20/01/2011 - 00:00

Ripper’s claims on tax reform a bit rich

20/01/2011 - 00:00

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Eric Ripper's gilding the lily a bit when he spruiks Labor's record on tax reform

Ripper’s claims on tax reform a bit rich

STATE opposition leader Eric Ripper ought to be a pretty careful when crowing about the tax record of the previous state Labor government, lest someone reminds him of his biggest faux pas as treasurer – the premium property tax.

Last week, Mr Ripper called on Colin Barnett’s current Liberal government to complete Labor’s tax reforms, following an Institute of Public Affairs analysis of business taxation regimes across Australia.

The IPA’s analysis showed WA has the lowest business tax regime, a point Mr Ripper claimed was vindication of seven and a half years of taxation reform under WA Labor.

While the Perth-based Chamber of Commerce and Industry WA disputes the IPA findings, and reckons the state is the highest taxing per capita, there is no doubt that Labor tweaked down a number of business taxes.

That should be put in context. In the background, revenue from property and payroll tax skyrocketed as the economy surged.

Whatever improvements Mr Ripper may have made to the system, it ought to be remembered that his attitude to tax was shaped by the experience of his first budget, in 2001, which contained the dreaded and since abandoned premium property tax.

That tax was as much about tax reform as current federal Labor’s various forms of mining taxes.

And it received much the same sort of welcome – a storm of protest that threatened the government and forced a back down.

It is worth remembering what the premium property tax was and how it would have panned out.

The tax was a 2 per cent rate on the unimproved value of a property over $1 million. In other words a 2 per cent rate on $200,000 where the land alone was worth $1.2 million.

At the time, Mr Ripper said about 900 premium properties in the metropolitan area would be affected by this measure. The average unimproved value of these properties was around $1.6 million – 14 times greater than the average unimproved value of land owned by Western Australians.

The premium property tax was to raise around $12 million in its first year, kicking in from January 2002.

“The government believes those affected by the tax, because of their relative wealth, will accept making an additional contribution towards extra spending in the health system,” Mr Ripper said in his budget speech.

So much for reform, this was just a big new tax on one part of the community to pay for the health system. It sounds like the resources tax, doesn’t it?

At the time there was a big stink, which did not help then federal Labor leader Kim Beazley’s chances of winning the national election later that year.

And that was before the huge rise in property prices in the past eight years, which would have meant far more than 900 people were caught. No doubt that is why so many people raised a fuss.

The $1 million tax-free threshold was to be indexed to the Perth CPI. According to the Real Estate Institute of WA, that figure has risen just more than 30 per cent between March 2002, just after the tax would have come in, to September 2010, the latest figure available.

In comparison, during the same period the median price of land (not houses) has risen exactly three times, up from $85,000 to $255,000.

With such accelerated bracket creep it is probable that thousands of people would have been caught by this nasty tax.

Having said that, at least Mr Ripper appeared to have learned from that mistake early in his career as treasurer and no further such taxes were proposed.

Maybe that is why his parliamentary colleagues decided to keep him on as leader when opposition treasury spokesman Ben Wyatt sought to challenge him two weeks ago.

As a seasoned political leader Mr Ripper knows what the electorate can do to someone who is new to the job.

Unsustainable point

THE Committee for Perth’s Factbase research conducted in conjunction with the University of WA is always a good read and I was fascinated to see the results of a survey of the views of ‘urban elite – business people, policy makers and academics’ in four key cities – Perth, Sydney, Melbourne and Auckland.

Among the repeated views expressed about Perth was a question mark over its sustainability.

One respondent was quoted as saying Perth is “the most illogically located city on the planet”.

No doubt this stems from increasingly touted predictions, like those of author Tim Flannery, that Perth may be ghost city in the not-to-distant future due to climate change.

But how illogical is Perth’s location? Granted water is an issue here, but a relatively minor one and, probably, the only one. Desalination solves that issue quite easily. If you don’t like CO2 emissions, build an emission-free nuclear power plant.

Apart from that, we have wonderful amenities such as beaches, safety, easily developed land and terrific food production.

The latter is a fairly logical reason to site a city and one of the key drivers for Perth’s foundation. If the climate does get harsher, this may diminish, but we’ll still produce enough food to feed ourselves – and that’s a lot more than Dubai does, or many other Middle Eastern capitals, which have been growing at an astonishing rate. Are they on the same planet?

Compared to half of the Netherlands, which already has dykes to stop the ocean inundation, Perth seems quite well placed to me.

And what about all those cold places in the Northern Hemisphere that are freezing this winter. Why is snow-bound New York, which requires far more energy to keep warm each winter than we’ll ever need for artificial water production, more logically located than Perth?

Toronto is worse; it’s not even a major port any longer – certainly since railroads were invented and the fur trade ceased. Shouldn’t all of the people there move to warmer climes to save the energy emissions? Or will climate change make them more comfortable and therefore more logically located?

Singapore imports everything to survive, even its water. Tokyo needs our energy for its industry and heating, not to mention our food. Why are 20 million people living there? The same could be said for several other major Asian cities. Seoul has the same issues, plus it is within missile range of a lunatic armed with nuclear weapons. Get out of there.

Mexico City sits astride a swamp that was home to the capital of the bloodthirsty Aztec Empire. No wonder the people are terrified by deranged and murderous criminals. It also sits on a fault line, making it prone to earthquakes, just like San Francisco and Christchurch.

In Europe, Warsaw was overrun time and time again by the marauding hordes from the east and, occasionally, its western neighbour, Germany. Why on earth did the Poles persist?

London has to have a special tide barrier to prevent the city being flooded if bad weather coincides with a king tide.

On home soil, Brisbane is looking a lot less logical as a location for a city after its second major flood in 36 years.

So let’s get things in perspective.

• mark.pownall@wabn.com.au.

 

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