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Oct 20, 2006

Peter Reith and unfulfilled longings on tax

A long, long time ago in a very different land – in those crazy, hazy days of Fightback – Peter Reith was John Hewson’s shadow treasurer.


A long, long time ago in a very different land – in those crazy, hazy days of Fightback – Peter Reith was John Hewson’s shadow treasurer.

The poor bloke never got his hands on the levers of power. He still clearly has unfulfilled longings. In today’s Australian Reith talks about how he’s helping that nice young David Cameron along on his own great tax adventure. But does anybody want to do anything here?

In the issue of Policy magazine out this week, former Treasury deputy secretary Des Moore tells us how the Howard years have been an era of big taxing and big spending government.

In 2004-05 the tax burden imposed by the Commonwealth was about three percentage points of GDP higher than in 1995-96. The money the government has saved on lower interest payments on government debt has been spent on other things, so that discretionary spending is one percentage point of GDP higher than when it came to office:

In an address to the National Press Club on 24 August 2005 Finance Minister Nick Minchin asserted that, over the life of the Coalition government, “total federal government spending had fallen as a proportion of the total economy from 25.5% of GDP to just 22.1% in 2005–06”.

Treasurer Peter Costello wrote in The Age on 27 March 2006 that “from 1995-96 through to 2005–06 the Australian Government’s spending has declined from 26.3% of GDP to 21.6%” and claimed that ‘one of the values that Liberals hold dear is to be disciplined with government spending’.

And, in a speech entitled “Taxation: Keeping Faith with Australian Families”, Prime Minister John Howard told the Menzies Research Centre on 18 April 2006 that “the Australian Government’s overall tax share has fallen as a proportion of GDP from 23.1% in 1996-97 to an estimated 21.0% in 2005-06”, adding that “we have the eighth lowest tax to GDP ratio in the OECD”.

But, while the OECD Factbook for 2006 does show the total Australian tax burden is the eighth lowest, he omitted to mention that it also records an increase of nearly two percentage points between 1995[4] and 2003 (and it will have increased further since then).

There is little doubt that if a CEO of a major company had falsely claimed his company’s costs had fallen over recent years by a similar proportion to the ministers’ claimed reductions in spending and taxes, he would be subject to heavy criticism and hauled before the regulatory authorities…


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