After two years in the making and after sitting on the thing for almost 5 months we finally have the Rudd Government response to the Henry Review: tax the hell out of mining companies.
The Rudd Government’s revolutionary proposal following the release of the Henry Tax Review yesterday is pretty astounding in its lack of vision.
It’s not so much a “root and branch” overhaul of the tax system as it is a rocks and dirt one.
This is not to say that the idea to place a 40 per cent tax on some mining company projects to fund Super changes and company tax breaks is a bad idea, but why did we need an entire tax review to do this?
Kevin Rudd had painted this review as the panacea for structural problems within Australia’s tax system, but his response looks more like budget leaks in an election year.
Its release only months before an election and only a week before a budget means that the waters around this thing have been muddied beyond all recognition.
As Australian Industry Group Chief Executive, and consultant on the Henry Review, Heather Ridout pointed out: “Henry is about the long term and in an election year it’s hard to do long term”.
Nobody expected the Government to accept all of the Henry Review recommendations, because frankly a few are electoral suicide (see below), but this is beyond timid. As PricewaterhouseCoper’s Tim Cox points out on The Punch today there is no timetable for any further changes.
The response to the Review also “adopts” things that weren’t in the Review to begin with.
The Henry Review didn’t actually recommend the increase in Super contribution from 9 to 12 per cent, so why does it form the backbone to a response? Nor does the Government’s company tax cut actually go as far as the review recommends - which was down to 25 per cent.
Yesterday Wayne Swan said there were a lot of recommendations in the Review that that the Government would “never do in a thousand years”, so here’s just a few Henry Review recommendations we could expect to see introduced in around 2210.
You can have a look for yourself as well at:
http://taxreview.treasury.gov.au
Recommendation 1: Revenue raising should be concentrated on four robust and efficient broad-based taxes:
• personal income, assessed on a more comprehensive basis;
• business income, designed to support economic growth;
• rents on natural resources and land; and
• private consumption.
This is pretty simple, the first recommendation, surely something on whether the Government supports this basic idea? Nope.
Recommendation 7: Consistent with recommendations by the National Health and Hospitals Reform Commission:
1. The medical expenses tax offset should be removed following a review of the scope and structure of health safety net arrangements.
2. The Medicare levy surcharge and assistance for private health insurance should be reviewed as part of the package of tax and non-tax policies relating to private health insurance.
Treasury has been itching to do away with the private health insurance rebate for ages. It’s odd that the Government doesn’t just come out and scrap it all together with the authority of treasury, given that they really want to and it’s actually not as immensely popular with public as private health insurers make out.
Recommendation 51: Ideally, there would be no role for any stamp duties, including conveyancing stamp duties, in a modern Australian tax system. Recognising the revenue needs of the States, the removal of stamp duty should be achieved through a switch to more efficient taxes, such as those levied on broad consumption or land bases. Increasing land tax at the same time as reducing stamp duty has the additional benefit of some offsetting impacts on asset prices.
Well if we’re talking popular with the electorate why not abolish stamp duty? Oh I forgot, all those States need something. Plus the recommendation to increase land tax would be like handing Tony Abbott a free kick – right into Kevin Rudd’s own personal treasury. Still surely was some room for the Government to make changes on this one.
Recommendation 61: Governments should analyse the potential network-wide benefits and costs of introducing variable congestion pricing on existing tolled roads (or lanes), and consider extending existing technology across heavily congested parts of the road network. Beyond that, new technologies may further enable wider application of road pricing if proven cost-effective. In general, congestion charges should apply to all registered vehicles using congested roads. The use of revenues should be transparent to the community and subject to further institutional reform.
Oh baby, where do you start with this? “As Prime Minister I fully commit to now taxing people to be stuck in traffic.” If it’s not bad enough that you have to wait 12 hours to get home on the M3, you will now pay extra for the pleasure. Not to mention the fact there’s no public transport out to half the suburbs most affected by this kind of traffic. Well you can’t fault the Government’s instincts for staying clear of this.
Recommendation 65: Revenue from fuel tax imposed for general government purposes should be replaced over time with revenue from more efficient broad-based taxes. If a decision were made to recover costs of roads from road users through fuel tax, it should be linked to the cost of efficiently financing the road network, less costs that can be charged directly to road users or collected through a network access charge. Fuel tax should apply to all fuels used in road transport on the basis of energy content, and be indexed to the CPI.
Continuing on that theme: “not only do I pledge to tax you for sitting in traffic, but you will pay more for petrol and roads for the right to drive home.” Once again, not surprising.
Recommendation 71: All alcoholic beverages should be taxed on a volumetric basis, which, over time, should converge to a single rate, with a low-alcohol threshold introduced for all products. The rate of alcohol tax should be based on evidence of the net marginal spillover cost of alcohol.
If you thought the battle over alcopops was painful, the industry reaction to this would be to detonate the doomsday device. In this instance we’re not talking some alcoholic soft drink made by big corporations corrupting 15-year-old girls - we’re talking wine. A big Aussie industry that old people like to drunk off, it’s just there’s a lot of tax concessions keeping wine prices down. But interfering with drunk teenagers is one thing, interfering with drunk adults is quite another.
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