A barrage of taxes will be introduced to help pay for avoiding the worst of the GFC.
Fifty years ago the best way for a politician to scare Australia was to talk about “reds under the beds”, a tactic aimed at raising concern about the march of communism. Today, but with far more accuracy, it’s time to talk about “the tax man under the bed”.
Governments, both state and federal, will try and pretend that it isn’t so, but there are tell-tale signs that taxes of every imaginable sort are poised to rise sharply.
Australia will not be alone in this orgy of additional taxes for a very simple reason. Now is when the world starts to pay for the $2 trillion spent to avoid a depression after the 2008 global banking collapse, and the 12 months of crisis that followed.
In Western Australia the obvious target will be the resources sector, with all levels of government considering ways to milk that particular cash cow.
The federal government has a resource rent tax (or income tax surcharge) on its radar screen, applying to iron ore and other miners, a regime already in place for offshore oil producers. The state government will achieve the same end by hiking royalty rates.
Banks will be the second industry attacked by higher taxes with government arguing that it’s only fair after it saved the banks from the global financial crisis with layers of guarantees on deposits and bulk borrowings.
Industry in general will be hit by an emissions, or pollution tax, of some sort, with global warming used as the excuse, but fund raising the real reason.
In every case, the higher taxes will be accompanied by a thick layer of public relations spin to make taxpayers feel better, and perhaps even imagine that it’s not them paying.
The resource rent tax will be sold as a tax on high profits being earned selling minerals to China.
The bank tax will be the price banks have to pay for GFC salvation, and the emissions tax will be levied as a way to save the world’s glaciers and polar bears, neither of which seem to actually be endangered unless you believe the dodgy science used by the increasingly discredited true believers in man-made global warming.
What will be lost in the blizzard of new taxes and higher taxes is an honest answer to these questions: why now, and who’s really paying?
The why now is because governments have kept their finger away from the tax trigger until they are sure that the crisis has passed. Higher taxes during a period of recession merely extend the recession.
The “who” that pays is you, despite government claims that it will be the miners, banks and polluters.
Like water, taxes always have a way of percolating through to the lowest level (you), especially taxes on banks, which have an unbeatable ability to pass on to customers all the charges they get hit with.
Resource rent taxes will also be passed through in some way, as will the promised emissions trading scheme, which is nothing more than a tax with a nifty tweak of PR spin.
Global tax on banks
Of all the higher taxes heading your way the most interesting is how government will manage the post-GFC charge on banks.
Record profits being posted by the banks make this tax an easy one to sell, even though it will be quickly passed through.
What might aid the PR spin is the potential for higher bank taxes to be dressed up as part of a global mechanism to recoup the $2 trillion spent by government on economic stimulation.
British government officials have already had talks with the International Monetary Fund about a global tax on banks similar to that being planned in the U.S.
The IMF cannot levy taxes at a local level in Australia, but it certainly can encourage the Australian government to join a worldwide fund raising exercise in the name of saving the planet from another economic near miss.
Interestingly, the possible entry of the IMF as a taxing agency, coupled with a form of globally-endorsed emissions tax, effectively represents a fourth layer of government taxing.
Soon we’ll have local, state, federal, and global taxes, something Bystander reckons might prove a bit hard for many voters to swallow.
Airlines lose contact
Wine producers and airlines remain at the top of Bystander’s “don’t buy” list of investments with both suffering from over-supply and bad management.
The problem with wine is the easiest to see with once-premium brands being heavily discounted and producers forced to go on producing because that’s what the grape vines do, every year.
Aviation is different but the collapse of Japan Air Lines is a sign that other carriers might also soon fold with the once mighty British Airways looking wobbly.
Closer to home there is an excellent business case study emerging in how airlines have failed to understand two aspects of their business. Firstly, that they do not “own” the customers, and secondly, that a physical distribution system remains an invaluable tool despite the rise-and-rise of the internet.
Singapore Airlines is at the centre of the distribution problem, suffering a severe downturn in its Australian business after refusing to sign a ticketing deal with Flight Centre.
Last year, when the Singapore v Flight Centre disagreement hit the headlines the smart money was on the airline winning. Wrong. Singapore might have the planes, all of which are no different to its rivals, but Flight Centre has the shops, and is in direct, face-to-face contact, with the customers.
A variation on this re-discovery of why the customer is critical to a business (how could anyone forget it!) is the re-employment of bank managers by Australia’s banks.
He said what?
Bystander’s inaugural award for silly statements goes to John Farey, chief executive of Hudson Investment Group. When announcing an investment by Hudson in Archer Exploration, he said: “Archer is a copper, gold and uranium explorer focused on the discovery of ore deposits”. Is there another reason for exploring?
“A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large.” Henry Ford.