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John Passant

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March 2015



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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole

Sick kids and paying upfront


Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. (0)

I am not surprised
I think we are being unfair to this Abbott ‘no surprises’ Government. I am not surprised. (0)

Send Barnaby to Indonesia
It is a pity that Barnaby Joyce, a man of tact, diplomacy, nuance and subtlety, isn’t going to Indonesia to fix things up. I know I am disappointed that Barnaby is missing out on this great opportunity, and I am sure the Indonesians feel the same way. [Sarcasm alert.] (0)



Of shit sandwiches, tax ‘reform’ and taxing the rich

On Monday morning, Joe Hockey, the Australian Treasurer, released Re:think, a tax discussion paper. It is no accident that he did so at the Australian Council of Social Services office.  Let’s hope ACOSS don’t fall for the 3 card trick that is the tax discussion paper.

Given the widespread opposition to the 2014 Budget, the one percent have drawn an important lesson from that debacle – consult with the intended victims before launching attacks on poor people and workers.  That is what the tax discussion paper is about. This Damascene conversion to talking to people begs the question – is a tax shit sandwich no longer a shit sandwich if it has consultation sprinkles on top? To ask the question is to answer it.

Like oher commentators I was going to ask how Abbott and Hockey could sell us this anti-working class tax package or aspects of it while one third of big business has an effective tax rate of less than ten percent and companies like Apple and Google pay very little tax here. It now appears Hockey will announce a diverted profits tax in the Budget to supposedly tax the likes of Google. Without having seen the detail it looks like it an attempt to tax Google and the like on their Australian sourced income. This in the case of Google might be difficult to apply because on the scant information so far it appears to be contrary to the Singapore Australia Double Tax Convention. Of course the Australian government could override that but this may be a step too far and adopting a new tx approach for treaties will have ramifications for more than just Singapore. It may represent real, shock horror, sovereign risk.

And now the Parliamentary Budget Office ahs said much the same thing. In a report described in the Sydney Morning Herald on 2April the Office, according to the SMH,  says:

The likely centrepiece of Treasurer Joe Hockey’s assault on multinational profit-shifting – a so-called “Google tax” – risks breaking Australia’s international tax treaties, the Parliamentary Budget Office has found.

So a diverted profits tax might be part of the snake oil to sell a greater tax burden on us, the 99%. Hockey can loudly proclaim he is dong something about big business tax avoidance while not actually doing anything that is effective or will stand up to judicial scrutiny.

Re:think is aimed at generating tax outcomes that benefit the 1% under the guise of consultation with the 99%. There will be debate and discussion, but a narrowly focused debate and discussion within the tax parameters set by the one percent about tax efficiency and the like. This is code for further reducing tax equity and increasing the tax burdens of the poor (e.g, the GST rate increase and base broadening) and the working class (through bracket creep).

Equity gets little mention in the paper and does not figure in the deliberations about suggested reforms. Thus there is for example almost no discussion about wealth taxes in the paper apart from a fleeting reference to estate duties. A wealth tax is a progressive tax that could be levied on the top twenty percent of wealth holders since they hold almost fifty percent of the wealth in Australia. Such an annual tax at one percent would yield on my back of the envelope calculations $30 billion and have little impact on business or investment.

In the paper there is lots of discussion about ‘tax system sustainability’ or similar. This is code for making working class taxpayers pay more tax or receive less social wage, or a combination of both.

For example the discussion paper suggests that technological and other changes threaten the Goods and Services Tax base. So it asks ‘To what extent are the tax settings (that is, the rate, base and administration) for the GST appropriate? What changes, if any, could be made to these settings to make a better tax system to deliver taxes that are lower, simpler, fairer?’

If we are having a truly national conversation then my answer would be abolish the GST and tax the rich on their wealth and their income, or, to use the language supposedly of a former right-wing UK Labor Chancellor, squeeze the rich until their pips squeak.

Piketty and others argue that growing inequality threatens social stability and abolishing regressive taxes and replacing them with more progressive ones addresses to some extent those concerns. However tax is a second order issue when it comes to inequality. The real reason for growing inequality is the lack of working class struggle over the last 3 decades.  The share of national income going to labour is at near historic lows and that going to capital historic highs. The best response to that is to strike to win big real wage increases and to cut the working week to 30 hours.

