The most important thing to come out of the past two weeks of horse-trading has been the plan to hold a tax summit. Or at least it could be. It could also be a complete waste of time.
Unfortunately, this latest instalment of tax reform in Australia has begun with another pre-emptive strike, just like the effort that began in 1985 and that took 15 years to complete.
Having commissioned a broad-ranging review of the tax system from an expert panel headed by Treasury Secretary Ken Henry, that then spent 18 months working on it, the Rudd government plucked out a mining tax to fund election promises, and polarised the community.
After Kevin Rudd was sacked — largely because of that — it was modified by agreement with the miners, but it is still being used to fund election promises and now the deal with the Lower House Independents as well, and it is still polarising the community.
As a result, discussion about tax reform now revolves around whether the Mineral Resources Rent Tax is on or off the table at the summit.
The government can’t honestly put it on the table unless there is a way of replacing the revenue, but switching Australia’s minerals taxation from ad valorem royalties to a profit-based resources rent tax is one of the two or three fundamental tax issues that need to be debated and resolved.
The fundamental issue in 1985 was consumption tax, and the pre-emptive strike that killed it came from the newly formed Business Council of Australia, headed by Westpac chief Bob White. The GST was contained in a paper called Option C and promoted by Treasurer Paul Keating, but as the 1985 summit got under way, Bob White got up and opposed it, effectively killing tax reform for 15 years.
In 1992 it became even more politicised when John Hewson included a consumption tax in a wide-ranging and radical set of election policies. By then Keating had flipped on the issue and won the 1993 election as a result.
The ALP remained opposed to a GST, and when it came back on the agenda after John Howard’s victory in 1996, it had to be legislated with the help of the Democrats, since the coalition did not gain control of the Senate. This deal eventually destroyed the Democrats.
So the question for the nation’s political classes in 2010 is whether this time tax reform can be achieved in less than 15 years.
The key issues are: minerals taxation, taxes on capital, including negative gearing, and welfare, including taxes on retirement incomes and savings.
And the question, as it was between 1985 and 2000 on the subject of taxing consumption, is what roles will the Business Council and the opposition take? Will they be constructive or self-serving.
As we learnt with the industry and IR reforms of the 1980s, the best way to get difficult reforms through parliament is with the support of the opposition. That’s why the Hawke government’s great legacy is industrial modernisation rather than tax reform — because the coalition supported it.
And that’s why the forthcoming tax summit could be important. Although tax reform can be achieved with the support of minor parties and independents, as it was in 1998, far better and more efficient to do it as a joint project of business and labour, represented in parliament by the ALP and the coalition.
And unfortunately, Kevin Rudd and Wayne Swan got this process off to a very bad start on May 2, when they announced the Resource Super Profits Tax. That immediately antagonised the entire business community, and turned it into a political opportunity for the opposition.
It’s why the spotlight should be turned on Tony Abbott, Joe Hockey and Andrew Robb now: they are the ones who need to take a constructive position on tax reform and climate change.
If good policy is left to the motley group of Independents, it will be a mess. The lesson of the 1980s is that it’s best done with the support of the opposition.
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Wait a minute, wait a minute. I thought you wrote an article damning Mining Tax and how irrelevant it is. You even start this article off on it but then you end by suggesting the only way it can be achieved is by Abbott. Good grief Kohler what have you done to yourself? You have turned into a right wing monkey.
Dr Harvey M Tarvydas
@DELIRIOUS – Posted Thursday, 9 September 2010 at 1:57 pm
He’s read my comment posted at Crikey articles a few times before and just after the election where I have (as an expert in psychology science) discovered and described an interesting Australian communal (the group of ignorant poor old Aussies who can’t see through abject stupidity when the ‘right important people’ are defining the smart community) mental illness promoted by and/or suffered by media experts and opinion creators in business which in its most basic form is an ability to swallow as a realistic and intelligent notion the idea that a current and sophisticated international market based economically literate smart Aussie ‘should pay more tax so that the worlds richest foreign companies who make their most super global profits in Australia can pay less tax and even insist on this when the leading group of those companies have confessed to their greedy attitude and agreed to pay more tax as a fair thing so average Aussie Joe Blow can pay less.
This is just like that mental condition known as ‘the sucker who insists on sucking even if it hurts him’ (he’ll call it loyalty even if it was resisted).
Well having read my piece he’s trying to change and I love him for it and understand it’s not easy with mistakes to be expected.
It was’nt the RSPT that polarised the community, it was the mining industries’ media campaign and an opportunistic opposition funded by said industry.
An interesting analysis by Kohler. But surely he is being hugely optimistic to imagine that an Opposition leader who spent all his time being unremittingly negative and oppositional will do anything else but continue to be unremittingly negative and oppositional.
Dr Harvey M Tarvydas
@GAVIN MOODIE – Posted Thursday, 9 September 2010 at 4:57 pm
I totally agree with you and what’s worse he (RS Tony Abbott), based on everything he has said since the big loosing day, doesn’t disguise for one moment that the plan is show us what destructive really means and that he’s convinced that there are enough Aussies whom are the perfect drongos and whom will march to his super negative tune till their feet fall off and their children die of starvation.