Friday, April 30, 2010

It’s Almost Christmas

It almost feels like Christmas Eve. Over the weekend, the much anticipated Henry Review of taxation will be released, along with the federal government’s response. Just what will be included in the review and what will be adopted by the government has been the subject of much speculation and some informed discussion. The interim report gave us a few clues as to what to expect, but it remains to be seen if it will be a Santa sack full of goodies for taxpayers, or another missed opportunity for genuine reform.

While many headlines have already been devoted to a host of possible measures, including a resource rent tax on mining, standardized individual tax deductions removing the need for many people to file a return at all, concessions on the tax paid on savings, and removing the disincentives involved in the transition from welfare to work, it remains to be seen if you and I will actually be any better off as a result. There’s no doubt that reform is overdue, and that simplifying the tax system would reduce costs and improve efficiency, but whenever bureaucrats talk about becoming more efficient at collecting tax there is the risk that what they really mean is that they will find ways to collect more tax.

I think I can safely say that there are a few things that will not be included in tax reform. For example, I’m pretty sure that the tax free threshold will not be increased to the level of the minimum wage, something which would actually fix a lot of those problems with high effective marginal rates for welfare recipients. Neither do I expect to see any sudden commitment to make it compulsory for road and fuel taxes to actually be spent on building and maintaining roads. I don’t expect to see a proposal to make it possible to claim interest payments as a personal tax deduction, even though we are forced to pay tax on any interest payments we might receive.

While I would not be surprised to see a proposal for income tax marginal rates to be indexed for inflation, I doubt that the government will actually adopt it. There’s no doubt that there will recommendations to fine tune the tax treatment of superannuation, but somehow I doubt that the report will go far enough in quarantining super funds from tax so that retirement savings can be maximized more efficiently. That’s an idea which would both benefit future retirees as well as ultimately save the government money on its future liability for the age pension. All in all, I do not believe that the Henry Review will put forward a plan which will result in a reduction in overall taxation. In fact, the opposite is likely as the government contemplates the ever increasing demands upon its resources over the years ahead.

Even so, I am still looking forward to Sunday with some optimism that perhaps something good will be lurking in the bottom of the Santa sack.

Thursday, April 29, 2010

Smoke And Mirrors

It has been suggested that the introduction of plain packaging for cigarettes from July 2012, along with an immediate increase in excise from midnight tonight has been deliberately timed to distract us all from the decision to delay the Carbon Pollution Reduction Scheme. Certainly, it is a stunt which has attracted a great deal of attention, and generated some debate, but whether it is enough to deflect attention from the federal government’s growing list of fumbles, failures and flip flops is doubtful. In fact the only thing that is likely to cause us to forget them is the fact that there are now so many it is becoming difficult to keep track of them all.

There should be no doubt that postponing the Emissions Trading Scheme amounts to abandoning it. If it is ever revived, whether in 2013 or later, it is likely to be more expensive, more complicated and more difficult to pass than it is now. Not one, but two elections will be conducted before it could possibly come into effect, and the chances of Kevin Rudd still being around at that stage are becoming increasingly remote. Even if he is, there is every chance that any future version of the scheme will bear little resemblance to the one which has effectively been scuttled by Tony Abbott’s relentless campaign against it.

As such, the dumping of the plan represents one of the most significant policy backdowns by any government, somehow transforming from the “greatest moral challenge of our time”, to “oh well, we won’t worry about that right now”. But it is far from the only policy retreat exhibited by this government. The COAG agreement on health is not an agreement for the Commonwealth to takeover hospitals at all, with the states now set to retain administration of the new system even though it was the states that were blamed for the administrative failures that have prompted the need for reform in the first place. Then there is a list of other backflips as long as both of your arms.

Let’s see, there’s Grocery Watch, Fuel Watch, private health insurance rebates, general practice superclinics, childcare centres, and of course the bungled and ultimately abandoned home insulation program. But while the government might well wish that we would overlook this ever increasing list of embarrassments, that doesn’t necessarily mean that increasing tobacco excise and introducing plain packaging for cigarettes is just a smoke and mirrors trick to distract our attention.

The fact is that there is nothing good that can be said for cigarettes. There is no benefit to smoking, the adverse impact on health is beyond dispute, the addictive nature of tobacco is insidious, and the social cost is enormous. Research indicates that packaging does have an influence on the decision to purchase, and it is blatantly obvious that higher prices due to increased excise act as a successful deterrent. The simple fact that the smoking rate among adults has already been reduced from about 30% down to just under 17% over the past thirty years has amply proven that.

