Time For Abbott Government To 'Re:think' The Meaning Of 'Reform'


Is there a more meaningless word in politics than ‘reform’?

Most of the policies that go by the name of ‘reforms’ are deeply regressive and unpopular. They’re not really reforms at all.

Christopher Pyne’s university ‘reforms’ would have cut public funding to the sector and allowed universities to charge whatever they want in course fees, saddling students with massive debts. Was that a reform? Not to the tens of thousands of students and university staff who opposed the policy.

Peter Dutton and Sussan Ley have been attempting ‘reform’ too. They want patients to pay more for visiting the doctor and getting a blood test or scan. Is that a reform? Few in the Australian community think so.

As Greg Jericho wrote last year, “reform” is just a synonym for “a policy we agree with.”

You’d think this government would have learned by now: voters don’t like ‘reform’. They especially don’t like ‘economic reform’, because economic reform from this government means less for ordinary citizens, and more for big business and the rich. 

But this week Joe Hockey is back campaigning for – you guessed it – more reform. He’s released a white paper on the topic of tax reform.

The white paper suffers from the silly name of Re:think. (What’s with the colon?) Much of its content is pretty silly too. As economists like Ian McAuley and John Quiggin have already pointed out, it’s not so much rethink as oldthink, where the thought comes straight out of 1980s neoliberalism.

Re:think is riddled with contradictions and inconsistencies.

If Australia has a budget deficit, shouldn’t the aim of tax reform be to raise more tax? Not so, according to this white paper, which seems to think the main problem with Australia’s tax system is that it isn’t efficient enough.

“Why tax reform?” the paper’s Better Tax website rhetorically asks. “The tax system is holding Australia back.”

“Australia’s tax system was designed in a different era,” the website continues, “when the economy was very different. It was not designed to deal with multinational trade, increasing global competition for investment, the internet and the digital economy.”

All of this might be true. But if footloose capital is the problem, why not tax the things that companies can’t move – like minerals or land? But no, Re:think wants companies to pay less tax, and consumers to pay more.

And if the problem is a tax system that was designed in a different era, why don’t we resuscitate the two taxes that were designed just five years ago: the carbon and mining taxes? But, no: carbon taxes, as Ian McAuley wrote yesterday, are simply ignored – “dismissed in the politicised foreword to the document as ‘a drag on growth’, without any evidence or argument.”

Further on, Re:think also tells us that the most efficient tax is land tax. And yet, despite how this whole reform effort is supposedly about efficiency, very little is made of land tax.

The paper also appears to have no problem with the $5.7 billion in fuel tax credits that mostly go to mining companies every year. “This approach avoids distorting business investment decisions and behaviour that would occur by taxing business inputs,” it says. Oh, of course.

Indeed, the Re:think white paper has a number of suggestions relating to corporate tax. They add up to the philosophy that there should be lower company taxes in general. This is a longstanding Treasury position, and was a feature of the 2010 Henry Review.

What we’re left with, then, is a white paper that seems strangely old fashioned in its view of tax reform. As John Quiggin notes today, most of the ideas of the last four decades have been ignored. “With the exception of some passing references to the digital economy,” Quiggin writes, “there is little here that would have surprised the authors of the Asprey Review, delivered in 1975.”

As a result, the white paper falls back on the tried and true line that we need to lower personal and company tax, and raise indirect taxes like the GST. The reason? Well, that’s what other countries do.

There’s a strange double standard in much of the tax debate. When it comes to the GST, the fact that other countries levy a higher indirect tax rate is advanced as a reason to increase our own. Yet when it comes to corporate taxes, the argument is reversed: other countries have lower company tax rates, so we should lower ours.

So is tax reform about raising more revenue, or changing our tax system to be more like other countries? After all, as the white paper itself points out, most other countries raise more tax overall than Australia. If we’re going to move in the direction of the broader OECD, we’d also need to raise our overall tax take.

Politically, of course, none of this will matter. The white paper will be overtaken by a GST debate that the government can’t win.

If the government was serious about tax reform, this would be disappointing. But the Coalition under Tony Abbott and Joe Hockey is not serious about tax reform in the interests of ordinary citizens, and never has been.

It’s about time we had a public debate about the GST, supposedly such a wonderful instrument. The Goods and Services Tax is deeply regressive. Even with its exemptions for rent, food and health, it still hits the poor harder than the rich. To its credit, Labor realises this and refuses to support a GST rise.

Indeed, the GST hits the very poorest the hardest. Those on the bottom tiers of our income pyramid pay no income tax on earnings below $18,200 a year. But they still pay the GST on many household necessities. Ask a homeless person what he or she thinks about paying more tax, while Google sends it profits overseas.

In fact, ask ordinary Australians what they think about paying a higher consumption tax, so company taxes can be lowered. When opinion pollsters do so, they find that most Australians want companies to pay more.

In March, Essential asked a group of voters whether big business was paying enough tax. 73 per cent told Essential that “large international companies” didn’t pay enough tax. For big business, the figure was 64 per cent. For mining companies, it was 67 per cent.

This white paper is the latest front in the Coalition’s neoliberal war on working Australians. It will fail for the same reasons the “reforms” to health and education failed: voters don’t want reform. They want high-quality public services, affordable housing, and a good job. They know companies aren’t paying their fair share, and they want them to pay more.

None of these things will be provided by ‘tax reform’, which is just another slogan in the Abbott government’s campaign on behalf of big business.

It’s not reform. It’s a policy that big business agrees with.

Ben Eltham is New Matilda's National Affairs Correspondent.