Philosophical Conversations Public Opinion Junk for code
parliament house.gif
Think Tanks
Oz Blogs
Economic Blogs
Foreign Policy Blogs
International Blogs
Media Blogs
South Australian Weblogs
Economic Resources
Environment Links
Political Resources
South Australian Links
"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

taxing times « Previous | |Next »
May 1, 2010

Tax review time dawns as our two speed economy heats up and interest rates rise in an election year.

The Henry Review of the taxation system was given a mandate to make recommendations across the broad sweep of tax policy. Will the implementation of its proposals be limited to efficiency considerations: ie., a tidying up of anomalies (plugging tax holes, simplifying the tax system, broadening the tax base)? Or will there be fundamental reform?

If the latter, then how politically palatable are the proposals in an election year? The tax take is going to have to rise to pay for increasing budget costs driven by an ageing population and increased demand for health care. Is the Rudd Government genuinely interested in substantial tax reform? If so, what would it be since they have ruled out raising the GST rate and have shown little interest in a carbon tax (polluter pays). Will the Rudd government being more interested in the extra billions that will flow to Canberra rather than the task of reshaping the country’s tax system?

We know that the Henry Review covers a broad suite of taxation proposals that cover resources superannuation, savings and property and roads. Already the miners, who are opposed to an ETS to address climate change, are outraged at the suggestion of a resources rent tax on the cash flows of new resource projects once their capital costs have been paid off.

Amidst a resources boom and super profits the miners cry from Perth ("killing the golden goose") is that jobs and investment will be placed at risk. They are not interested in sharing the wealth, despite the resource industry requiring public investment in skills and transport infrastructure or those in the economic slow lane who are are expected to bear the brunt of the recovery with interest rates rising to "above normal" levels as the economy picks up pace.

Will the Rudd Government finally reduce the high effective marginal tax rate that still applies to to low-income people seeking to increase their earnings? Isn't that one way to address the skills shortage and reform the tax system ?

What will happen to the superannuation industry? Currently, the superannuation system is funded largely by employers and effectively offers major tax breaks to wealthy Australians able to divert their income into retirement accounts. Will there be a rise in tax on contributions? What will they do for lower income earners?

The Australian has its own ideas. In an editorial it says:

Australia desperately needs a tax system that allows individuals, families and businesses to retain more of their earnings backed by a smaller, efficient government sector. In a global economy, Australia's long-term prosperity demands an attractive investment climate to encourage effort, investment and savings through competitive company taxes and a low personal tax regime.It's all about incentive.

They say that Australia's top tax rate of 45 per cent on income above $180,000 must be cut. So must company tax---it is also ripe for reform---by which they mean reducing the burden on companies.

| Posted by Gary Sauer-Thompson at 7:35 AM | | Comments (12)


Don't hold your breath for major tax reform advocated by Ken Henry. This is an election year and the Rudd Government is easily spooked by the first whiff of grapeshot from special interest groups protecting their turf.

This is not a reforming government. Its conduct is more akin to political wimp-out as shown by ditching the ETS.

I dare say that Abbott and the coalition, will have every incentive to treat the Henry findings as fodder for yet another scare campaign.

"One persons terrorist is another's freedom..." fighter"
Perhaps those that know better could inform the rest as to what's meant by "tax reform"?
Does tax "reform" have the same meaning for a neolib dry as a social democrat, for example.
Specifically, am hoping if others could identify specific issues, areas and may be comment on why they think that?
I notice two instances this week, with a tobacco tax hike on one hand and a plan to tax big mining (defacto carbon tax?).
They seem fair enough to someone like me.
Yet Tony Abbott made an absolute hash of his responses to the various announcements.
What am I missing here?

the Rudd spin is in: the Henry tax review will be good news for families, seniors and small businesses. Trust us. The budget will be even more good news. You can rely on us.

Abbott has to shore up his base of Howard battlers---many of whom still smoke. Hence the big tax line that says that you are being slugged to pay for big government, overspending and wasting money. It's electoral politics not policy.

We do need more going into super especially now that lots of people have gone backwards because of the economic crash.

The tax reform will be a bit like changing the curtains.

Well, coming from that Gary, etc- what parts of the tax system need to be changed and to what end, as per example?

it would be a good reform if the mandatory employer contributions to superannuation rises from the current 9 per cent to say 15%. That would help boost Australians' savings for retirement as the population ages.

how about Henry's recommendation to introduce road-user congestion taxes, where motorists face variable charges depending on the time of day or the volume of traffic---instead of the one size fits all motor registration charge?

It will be rejected.

Or reducing the clash between the welfare and tax systems that delivers high effective marginal tax rates, which is a strong disincentives for those seeking to move from welfare into work. That will be a test of the reform courage in an election year because Swan has being going on about this for years.

My guess is that the Rudd Government will cherry pick the Henry Review to target the hip pocket of the right-of centre Howard battlers to stop them from shifting over to Abbott.

The Australian's neo-liberal idea of tax reform shines through--slash the welfare monster. It says:

So perniciously has the welfare state encroached on everyday life that 40 per cent of families receive more in handouts than they pay in income tax. If it is to leave more money in people's pockets, the government faces a monumental task, ideally with opposition support, to encourage Australians to again take pride in providing for themselves.

We gotta stand on our own two feet and roll back the big spending bureaucracy.

The Australian's idea of tax reform doesn't really connect with the Henry Review. They are in the camp of restoring the budget to surplus, and paying off the debt rather than thinking of what to do with the flow of mining under a new mining boom.

The hysteria and lies from the big miners over the resources rent tax continues. They are now talking about nationalisation! Abbott jumps on the miners bandwagon as expected.