Do the wealthy have a moral obligation to help those less fortunate?
I AM intrigued by the commentary around the scale of mostly-secret native title settlements and the parallels drawn with wealthy Western Australians who earn millions from mining royalties.
There is no doubt that individuals should have the right to spend the money they rightfully earn in whatever way they see fit.
It is not for the government to decide that someone has more than enough and should spread it around for the greater good. We already have enough taxation that applies that rule all-too vigorously.
Nevertheless, when a community or family is demanding the state build houses, supply transport or provide special services, the taxpayers funding that would naturally want to understand their internal capacity to meet their own needs.
This is especially the case in the Aboriginal community in the north-west whose living conditions, in many cases, have been described as ‘third world’. Australia regularly gets criticised by bodies such as the United Nations for the poverty within its indigenous population; let’s face it, it is an embarrassment.
Complicating this is the fact that Aboriginal people have been successful in creating for themselves the perception that they speak as one when, in fact, their society is a diverse mixture of communities and families that differ as much as any seemingly united group of nations may be.
No-one is claiming that Aboriginal families who have negotiated large settlements ought to be forced to redistribute those funds to other communities – not beyond any normal level of tax like the rest of us pay, including those wealthy royalty recipients.
But there has to be a huge question mark over policies of the past if they have resulted in massive slush funds being created without doing anything to relieve the poverty we all know exists.
Ironically, the parallels between the wealthy royalty recipients and those sitting on big native title settlements and other compensation are closer than just the funds that stream into bank accounts.
It is not just the origin of the wealth that is similar, but also the impact of having large amounts of money without having worked for it. That is especially the case with the descendants and immediate families of those who have made money in mining. There are plenty of cases of frivolous wastage and outrageous spending that are just as disturbing as the stories of mismanagement we hear from the north. We all know dysfunction is not exclusive to the poor.
However, to my knowledge, these royalty recipients and their offspring are not putting their hands up for state welfare or living in conditions that call to question Australia’s first world status and undermine our status in the global community.
There are plenty of people in the community who see extreme wealth as obscene and would argue that it ought to be redistributed as long as anyone lives in poverty.
In my view, Australia already has more taxation than it needs, with that raised already inefficiently used by government.
Nevertheless, we all want to see the indigenous people of the north-west lifted out of the poverty many are trapped in. People like mining leader Andrew Forrest have proved they are willing to put their time, effort and money into solving the problem.
The challenge for Aboriginal people of the Pilbara is to show that they are committed to that as well.
As part of that they need to wisely use the wealth they have accumulated over recent decades to help deliver a better deal for their people.
I disagree with the argument that these funds are for the future. The Aboriginal people’s future is being created, or wasted, right now. It is the young people who need education, skills and training to take advantage of the current development in the north-west.
They don’t need a safety net for tomorrow to keep them in the poverty that many of them have today.
Not part of scheme
MORE than a decade ago, I spent a lot of time writing articles about the types of investments broadly termed ‘agricultural managed investment schemes’.
It was a growth industry, and so successful I could envisage it challenging the stock market as a way of raising funds in the futures.
Indeed, by 2005-06 it was generating investment capital of more than $1.1 billion.
Much of this was directed at the forestry and wine industries, which had strategic goals, backed by the government in the case of the former sector, to reach global scale in rapid time.
These strategic goals had a whiff of vision about them and, adding the romance of the possible, investors became enamoured with the prospect of growing trees and making wine.
Of course, an immediate tax deduction was also very appealing.
This year, though, MIS is looking down the barrel at a dreadful season, one that might be enough to put the mainstream retail side of this sector out of business for quite some time. It is certainly unlikely to challenge the ASX.
MIS is unlikely to go away. The structure is used for other non-agribusiness ventures. Even in wine and trees it has been quite successful in the hands of small groups of sophisticated investors who have used the tax deduction and sought to develop long-term assets.
At retail level, though, a big question mark must now hover over the sector.
The tax office has punished investors in the past; now they are haunted by the collapse of two of the biggest companies in the industry – Great Southern and Timbercorp.
The failures have further exposed the misallocation of funds to non-productive expenses like commissions, the reliance on year-on-year growth, and the unwieldy corporate structures.
This has also spooked the banks, which have tightened the screws on the remaining players both in terms of access to corporate debt and finance to fund investors, the latter being a crucial part of the product mix.
Banks are extremely cautious in many markets but in MIS they have especially good reason to be. The failure of big players has exposed the complexity of these businesses, due in the main to the need to maximise the tax-effectiveness of the retail product.