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Issue #1473      22 September 2010

Taxing time ahead for Gillard govt

Taxation was almost buried as an issue during the election campaign, but it could become a make-or-break issue for the Gillard minority government. Treasurer Wayne Swan has been forced to not only go ahead with a tax summit in 2011 that he did not want, but to accept items on the agenda that he had categorically ruled out. At the same time the mining lobby appears to have strengthened its grip on the Ministry with appointments such as Greg Combet, Joseph Ludwig, Bill Shorten and the industry’s “darling” Martin Ferguson retaining the resources and energy portfolio.

Prime Minister Julia Gillard and Treasurer Wayne Swan.

In negotiations with the independents, Labor agreed to a ‘’public forum of experts’’ to discuss the Henry Taxation Review by June 2011. Pressure from industry and independents has seen this public forum expand to a full blown summit where almost anything related to taxation could be on the table.

Independent MP Rob Oakeshott led the charge, calling for a summit to address tax reform following discussions with mining magnate Andrew Forrest. He has expressed support for a move from state-based mining royalties (taxed according to volume of production) to some form of federal rent resource tax (based on profits).

Forrest, who heads Fortescue Metals was one of the leaders of the very vocal campaign against the Rudd government’s resources super profits tax (RSPT). This campaign played a major role in providing the trigger for the Gillard coup against Rudd. When Gillard took over as prime minister, she negotiated the watered down mineral resources rent tax (MRRT) with the big three mining companies (BHP Billiton, Xtrata, Rio Tinto). Forrest was furious at not being included and has been fighting ever since for a seat at the negotiating table – one of the reasons for his call for the tax summit.

Independent MP Tony Windsor also insisted on a tax summit to discuss the Henry Review’s recommendations, including the highly controversial mining tax which Swan said was not up for review. Swan has since reluctantly said they can discuss “the design of the tax” but “we have to move forward with legislation”.

Family First Senator Steve Fielding, who was not re-elected to the Senate, is threatening to make life as difficult as possible for the government in the Senate where he holds balance of power until his exit in July 2011. He is opposed to the mining tax.

Independent MP Andrew Wilkie has warned that the mining tax is “rushed” and “flawed” and also wants more consultation with industry before he could support it. He has also raised the question of extending it beyond coal and iron ore. Gillard’s backdown on the original RSPT saw other minerals excluded from the tax.

Under pressure from the independents and the big end of town, Swan has now confirmed that all recommendations of the Henry Review will be up for discussion including those his government had specifically ruled out, among them taxing capital gains more highly and rationalising taxation of alcohol.

The Henry Review’s 138 recommendations are a neo-liberal prescription for the unfettered, market-driven plunder of Australia’s non-renewable resources to make Australia more attractive to foreign and domestic investors. The report also contains proposals for a radical transformation of the social welfare system, an area that Rudd had left for implementation at a later date (See Guardian No 1454, 12-5-2010).

It takes a long-term perspective for gradual change over 40 years. The Rudd/Swan Labor team took initial steps in its implementation in the 2010-11 budget last May in the areas of superannuation, the mining super profits tax, abolition of state mining royalties, assistance to the mining industry, reduction of corporate taxes, assistance to small business in write-down of capital expenditure and reduction in taxation of interest on savings deposits.

GST on agenda

The big end of town was disappointed when the GST was excluded from the Henry Review. They are pushing for the present exemptions on certain goods and services (education, medical, fresh food, etc) to be ended - for all goods and services to be subjected to the tax. At the same time they are demanding that it be increased.

The big accounting firm PricewaterhouseCoopers is calling for an immediate rise from 10 percent to 12.5 percent. Partner Tim Cox made comparisons with New Zealand where it has risen from 10 to 12.5 percent and set to increase to 15 percent in October. Britain will be lifting its rate to 20 percent next January!

Cox openly admits that the aim of increasing the GST is to be able to reduce taxation on company profits, personal income tax, payroll and other state taxes. Successive reductions in company taxation over the past 20 years have seen the official corporate rate reduced from 46 cents to 30 cents in the dollar. Cuts to higher marginal rates on personal income tax have seen the wealthy pay a far smaller proportion of their income in tax.

These regressive trends were compounded by the very unfair GST which taxes the rich and poor at the same rate in the dollar and is paid on a much higher proportion of income by those on low incomes. This is because the rich do not spend all of their income on goods and services in Australia – they invest much of it or invest and splurge it overseas.

The Greens oppose any increase in or extension of the GST. They are seeking a gradual and long-term shift in the tax system from work-based taxes to taxes on natural resources and pollution. This includes a carbon tax, a national carbon trading scheme and other ecological taxes and charges that reflect the full environmental cost of the production, use or disposal of resources.

They also have a number of proposals for reducing inequities in the current personal and corporate tax systems. These include a new top marginal rate of 50 percent on incomes of $1 million or more, the return of the company tax rate to 33 percent and reductions in corporate tax concessions. Their progressive policy is totally at odds with the Henry Review, the government and its patrons in the mining industry and other sectors of big business.

The summit, scheduled for mid-2011 is certainly shaping up to be a big test for Labor under pressure from the various vested corporate interest groups, and the differing views between those holding the balance of power in the both Houses.

Add to that a belligerent Opposition leader who would rather see the government brought down than support legislation that he himself would have introduced. As for the working people of Australia and the trade union movement, the Gillard government will have to be forced to give them a voice through action on the ground and support for the Greens’ in parliament. Gillard and her loyal ministers are no friend of labour, their class interests lie elsewhere.  

Next article – The disgraceful pursuit of Ark Tribe

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