17/04/2014 - 15:21

Reform takes a back seat

17/04/2014 - 15:21


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The Barnett government has lost the ticker to make the changes recommended by the Economic Regulation Authority.

Reform takes a back seat
LOCKED IN: The ERA has recommended abolishing stamp duty on housing sales, which it says acts as a disincentive to downsize or relocate.

The Barnett government has lost the ticker to make the changes recommended by the Economic Regulation Authority

Sadly, the State Government has been far too quick in distancing itself from some of the key recommendations of the Economic Regulation Authority, which are designed to improve efficiency in the public sector.

What's happened to the reforming zeal?

Obviously the “nervous nellies” within government think some of the draft proposals are too hot to handle, and need to be killed off quick smart. How weak-kneed and short sighted.

If Western Australia ever wanted to consolidate itself as the “State on the Move” – a slogan which gained currency when Sir Charles Court was premier – the opportunity was there with the ERA report.

But the instant reaction suggests the government is lining up with the stick-in-the-mud attitude that has been holding back other many Australian states.

If former prime ministers Bob Hawke, Paul Keating and John Howard had taken the same approach over the past 30 years, Australia would be heading  rapidly towards becoming an economic backwater.

Let's take some of the ERA's main points, which the government was so quick to ditch.

One recommended option for state taxes was to remove the stamp duty on housing sales. ERA chairman Lyndon Rowe said the duty acted as a disincentive to downsize or relocate.

The revenue lost by abolishing the duty could be recovered through a more broadly based payroll tax, which would apply at a lower rate than at present, and widening the land tax base at a “slightly” higher rate.

Bigger companies would appreciate the change, but many smaller employers, who are now exempt, would not like having to pay any tax at all.

The ERA says land and payroll taxes are efficient. They are easy to apply and economical to collect. By including exemptions and other compliance issues, collection costs increase. Having taxes apply across the board, with no or minimal exemptions, means lower overheads.

The sticking point for business is that it has been railing against payroll tax for years as a tax on jobs. Even if the rate were lower, the ERA's proposal for existing exemptions to be removed would mean all employers paid the tax. Those currently exempt would protest vigorously. And they all vote.

Even a modest charge on the family home, which is tax exempt, would provoke a backlash.

Mr Rowe makes a strong case for change in a sensitive area of the Royalties for Regions policy, which requires that 25 per cent of the royalties revenue be quarantined to top up spending in country WA.

“The size of the royalties going into the fund have been considerably greater than when first forecast,” he said.

“RFR appropriations have more than doubled from 2.3 per cent to 5.2 per cent as a share of government revenue, and from less than 10 per cent to more than 20 per cent of the size of the asset investment program over its six years of operation.”

In other words, the program is handling hundreds of millions of dollars more than when introduced.

That money is not available for normal government spending and the ERA seriously questions whether that is the best way to use scarce taxpayers’ dollars.

Not surprisingly, National Party leader Terry Redman quickly knocked any thought of change on the head.

Treasurer Mike Nahan did too, although privately he might have some sympathy for the Rowe plan.

Opposition leader Mark McGowan said Labor would target the royalties plan “more wisely”.

Tough public cost-benefit analysis would apply to all election promises, there would be a trial congestion charge on cars using the CBD, asset sales would be pursued, the taxi industry would be freed up and the Keystart low income housing loan scheme axed.

The resilient Potato Marketing Corporation, which has survived calls for its abolition under coalition and Labor governments over the years, would also get the chop. 

The corporation’s last annual report showed it is overseen by a five-member board whose fees total about $100,000 a year.

It also employs 14 full-time staff, and returned a loss of $480,561 last year. The ERA report says its costs are equivalent to almost $54 per tonne of potatoes produced, although the corporation says WA potatoes are cheaper than in most other states.

But the potato lobby was quickly on the front foot in response to the ERA report, bagging the recommendation. Don’t hold your breath waiting for action.

Mr Rowe says that with signs of a slowing state economy and the loss of the AAA credit rating, it is timely to consider the removal of government-imposed barriers to competition.

He claims the benefits for taxpayers would run into hundreds of millions of dollars annually.

But apart from asset sales and a few other areas, it appears the government has little stomach for reform.

Where are the successors to prime ministers Hawke, Keating and Howard when you need them?


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