OPINION: by Hon. Kevin AndrewsNews Weekly
Employee share ownership under threat
, June 13, 2009
Labor is out of touch with the aspirations of hundreds of thousands of Australian workers, argues the Hon. Kevin Andrews MP.One of the historic complaints of the labour movement has been the detrimental impact of the division of capital and labour on workers. It is at the core of the Marxist, socialist critique that historically has underpinned the labour movement, both in Australia and overseas.
It comes as a surprise then that the Labor Party would undermine and destroy a means by which workers could share in the capital of the enterprise for which they work. But this is exactly what the Labor Party proposed to do with changes to employee share ownership arrangements in the Budget.
The separation of capital and labour, accepted for much of the last century, cannot be assumed today. In a rapidly changing world, many workers are increasingly both the possessor of capital of the intellectual kind and the instrument of labour. The two are much more intermingled. And the impacts of technological progress reinforce this understanding. It makes sense that productivity is more likely to increase when management and workers have a common interest in the outcome of their work.
In Europe and the US, this understanding is more advanced, with a much higher take-up of employee share ownership than in Australia.
The concept of employees owning a share of the enterprise they work for is not new. It has origins in the 18th century. Schemes have operated in Australia since the 1950s, although it was not until 1974 that legislation was introduced.
According to the Australian Bureau of Statistics, just 1.3 per cent of employees received shares as an employment benefit in 1979. Over the decade to 1999, the percentage of full and part-time employees taking part in some scheme grew from 2.4 per cent to 5.5 per cent. By 2004, 5.9 per cent of employees held shares as part of their employment benefit.
In 2004, the Howard Government established an Employee Share Ownership unit in the Department of Employment and Workplace Relations, and set a target to double the level of employee share ownership to 11 per cent by 2009.
In contrast, Labor has displayed an antipathy towards employee share ownership. In 2000, the ACTU told a House of Representatives inquiry that tax incentives for such schemes would be a misuse of scarce public funds. Labor members, including Julia Gillard and Craig Emerson, now small business minister, issued a dissenting report in which they argued that there was "no clear and objective evidence" for the claimed productivity pay-off from such schemes.
Despite arguing in Opposition that the Howard Government had not sufficiently increased the take-up of the schemes, Assistant Treasurer, Chris Bowen, threatened to decimate them with Labor's Budget announcement.
There are two main types of plans under the current system. Under the tax-exempt option, an employee can receive up to $1,000 worth of shares each year without paying any tax on them. Any growth in the value of the shares above $1,000 may be taxed at the concessional capital gains tax rate.
The second option is a tax-deferred plan which is typically used by companies who want to issue larger bundles of shares. Under this option, an employee can defer the tax liability on these shares or options for a period of up to 10 years.
There are various conditions that must be met in order to qualify for the tax benefits.
Whereas the previous government had regular liaison meetings with the employee share groups, this has not been continued by Labor. In an ill thought-out tax grab, the government's Budget announcement effectively destroyed the scheme. Businesses froze their plans.
Facing mounting pressure, the government has subsequently decided to consult and review the proposal. If, as claimed, the decision was aimed at tax evasion, there are other measures that could have been put in place.
What this episode suggests, however, is that Labor is out of touch with the manner in which business has evolved over the past decade. And it is out of touch with the aspirations of hundreds of thousands of Australian workers.- the Hon. Kevin Andrews is a Victorian federal Liberal MP and former Howard Government minister. This article is from a public policy journal he edits, The Australian Polity.