21/03/2006 - 21:00

Another wasted opportunity?

21/03/2006 - 21:00


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Federal treasurer Peter Costello has convened a two-man inquiry into Australia’s tax burden and how it lines-up against so-called “comparable countries”.

Federal treasurer Peter Costello has convened a two-man inquiry into Australia’s tax burden and how it lines-up against so-called “comparable countries”.

It’s amazing the Treasury doesn’t already have such details at its fingertips.

That said, let’s stand back and overview the basis underlying the tax burden issue during the past 20 or so years.

At the turn of the 1980s and 1990s, two important and contradictory international turnarounds occurred in relation to question of the extent and role of government.

The first of these began when the entire Polish nation refused point blank to tolerate living in urban and rural slum conditions arising from 45 years of imposed socialism or maximum government control.

The few Poles still working diligently ceased doing so, and young and skilful people began fleeing Poland, with many of these now living in Perth.

Solidarnosc – a nationwide civic-minded movement with unity of purpose – formally emerged in September 1980.

After a decade of heroic opposition to Poland’s pro-Soviet ruling clique, Solidarnosc toppled that bankrupt regime in a bloodless coup, disproving the claims of Western ‘experts’ it couldn’t happen.

Other socialist satellite regimes then promptly and sequentially collapsed, with Moscow finally following.

Socialism was thus completely discredited worldwide.

Now, all this is well known in the West, across nations that had held the line against that socialist or maximum government order since 1945, at great cost to their taxpayers.

Not so widely realised, however, is that a contrary trend was blossoming in the West since around the time socialism was collapsing.

Very few Australia’s Liberal MPs now ever advocate small government.

The Howard government, elected in 1996, so soon after socialism tumbled, is a big taxing, big spending, and an increasingly intrusive and duplicating centrally oriented entity.

And the Howard-led Liberals aren’t alone – American Republicans are also increasingly oriented that way, while Britain’s new Conservative Party leader, David Cameron, shows no sign of being small government oriented. It’s increasingly difficult to find a right-of-centre party that backs limiting government, and thus taxation.

As far as Australia is concerned it  matters little if it’s Kim Beazley or John Howard holding the reins of power – the domestic and taxing outcomes are essentially identical.

Name one Western Australian politician who is a vocal lobbyist for lower taxation and, more importantly, is likely to work for the introduction of such a policy.

Federally there are only Liberal MPs Sophie Panopoulos and Malcolm Turnbull who seem so inclined, with Labor’s Craig Emerson putting his toe into the water.

Mr Costello baulked when Mr Turnbull recently suggested tax cuts, and the treasurer’s current inquiry may well be his way of justifying retention of current high taxation levels.

What happened in the 1990s, therefore, was that the worldwide left lost one argument – the case for socialism – while the worldwide right concurrently started ceasing to promote its traditional support for low taxes and small government.

Small government and low and indexed taxation have, to use current jargon, vanished off the right’s radar screens.

The score is thus one all, with only the left’s loss generally highlighted, while the right’s quiet discarding of its long-held stand against greater governmental intrusion into civil society, and thus low taxes, is now rarely spoken of.

Now, it helps to realise this because we presently have a federal treasurer calling for Australia to be gauged against “comparable countries”.

But that’s the trick, in those very two words, “comparable countries”, because since the socialism’s collapse no country with a right-of-centre government has trimmed spending. Rather, these countries’ public sectors, and thus taxes, have grown.

Even alleged conservatives or right-of-centre politicians like George W Bush, John Howard, David Cameron and Angela Merkel are overseeing big taxing governments.

Mr Costello, don’t direct your inquirers, Dick Warburton, Caltex’s chairman, and Peter Hendy of the Australian Chamber of Commerce and Industry, to only consider Australia vis-a-vis “comparable countries”.

If that happens Australia will undoubtedly be shown as sitting somewhere in the middle of all those big-taxing countries, and those wanting to keep Australia’s taxation levels high will run around chanting: “Look, we’re not as heavily taxed as country A, or country B, and so on” to justify that view.

There are several things the treasurer should do if he wants a ridgy didge taxation inquiry.

Firstly, declare that no-one will be required to pay more than 20 per cent marginal income, with taxes for lower earners kicking-in well above the present threshold. Twenty cents in everyone’s earned dollar is quite enough for any taxman.

If politicians believe they need more, they’re not doing their job and are overspending.

Don’t forget there are also corporate, capital gains, goods and services taxes, tariffs, plus myriad other taxes in their dilly bags.

The 20 per cent upper limit must be driven into the heads of treasurers and politicians because the one thing they’ve all forgotten is how to live within their tax revenue means – so they instead keep lifting taxes via bracket creep or just upping the rates.

What Mr Costello should also do is assess the levels at which each state government taxes its citizens.

Too many state treasurers, including Eric Ripper, get away with rapacious taxing.

Let’s not forget that former premier Geoff Gallop, on the eve of the 2001 election, said there would be no tax increases under his government.

Look what happened in the budgets of 2001, 2002, and 2003, followed by a slight trimming in late 2004 because an election was due in February 2005. It’s enough to make one feel depressed.

Secondly, and State Scene has highlighted this point before, in 2003 the House of Representatives Economics Committee (HREC), chaired by Victorian Liberal David Hawker, disclosed in a little-publicised report that duplication between all levels of government was costing taxpayers $20 billion.

That means every man, woman, child and infant is being charged $1,000 annually for this huge exercise in extravagant doubling-up due to duplication of bureaucracies and programs.

In the case of, say, 10 million taxpayers, that figure doubles to $2,000 annually for each taxpayer, an average of about $40 per week.

In other words, if all duplication and coordination costs were scrapped, each taxpayer could expect to have their tax burden lightened by that $2,000.

And that’s over and above the amount that should be adjusted for bracket creep annually due to inflation.

The Hawker Report carried several recommendations, including that an urgent meeting of federal, state and local government representative be convened to develop an inter-government agreement where Australia’s $20 billion plus duplication problem could be remedied.

But such a move shouldn’t be permitted to go towards further expanding the distant Canberra’s bureaucracy. No more costly centralisation and duplication, please Mr Costello.

That bureaucracy should be trimmed and should vacate entire areas of activity, most especially education, transport and health, plus many more.

Mr Costello said on March 12 1996 that the “days of sloth and waste are over”, and pledged to slash $8 billion from the budget over the next two years.

Who did Mr Costello’s spin-doctors think they were kidding? Sloth and waste is not over.

What’s needed is a commitment to limiting taxation to no more than 20 per cent of any taxpayers’ earnings; indexing of taxation to combat bracket creep, something the Liberals promised in 1975, enacted, and promptly scrapped by 1977; and the elimination of costly governmental duplication.

If these don’t happen, Mr Costello’s snap inquiry to determine where Australia stands among other big taxing nations won’t be worth the paper that report is printed on.

Australia should become the leader in taxation policy and not be somewhere up among so-called “comparable countries” whose politicians are even less adept at refusing to drift with the worldwide trend of taxing at ever higher levels.


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