVs, 4WD etc. which blew out the current account deficit to scary figures.

      Reply
 
Sorry, comments are now closed for this article.

Facebook Recommendations

Read all about it

Punch live

Up to the minute Twitter chatter

Malcolm Farr

farrm51 25 May 13 09:41PM

RT @CrawfordFund: @farrm51 u may like 2 help spread word of our #foodsecurity journo award http://t.co/FwbMWwJmLf

Daniel Piotrowski

drpiotrowski 25 May 13 12:59PM

RT @adamroy37: Just received a phone call from a young girl apologizing for her actions. Lets support her please #racismitstopswithme#Indi…

tory_maguire

_Tors 25 May 13 12:42PM

RT @adamroy37: Just received a phone call from a young girl apologizing for her actions. Lets support her please #racismitstopswithme#Indi…

Daniel Piotrowski

drpiotrowski 25 May 13 12:03PM

Australia. Where you die for your country and get a rest area named after you http://t.co/hO6LpfwDvI

See all tweets

Recent posts

The latest and greatest

The Punch is moving house

by The Punch Team

385

The Punch is moving house

Good morning Punchers. After four years of excellent fun and great conversation, this is the final post…

Will Pope Francis have the vision to tackle this?

by Hannah Harborow

122

Will Pope Francis have the vision to tackle this?

I have had some close calls, one that involved what looked to me like an AK47 pointed my way, followed…

Advocating risk management is not “victim blaming”

by Sarrah Le Marquand

251

Advocating risk management is not “victim blaming”

In a world in which there are still people who subscribe to the vile notion that certain victims of sexual…

Nosebleed Section

choice ringside rantings

From: Hasbro, go straight to gaol, do not pass go

Tim says:

They should update other things in the game too. Instead of a get out of jail free card, they should have a Dodgy Lawyer card that not only gets you out of jail straight away but also gives you a fat payout in compensation for daring to arrest you in the first place. Instead of getting a hotel when you… [read more]

From: A guide to summer festivals especially if you wouldn’t go

Kel says:

If you want a festival for older people or for families alike, get amongst the respectable punters at Bluesfest. A truly amazing festival experience to be had of ALL AGES. And all the young "festivalgoers" usually write themselves off on the first night, only to never hear from them again the rest of… [read more]

Light weight

Gentle jabs to the ribs

Superman needs saving

Superman needs saving

Can somebody please save Superman? He seems to be going through a bit of a crisis. Eighteen months ago,… Read more

28 comments

Newsletter

Read all about it

Sign up to the free News.com.au newsletter