Let’s be clear. We aren’t having a national tax conversation; we have been served a tax reform program that reflects the wider agenda of neoliberalism, first introduced into Australia by Labor in 1983,  of shifting more and more wealth from workers and the poor to capital and the rich. Tax over that period of time in Australia has become less progressive, another indicator of the wealth shift to the rich and powerful.

Hockey will try to buy us off with promises of tax cuts if the GST is increased and/or its base broadened to include health, education and fresh food. Bracket creep will erode these tax cuts ina few years just as it did the ‘compensatory’ tax cuts when the GST was introduced.

Company tax cuts mean that those many big businesses who are, according to the Tax Justice Network/United Voice report ‘Who pays for our common wealth?’ tax leaners,  will get even more rewards. The paid poppinjays of the 1% argue that company tax cuts lead to more employment and higher wages. This assumes the extra profit in the hands of the bosses is reinvested in labour and more competitive pricing. In fact the general tendency of capital is to reinvest their profits in capital in the form of labour saving machinery, etc. Ireland has a company tax rate of 12.5%. That didn’t save it from the ravages of the global financial crisis. In fact it may have worsened the situation. Ireland’s unemployment rate in early 2012 was over 15 percent and would have been over 20% except for mass migration.  A 12.5% company tax rate didn’t save it.

Despite the fact Joe Hockey has said nothing is off the table, there won’t be any discussion of a carbon tax or rent taxes. In fact the paper doesn’t mention environmental taxes on the big polluters at all or getting back any of the super profits (economic rents) the banks make and the mining companies used to make. The only real reference in the paper to them is the government bragging about their repeal.  So too there will be no discussion of wealth taxes, of estate duties or of soaking the rich till their pips squeak. It will be a carefully stage managed consultation process within narrow limits.

In 2013 Labor bought forward proposals to abolish the outrageous section 25-90 which allows interest and other deductions against certain untaxed income. Joe Hockey after some pressure from his big business mates abandoned the proposal. There goes $600 million that could have come in handy to spend on public schools, hospitals, transport.  No doubt this proposal is back on the agenda eh Joe? Ha! The Re:think paper doesn’t mention it.

Budget speculation has been on a tax of 0.05% on bank deposits up to $250,000. This is supposedly to help pay for the government guarantee on such deposits, a guarantee which assists the banks to raise money and which is unlikely to ever be used. Details are unclear and it wasn’t mentioned in the tax discussion paper, but if it goes ahead the banks will pass on the tax to customers. This will be a further tax on workers and the poor.

Another sleight of hand in the paper is to offer up for consideration a few sacrificial lambs like the massive benefits the tax system delivers to rich superannuants and rich will be superannuants. [After writing this, while the Treasurer might be keen to wind back some of the superannuation concession going to the uber rich, the Prime Minister has attacked Labor support for such changes as being a great big new tax, tax, tax, tax. Funny how the Prime Minister thinks restoring some modicum of equity to the tax system and taking away a tax rort for the rich is all about increasing tax. Well, not funny really; sad, very sad.]

The paper also asks does the capital gains tax 50% exemption ‘and negative gearing influence savings and investment decisions, and if so, how?’ While addressing these legally sanctioned tax rorts is a step forward, the fact that they are discussion points to justify cuts to company tax rates and to increase the rate and broaden the base of the GST confirms this is tax discussion paper is a document of the rich, by the rich and for the rich.

The answer to the tax and budgetary dilemmas seems pretty clear. Tax the rich.



Pingback from Think, not rethink. | Whispers' Cellar
Time March 31, 2015 at 9:39 am

[…] if it has consultation sprinkles on top? To ask the question is to answer it</blockquote> <blockquote>”IN launching its national “conversation” about tax reform, the Abbott […]

Comment from Florence nee Fed up
Time March 31, 2015 at 10:02 am

Spot on. We are being soften up for the kill in May budget.

Comment from Mike
Time March 31, 2015 at 10:48 am

Index the income tax brackets to inflation, or better still Male Total Average Weekly Earnings.

