COALITION budget savings, including those stalled in the Senate, have not been enough to cover the cost of new policies and have so far made no contribution to reducing the deficit over the next four years.
With cabinet’s razor gang meeting to work out politically acceptable cuts, Tony Abbott needs this year’s budget to bring a boost to his stocks while keeping faith with his vow to Australia’s creditors that he would put the budget on a secure path to surplus.
The Prime Minister yesterday foreshadowed a budget that would be “prudent but frugal”, while saying the cost of a multi-billion-dollar tax cut for small business would have no impact on the deficit because it was already accounted for in last year’s budget.
However, the failure of measures announced to date to make an appreciable dent in the deficit over the next four years has left the promised return to surplus vulnerable to Senate obstruction, with savings measures worth about $20 billion over four years blocked at present, and to further deterioration in the economic outlook … Wrong turn on budget: savings not covering new policies
Most of this document is from the address Humphrey McQueen gave to the Eureka Dinner in Adelaide on 16 November 2014. The imposition of a Service Tax on internalised transactions has been added.
Commonwealth Treasury claims that there are structural problems in the Commonwealth budget. Indeed, there are. Too much expenditure subsidises the corporate plunderers. Too little tax is collected from them.
To reduce this criminality, here are six modest proposals for reforming the tax system. These changes are what we used to call reforms. The last thirty years has seen the term ‘reform’ applied to what are in truth ‘de-forms’.
First, all tax returns become public documents the moment they are lodged. That will offer whistle-blowers the evidence they need to report their suspicions of what their employers are up to. Here is a new realm to welcome the injunction: ‘If you see something, say something.’ The chance that increased exposure will make executives and rentiers think twice before cheating is not great given their sense of entitlement.
Second, impose a HECS payment of a million dollars for business degrees if graduates work for the corporate tax accountants but suspend HECS if they work for the ATO catching the dodgers. This HECS charge will be retrospective for incoming Treasury Secretary Fraser who spent twenty years with the most scandal-prone of the Swiss dodgers, UBS.
Third, abolish all deductions for persons and businesses. The moment accountants can deduct expenses in any way related to earnings, the doors and windows are flung open to evasion, and not just avoidance. Stricter rules about what is or is not a legitimate expense is great for the income of tax lawyers but little help in getting non-PAYG earners to their share. That is even more the case for corporations. Companies use accelerated depreciation and transfer pricing to turn their tax bill into a profit. If we sweep away all deductions, we can abolish taxes on those most in need nd still have more revenues for social welfare..
Because flat-rate levies, whether on Medicare or for flood relief, are calculated on taxable incomes they compound the injustices that flow from deductions.
Fourth: This reform concerns another flat-rate tax, the so-called Goods and Services Tax. Here, I suggest we move in three directions. Above all, abolish the current GST. The tax deformers talk about extending it to health, fresh foods and education. They also want to lift the rate from 10 to 12½ or even 15 percent. Forget about extending the flat-rate tax. Forget about lifting the rate. Instead, replace much of the current revenue from the GST with a Financial Services Tax, that is, a tax on the major ‘service’ outside the GST net. The de-formers never mention the biggest ‘service’, the one that is not taxed.
The proposal is to replace the unfair GST with a Financial Services Tax of 0.1 percent on each dollar traded. The annual turnover on Australian foreign-exchange markets alone is $50 trillion. One cent out of every thousand of those five thousand trillion cents would collect $ 50 billion. That is the same amount as is gathered by the current GST. On top of the foreign exchange trades, there are those on the stock exchange and the futures markets. If they also paid a 0.1 percent Financial Services Tax on each dollar traded, who knows how many welfare services could be funded for citizens instead of for the corporates.
No doubt you have already worked out what the traders will say. A Financial Services Tax (FST) will not generate anything like the revenues I’m predicting because it will drive those transactions off shore. There is no doubt that a FST will be a blow to Merchant Bankers like billionaire Malcolm Turnbull. The FST would also keep down an exchange rate that has been driven up by parasites whose ‘value adding’ to fictitious capital has helped to destroy manufacturing jobs and to stymie the export of other services. Before Hawke and Keating floated the dollar in December 1983, foreign exchange traders dealt with physical goods and services such as transport and insurance. Since the biggest deform of all, FOREX has become a diamond mine for speculators. The huge trades on foreign exchange add to the volatility of an inherently chaotic system. In 1980, the annual turnover on the local futures market was $100 million, a fraction of the trillions this year. We can’t afford to wait for the next crash. We have to take the fight up to the Masters of the Universe by re-regulating the financial sector. Re-opening a peoples’ bank to replace the Commonwealth Bank that the ALP sold out would be a start.
The fifth modest proposal again extends a Services Tax to GST to transactions inside corporations. A family business which outsources its legal work has to pay GST on its lawyers’ fees. A corporation with in-house lawyers does not. Indeed, the avoidance of such taxes is a spur to oligopolising and thus puts small and medium firms at an added disadvantage. Hence, to approach equity in taxes and in competition, the GST of 10 percent should apply to purchases of goods and services that take place inside firms.
INCOME MANAGEMENT
The sixth reform takes up income management. Introduced by the Coalition. it was extended by the ALP under Gillard. South Australian ALP premier ????? wanted to go even further than the Abbott crew until his de-forms were knocked off at the ALP State Conference in November 2014.
The Northern Territory Intervention has proved to be the thin edge of yet another wedge. Income management has spread beyond the Territory and beyond indigenous communities. We are now confronted by the de-form proposed by paper billionaire Andrew Forrest. The Coalition had commissioned him to investigate indigenous affairs. He went way outside that brief to say that the regime should apply to two million Australians. He exempted pensioners and war service benefits because that would be politically disastrous – for the moment. The Coalition has not accepted Forrest’s ambit claim – for the moment. But the universal management of incomes is now on the agenda. The boundaries of what it is acceptable to argue about have been thrust further to the Right.
One assumption behind the Forrest report is crucial because it confronts the unequal version of ‘equality’ that he uses to extend income management to non-indigenous Australians. He justifies expanding the regime so as not to be seen to discriminate against indigenous Australians. Once more, we encounter the doctrine of fake equality before the law, the Hansonite mantra: ‘treat everyone the same’ and ignore generations of social inequalities.
Nonetheless, managed incomes are a great idea – if applied to the likes of Andrew Forrest. He did not go far enough to achieve real social equality. We demand income management for billionaires by stripping them of their booty. Let’s manage his income by relieving him of most of it. A marginal tax rate of 90 per cent would be a start. At the same time, we should manage corporate welfare by putting an end to all of it.
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