EDITORIAL: by Peter WestmoreNews Weekly
Is Rudd Government planning a new tax grab?
, February 6, 2010
Clear signs are emerging that the Rudd Government will use the Henry Tax Review to justify a range of new or increased taxes, as well as cuts to family benefits.
Almost two years ago, the federal Treasurer, Wayne Swan, announced a review of Australia's tax system, chaired by Treasury Secretary Dr Ken Henry, and conducted by a panel of five people with academic, public service and industry backgrounds.
The terms of reference of the tax inquiry, called Australia's Future Tax System
, made clear that it was an attempt to modernise Australia's tax system, reducing complexity and compliance costs to make it more effective in delivery of welfare services, while removing disincentives to both taxpayers and businesses.
Significantly, the terms of reference specifically excluded increasing the 10 per cent GST rate or broadening the base of the GST. The panel was instructed to "preserve tax-free superannuation payments for the over 60s; and the [Rudd Government's] announced aspirational personal income tax goals".
The review included consideration of federal, state and local government taxes and charges. It envisaged no reduction in the size of the public sector, and was to make recommendations to maintain the overall level of taxation as a proportion of the nation's GDP.
It was also asked to "take into account recent international trends to lower headline rates of tax and apply them across a broader base, as well as domestic and global economic and social developments and their impact on the Australian economy".
A Treasury discussion paper, released three months after the tax review was announced, gave the Treasurer little comfort. It said that existing tax rates on company tax in Australia were among the highest in the developed world, while taxes on wages (including personal tax, payroll taxes, etc.) were lower than the average of the industrialised nations of the OECD.
In releasing the report, Mr Swan distanced the government from its contents, saying it was just a discussion paper and that he would not be commenting on any of the issues it raised.
However, he went on to say that he did not agree with all the report's observations. (The Australian
, August 8, 2008).
Since the report was commissioned, the global financial crisis has led to a massive increase in government spending, amounting to tens of billions of dollars, pushing the federal Budget from surplus into a massive deficit. Additionally, state deficits have also blown out, as a result of rising expenditure.Ageing population
Although the final recommendations of the tax review were given to the Federal Government last December, the government declined to release them, although both the Prime Minister, Kevin Rudd, and the Treasurer subsequently foreshadowed major increases in costs related to health and the ageing population, which will have to be met by increasing taxation.
A couple of weeks ago, the Treasury Secretary, Dr Henry, made a speech in which he also foreshadowed increased taxes to meet higher health costs, and supported "environmental taxes to address some of the environmental challenges that we are facing today".
This could, of course, simply refer to the Rudd Government's emissions trading scheme; but it could equally refer to increased excises on petroleum products such as petrol and diesel.
Further, miners and the state governments are deeply concerned about leaked plans to impose a new super tax on the mining industry, based on the petroleum resource rent tax which is 40 per cent of taxable profits.
Ultimately, increased taxes are passed on to consumers, in the form of higher prices.
The prospect of rising taxes comes at a time when businesses and home-buyers face the prospect of further increases in interest rates. Late in 2009, the Reserve Bank increased official interest rates three times, and the largest private banks increased rates further again.
The business community is increasingly nervous about the deliberate leaks from government about new taxes.
Adrian Raftery, an accountant and tax commentator, said recently that accountants had been inundated with queries "as leaks emerge on issues such as superannuation access, capital gains tax (CGT) of family homes and fringe benefits tax (FBT) for charities".
For all these reasons, taxation is emerging as a major issue in 2010. The Federal Government's reintroduction this month of its emissions trading legislation, which imposes a new tax on energy, will reinforce community concern that the Rudd Government is intending to increase a raft of new taxes in 2010.
For the federal Opposition, taxation presents both a challenge and an opportunity. New or increased taxes invariably face a hostile response from the electorate. The challenge for the Opposition is to put forward credible alternatives to the policies of a Federal Government which has turned large surpluses into deficits, which will have to be repaid in the form of higher taxes.Peter Westmore is national president of the National Civic Council.