If that is a distraction, then it is at least a useful one.

Wednesday, April 28, 2010

The Government Cannot Afford Any More Embarrassments

Is Kevin Rudd losing his grip on the political agenda? That’s the suggestion made by the front page headline of today’s Australian newspaper, following the announcement that the proposed Carbon Pollution Reduction Scheme will be postponed until at least the end of 2012. The Australian reports that this represents the latest in a series of policy reversals, adding up to the appearance of a government in retreat. When all the cards are put on the table it’s not hard to see why.

Despite the economic success of the government’s response to the Global Financial Crisis, the implementation of the home insulation program has resulted in tragedy and disaster leading to the ultimate cancellation of the program. Details are still emerging about the flawed process which lead to this monumental failure, and none of them are flattering for the government. In addition, the other big ticket item in the economic stimulus plan, the Building the Education Revolution schools construction program, has been revealed to be riddled with rip offs and rorts, resulting in inadequate and often unwanted facilities at ridiculous prices, rather than a once in a lifetime opportunity for real refurbishments.

The promise to build 260 childcare centres has been abandoned, and even the much vaunted agreement on health and hospitals failed to include every state, and in any event will not show any discernable impact on how hospitals are run for another five years. Even the pledge to participate in a series of three leaders’ debates leading up to the election appears to be floating away in the breeze. That in itself might be a minor thing, but it is just one more piece of the picture that Australians will be forming in their minds as they consider their options at the ballot box.

All of this adds up to a series of policy failures and disappointments which can’t help but take the gloss off the reputation of the government. Add to that the concerns about government debt and the budget deficit, and it would seem that Tony Abbott and the opposition have plenty of ammunition as the election inexorably looms nearer. At this point, the government still commands the lead in the opinion polls, but the question is whether that can continue to be the case if there are any more embarrassments between now and the election.

Tuesday, April 27, 2010

Why The Flag Is Relevant… And The Debate Is Not

Although Ray Martin and Channel Nine appear to have done everything they can to provoke debate about changing the Australian flag, I am not really sure just how many people are keen to pursue the idea. Simply scheduling the discussion to be broadcast on Anzac Day could in itself be seen as being deliberately contentious, and there are no doubt some people who have been genuinely offended by the timing. But in spite having chosen to be as provocative as possible, there doesn’t appear to be any great uprising of Australians responding to the call to arms and demanding change.

Proponents of change suggest that the current flag is anachronistic, and no longer representative of modern day Australia. They suggest that the inclusion of the Union Jack in the top left corner amounts to having another country’s flag as part of our own, and reflects a time when Australia was a part of the British Empire, rather than the independent and sovereign Australia of today. They suggest that a significant number of Australians agree with these views, and therefore support changing the flag. Unfortunately, these assertions amount to a misrepresentation.

A survey conducted for Ausflag has found that 51% of Australians want a new flag without the Union Jack, with a further 19% undecided. While this represents a slender majority, it does not indicate an overwhelming force for change. However, it is not surprising given the considerable publicity given to the idea that the Union Jack somehow represents subservience to Britain. I suspect that many of the people who favour change do so because they have not been taught the meaning of the flag, and have been encouraged to embrace a new flag as a somewhat jingoistic statement of independence.

Unfortunately, they are not the only ones to have misunderstood or misinterpreted the significance of our flag. Supporters, with every good intention in the world, have sought to defend the current flag by saying that our armed forces have fought and died for our flag, or at the very least under it. It is a view which can lead to deeply held feelings, and to passionate argument, without grasping what is truly important. No one fought and died for the flag, they fought and died for what it represents, and that is the democratic freedoms and the principles of justice that form the foundations of our existence as a nation.

In that context, the presence of the Union Jack signifies not allegiance or subservience to Britain, but rather our living legacy of the Rule Of Law, including Common Law stretching back to the Magna Carta and beyond, Habeus Corpus and the Presumption Of Innocence, along with the Westminster system of Parliamentary Democracy, and the Separation Of Powers. That marks Australia as different from other nations which are founded on different, and in many cases less attractive, legal principles. Far from being anachronistic, those principles are more relevant now than ever before, and the only reason that anybody could think otherwise is because we are failing to teach our children the truth about what our flag actually means.