Comment from Ross
Time March 31, 2015 at 11:31 am

Florence is right. They will declare a 15% GST including food as well and we will be happy with 12% GST.

Put a turnover tax on all businesses including banks ,currency trades, share market, derivatives and lack of tax won’t be a problem.

Comment from Ross
Time March 31, 2015 at 3:41 pm

Bank deposit theft is coming. Watch what is happening in Greece.

Comment from Chris Warren
Time April 1, 2015 at 9:30 am

yes, I think Ross is right.

A fraction of a percentage tax on daily share transactions and foreign exchange would reap in sufficient taxation.

But what are the actual numbers?

The GST is not working if more and more people purchase overseas from foreign suppliers.

Comment from John
Time April 1, 2015 at 9:42 am

I saw somewhere a Tobin tax would raise a billion year. That seems a massive underestimate. And our financial institutions would just pass the cost back to us.

Comment from Chris Warren
Time April 2, 2015 at 1:09 pm

institutions would just pass the cost back to us.

Yes, but this applies to all taxation where there is no substitute.

A tax on cigarettes is passed back to cigarette consumers.

A carbon tax is not easily passed back because it changes relative costs between carbon products and substitutes.

However, a Tobin tax would produce billions which would fund hospitals, housing and jobs etc. which would then reappear at the point where this flow would reappear in the hands of these workers.

Any price hike will be offset by the increased demand produced by these new wages.

All taxes increase prices in a partial equilibrium sense, but the money appears elsewhere.

The end result is that instead of company shareholders getting dividends for luxury cruises and lifestyle coaches – we get hospitals and schools.

In general taxes cannot solve the inherent contradictions of capitalism – they may sooth the pillow of a dying economy and demonstrate that workers can defend themselves even as capitalists start imposing austerity and ending the entitlements we were promised.

Only workers cannot pass taxes on to anyone else. They can only beg for pay rises.

They need to look for an alternative to capitalism.

Taxes just divert money and only money that is available as surplus value.

The real argument for a Tobin tax is that the rate can be set so low that it is lower than the cost involved in capital moving elsewhere, and probably lower in impact than normal fluctuations due to the weather, FX volatility, and various forms of hedging and speculation.

Taxing surplus means you are not taxing production, and you can even avoid taxing workers consumption or expenditure.

Comment from John
Time April 2, 2015 at 2:57 pm

Hence the call I have made previously for price controls. And the best way to stop tax avoidance is to win back some of the value we create in higher wages.

Comment from Ross
Time April 2, 2015 at 10:15 pm

Chris warren the turnover of currency and derivatives in this country is $135 trillion. However because this parasitic side of our economy will collapse easily with just a little tax pressure, it is a sacred cow.

Comment from Chris Warren
Time April 3, 2015 at 9:08 am

It appears that a Tobin Tax is being proposed on certain transactions only. This is weak.

We need a tax on all foreign transactions, not just a Tobin Tax.

If you apply a Tobin Tax, you need a reasonable rate to get worthwhile revenue, and capitalists will undermine this by going on strike.

However, I suspect that, if a tax covered all movements of surplus value across Australian borders, which are computerised, then the rate could be somewhat lower, and earn a decent pot of revenue.

The Australia Institute’s Tobin Tax paper by Cameron Amos seems to miss the point.

A transactions tax should also apply to all domestic movements of surplus value not already covered by the GST such as purchases of gold.

A cut in the GST and lower PAYE rates at the lower scales would win back some of the value we create. Automatic indexation of minimum wage would be even better.

Comment from Ross
Time April 3, 2015 at 6:11 pm

Re Chris Warren on financial turnover transactions in Aust. I’ve seen numbers like $135 trillion. However because these transactions are not based on real productivity, any tax will see their demise and that cannot be a bad outcome.

The current financial system has become detached from all economic reality.

Comment from John
Time April 3, 2015 at 6:36 pm

I think finance capital and productive capital are intertwined.

Comment from John
Time April 3, 2015 at 6:37 pm

I saw an estimate of $1 billion. From John Quiggin I think. Don’t quote me. Or maybe someone on one of his posts commenting on the likely revenue. Not much at all.

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