May 5, 2014

Rort nation: it’s only a tough budget if you ignore the obvious cuts

There's billions of dollars in Commonwealth funds going to waste in rorts across superannuation, negative gearing and salary packages. So why is that off limits when the government is looking for savings?

One thing to bear in mind as we wend our way through the daily politics of the "tough" federal budget over the next week is this: it is not really very tough at all. The one area of budget largess that is most in need of reform, most corrupting to the economy, most inequitable to the nation, and therefore most politically difficult to address, are the special tax dispensations offered to various interests in the economy: stuff like super concessions, negative gearing and salary packaging rorts. The International Monetary Fund recently did a study of these rent-seeking tax giveaways and listed Australia as the OECD’s worst offender:

According to the report, tax expenditures are:
"… government revenues foregone as a result of differential, or preferential, treatment of specific sectors, activities, regions, or agents. They can take many forms, including allowances (deductions from the base), exemptions (exclusions from the base), rate relief (lower rates), credits (reductions in liability) and tax deferrals (postponing payments)."
The IMF believes that tax expenditures should be reformed since they:
"… can have major consequences for the fairness, complexity, efficiency, and effectiveness of not only the tax system itself but, since they often serve purposes that might be (or are also) pursued through public spending, of the wider fiscal system."
It also argues that now is the time to roll back tax expenditures to help cut budget deficits. Regular reviews would increase scrutiny of outdated perks, and many could be replaced with more targeted measures, since most of the benefits are currently enjoyed by the wealthy rather than those needing help. Eight per cent of GDP is some $130 billion in giveaways, none of which are being touched. Tough budget? I think not. *This article was originally published at MacroBusiness

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10 thoughts on “Rort nation: it’s only a tough budget if you ignore the obvious cuts

  1. zut alors

    There would be no necessity for a Budget debate if Rudd’s RSPT legislation had been passed. The $20M spent by the miners in a fright campaign was an outstanding investment – we became a nation of simpleton suckers. And who is now about to pay, suckers?

  2. Bill Hilliger

    Zut the simpleton suckers are now about to find out how they have been gypped, and there is a price to be paid for being simpleton suckers the Abbott government will make sure of that.

  3. bushby jane

    Yes, zut alors. Wouldn’t it have been a different state of affairs if it had been presented and passed. Also, if those silly Greens had allowed the first iteration of the Carbon Tax to go through the Senate, we wouldn’t have been having the brainwashing of Abbott as it would have had time to be accepted, and perhaps we may not have this dreadful govt that we have now.

  4. fractious

    The International Monetary Fund recently did a study of these rent-seeking tax giveaways and listed Australia as the OECD’s worst offender.

    I didn’t know that, but I can’t say it comes as any substantial surprise. That this country is worse (or better, whichever) at lining the nests of the already-well-off than any of the EU basket cases (up to and including Italy) ought to shock the majority in Oz out of their apathy, which of course is why this article is placed in a quiet corner of Crikey rather than out there in big bold block capitals in the arena of Failfax/ News Corpse/ Shoutback radio.

  5. Tyger Tyger

    Rudd and co.’s abject failure to sell the RSPT was perhaps an even bigger factor than the mining industry’s predictable campaign. They failed to simplify and explain a complex piece of legislation for public consumption, and worse, couldn’t make hay from the likes of Rinehart and Forrest suddenly morphing into placard-waving activists. Hopeless! None of which, however, addresses what this article is on about.
    The LNP and ALP are both in thrall to swinging, mainly middle class voters, therefore middle class welfare will remain so long as those forces remain the two “sides” of Australian politics. It’s Tweedledum and Tweedledumber. Take your pick. Or stop voting for them.

  6. CML

    Good article, David. I’m another one who is not surprised. I just wish Labor could produce a leader with intestinal fortitude to do something about this abomination, for the truth is, the Libs never will.
    Thomas Piketty’s new book: “Capital in the Twenty-first Century”, seems very relevant to the points you make.

    And Tyger, Rudd could have been dog’s gift to politics and it wouldn’t have made the slightest difference to the RSPT. The Yanks and the multinationals were out to get him for other reasons. The RSPT just concentrated their resolve! Of course they had a little help from the right-wing of the Labor Party.
    Ultimately, and in the not too distant future, Labor will have to get its house in order, or risk oblivion. Once the membership has voting rights, the true base of the party will change it forever. However, the present government is sooooo bad (as a cursory look at any poll will tell you), I think Labor will win in 2016 by default!
    Just wish it could be sooner, before this mob destroy the joint irreversibly.

  7. Tyger Tyger

    In effect what you’re saying, CML, is that Labor has no choice but to bow to “the Yanks and the multinationals” and might as well not even bother putting up any legislation that challenges their hegemony. That’s precisely what I keep saying is the problem in these posts. You can’t play both sides of the street and expect to remain politically credible.
    If the ALP doesn’t want to fade into irrelevance, it has to come out and say in plain language it doesn’t support the current economic model that funnels most economic gains to the über-rich – with a few sops for the middle class – and trashes hard-won political freedoms and the environment. It has to “fight the good fight”. You can’t fundamentally support the status quo AND be a “progressive” party.

  8. Liamj

    Ah Tyger, its nice to know there are still some dreamers out there. Do you really think the ALP is capable of reforming itself? Looks to me as if the rot set in with Hawke, and its internal processes have now been almost completely gamed by ‘pragmatists’, influence peddlers and worse. If the idealistic rump of the ALP doesn’t wake up & smell the gangrene & start again from scratch, then it’ll be neoliberalism from here to penury.

    Re Mr Llewellyn-Smiths article: yep, but whats reality got to do with MSM rationalisations for LNP beating-up the victims?

  9. fractious

    CML @ 6

    “I just wish Labor could produce a leader with intestinal fortitude to do something about this abomination”

    Thing is, I can’t think of a single senior Labor figure (let alone a government) in the last quarter of a ventury who’s ever seriously proposed the idea of winding back any of the rorts mentioned in the article. In my view, when it comes to putting a stop to swindles like negative gearing, the ALP is just as head-shy as the Coalition.

  10. Tyger Tyger

    No, I don’t, Liamj @8. I’m with you and agree on the timing, too. Hawke and Keating laid the “economic rationalist” groundwork for the rich man’s (and Gina!) paradise we now inhabit. Yes, they knocked the rough edges off the model with the Accord, but surely had to know the low tax, low spending, business friendly environment they created would be expanded under the LNP and that government services – and even the idea that government has a role to play in the economy – would pay the price.
    I’m just constantly bewildered when people argue we have to get rid of this awful government and replace it with the ALP and all will be sweet. So I try to point out there aint that much difference! For all their flaws, The Greens are the only progressive party in Australia and as such I’ve voted for them for 20 years. Mind you, I always preference Labor because they remain the lesser of two evils, but I don’t hold out any hope they’ll have a “road to Damascus” moment. Or if they do, it’ll be in the form of falling to their knees and, blinded by the quick-fix revenue opportunity, declaring, “We can privatise this!”

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