En Passant

Chris Jordan has been appointed Australia’s next Commissioner of Taxation. He takes up his role on 2 January 2013.

According to the Treasurer’s Press Release, ‘Jordan is currently Executive Chair of Chase Corporate Advisory, Chair of the Committee for Sydney and also serves as a board member of the Bell Shakespeare Company and the Sydney Children’s Hospital Foundation.

‘He is also Chair of the Board of Taxation. He has been a member of the Board of Taxation since its inception in September 2000, becoming Deputy Chair in January 2005 and then Chair in June 2011.’

The Board of Tax is the bosses’ body for tax policy debates among the 1% and a group designed to pressure and influence the Treasury to favour big business in policy development, not that they need much influencing or pressuring.

‘Jordan was previously Chair of KPMG New South Wales and Partner in Charge of the New South Wales Tax and Legal Division of KPMG. KPMG is one of the major accountancy firms and tax advisers to big business and the rich.

‘Jordan also served as Chair of the Business Tax Working Group and Chair of the New Tax System Advisory Board.’

In other words Jordan is a ruling class tax man.

This is the first time the Commissioner has been appointed from outside ATO ranks. And not just outside ATO ranks – a partner in one of the big 3 (or is it 4?) accountancy firms, firms who make their money advising big business how to pay less tax.

Is  Jordan’s appointment putting the fox in charge of the hen house or a case of poacher turned gamekeeper?

Labor has axed the current Commissioner, Michael D’Ascenzo and replaced with him a business friendly outsider.

What is going on? As Jean Baptiste Colbert, Louis XIV’s Minister of Finance, said: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

Under D’Ascenzo’s reign there has been a lot of hissing from business. They don’t like paying tax. With the GFC impacting on their income, and the global economy heading into deep trouble,  they like it even less.

On the other hand the Government wants more revenue, to paint itself as fiscally responsible and to deliver a budget surplus. It also wants and needs a happy ruling class.

D’Ascenzo, despite his business friendly approach, couldn’t get the mix right. Jordan will not be able to either and tax law changes will address this by shifting the burden of tax even more on to workers and less on capital.

Business will be very pleased with Jordan’s appointment. They will talk about a new era of cooperation. That is code for them paying less tax, they hope.  I doubt ATO staff are that happy, fearing they will become an adjunct for less tax from business and more tax from ordinary working people.

This balancing act between the Government’s need for revenue and the need to keep business happy is what drove the Labor Government’s pathetic compromise over the Minerals Resource Rent Tax, the tax that isn’t.

D’Ascenzo could not pull off the same balancing act as Swan did on the MRRT. If he’d followed the sort of leadership Swan and Gillard provided over that tax, there’d be no company tax collected at all.

In my opinion D’Ascenzo was soft on big business but he wasn’t soft enough from their point of view.

Business has essentially captured tax policy making. However it hasn’t, until now, been able to capture tax administration.

The global financial crisis, the economic crises in Europe and North America, the slowdown in China and the decline in global profit rates has turned the attention of business even more to the ATO and its ‘outrageous’ demands that big business pay tax and to complain even more about the audits it conducts.

Sidelining D’Ascenzo and appointing Jordan is the Labor Government’s way of responding to business criticism of the already fairly softly softly ATO approach to business as it is.

What better way to gut the Tax Office than for business to appoint one of their own to lead it?

Tax policy is already moving in the direction of taxing labour more and more and capital less and less. Tax administration will follow. The focus of the ATO will shift even further away from big business to the little taxpayer, that is to workers and small business.

As part of the recent MYEFO announcements the Government gave the ATO an extra $390 million to pursue transfer pricing – where multinationals manipulate pricing to shift profits from Australia to other often low tax jurisdictions – and tax avoidance more generally. This will, the government estimates, raise an extra $2.5 bn.

Why limit it to $390 million if it is going to bring in six times that amount of revenue, an amount I suspect is an under-estimate? 

Years of chronic underfunding of the ATO and the destruction wreaked by Labor’s efficiency dividend have undermined the ATO’s capacity to pursue the big end of town fully. There is a gold mine out there. I suspect under Jordan it will remain unmined.

The courts are destroying the general anti-avoidance provision with neoliberal interpretations (much as they did in the 70s with its predecessor) so without a more effective and re-written anti-avoidance provision the extra money to the ATO may not produce the hoped for results.  An effective anti avoidance provision, instead of the currently hamstrung one, might bring in billions more if the ATO were to be more adequately resourced.

As tax revenue from business continues to fall, in part because of tax avoidance, and the Government finds it harder and harder to squeeze more money out of ordinary workers, Gillard and Swan or Abbott and Hockey will further cut social welfare, health and education spending.

If the new focus shifts even more to being ‘business friendly’ for tax officers it will mean trying to collect tax under a new regime whose raison d’etre is profit, not tax.  This fundamentally misunderstands the role of the State and its revenue collector under capitalism. Should the defence forces also be run along business lines? Would any Government put Mahatma Gandhi in charge of their killing machine? Why not put Julian Assange in charge of the CIA? Hmmm, not a bad idea. (There is a vacancy, I understand.)

This Grundnorm of profit, profit, profit, rather than tax as the price we pay for civilised society, could destroy the culture and ethics of the ATO.  With a potential fox in charge of the hen house, revenue from companies could well dry up and ordinary workers would pay – either through more tax or savage cuts to government spending and services.

Is there an alternative? Yes. Tax the rich and give the ATO enough funding for it to do its job as the collector of tax rather than the handmaiden of business. Make the rich pay. That is something Labor won’t do.

Such is Labor’s degeneration they have handed the tax collecting role to a person whose whole working life has been representing the interests of big business in general in policy debates and discussions and defending specific big business when battling the ATO. Jordan would almost certainly be someone who has undertaken tax planning for his big business clients and the rich. One has to wonder if he has been involved in tax avoidance schemes.

Neoliberal madness.