Cut spending on business, not us
Budget surplus fetishism is not about good policy. It is cover for attacking public services to the poor and working class.
So it is that this Labor Government is softening us up for major Budget cuts. Why?
Well in part it is because company tax collections have fallen a staggering $3.5 billion on estimates of only a few months ago. The main reason according to the Treasurer is a collapse in company capital gains tax (CGT) collections.
Most commentators have linked the fall in share prices during the Global Financial Crisis to the fall in CGT from companies.
But there is something else going on – it is called tax planning. In the last year or so the Australian Tax Office has been losing a large number of cases in the courts involving hundreds if not billions in revenue.
Recently the ATO lost the Foster’s case, involving $850 million worth of deductions, and also lost Axa with a capital gain of $383 million and News Corp with a capital loss of $1.5 billion.
Each court victory for the tax avoiders sees the schemes proliferate as other business adopts the arrangements if it can to reduce its tax bill and remain competitive.
Now a reforming social democratic Government might change the law to address these massive ‘tax planning’ cuts to revenue. Not Labor. Instead they are going to deny tax deductions to…students on youth allowance. That’s showing them Labor.
But it also shows us clearly which side Labor is on – the side of capital.
It explains why Labor will do nothing about the tax gap. As the Australian economy and profits have been growing company collections have been falling.
It also explains why Labor has done nothing to redress the fact that almost half of all big business pays no income tax and of those that do pay some tax most pay much less than the headline company tax rate of 30 percent.
The tax system not only raises revenue – through tax exemptions and extra deductions it is also a quasi spending program. Every year Treasury puts out estimates of that spending program and this year it amounts to $113 billion – about one third of actual government spending of around $350 billion.
Thus for example we spend almost as much through the tax system on superannuation as we do on government pensions. By 2013 Treasury predictions are that we will be spending more.
We spend through the tax system tens of billions on business, yet no-one questions the efficacy let alone efficiency of these spending programmes.
A simple tidying up of tax laws to get rid some of the more egregious tax planning opportunities, coupled with removing a few of the tax concessions for business would yield tens of billions every year. That would wipe the Budget deficit out overnight. Overnight.
But of course capital is sacrosanct so we can’t tax it. We have to cut spending on the poor and working class instead. It is truly all about priorities for Labor – the wrong priorities.
Last year Prime Minister Kevin Rudd attempted to introduce the Resource Super Profits Tax or RSPT, a mild resource rent tax. Capital went on a war footing against the tax and Rudd lost his job.
Gillard’s compromise tax will raise about ten billion a year less. The RSPT would have wiped out the Budget deficit with enough left over to spend more on public health, education and transport.
Don’t cut services to the poor and workers, Gillard and Swan. Stop spending our money on subsidies to capital. Tax big business and the rich.