MUNGO MacCALLUM. Tax – something will turn up.

Jul 10, 2018

Scott Morrison has inched forward to another interminable episode of tweaking the tax. This time it’s the scales of the returns the states get from the commonwealth’s GST, but, as always, do not hold your breath.  

Like the personal income tax cuts the new measures will take a minimum of seven years to be implemented and probably a couple of years later to actually settle into the bank accounts of the patient, and of course hard-working, recipients.

The corporate tax cuts are back on the back burner, may never be completed, and, on all the evidence, would do bugger all for any except the directors, shareholders and their mates anyway. So much for the great Enterprise Tax Plan, which has dawdled and dithered its way around Morrison’s mind for more than two and a half years and still has failed to produce much beyond the odd triumphal headline.

Even in its own term, the GST proclamation was pretty feeble. The determinedly cheerful ScoMo insists that of course everyone’s winner and if they’re not then he will just keep throwing money at them until they are satisfied. Actually New South Wales is still a bit grumpy, but a few drops will trickle down in the direction of Macquarie Street, so in the lead up to a state election, no one is making too much of a fuss.

And what is most important is that the new formula, aspirational though it may be, will probably shut up the whingeing Sandgropers of the west. With the promise (eventually) of a guaranteed safety net so they never need to take serious responsibility for any future resources booms and busts. Nor, of course, will anyone else, which suggests that last week’s announcement was more about votes than economics and engineering, as Malcolm Turnbull likes to muse wistfully when the party room, the polllng and the public routinely reject his agenda.

The GST formula did need rejigging, and initially the government sent in the right team to provide advice: the Productivity Commission. But the commission either ignored or dismissed the politics: it came up with a report which was fair and affordable within its terms of reference, but it produced losers, most critically Queensland, poised on the brink of the Longman by-election and not too far away from a national election in which the deep north would be vital to the government’s survival.

Offending the Banana Benders was thus out of the question, but equally was topping up their share to disadvantage someone else. So Morrison magicked a swift $7 billion to fill the gap.

Asked, reasonably enough, where the money was coming from, our meticulous Treasurer said that it would somehow be absorbed in the budget – in other words, something would turn up. All very McCawbwerish, but utterly unconvincing, especially when his recent budget figures are already proving to be seriously over-optimistic.

But who cares, the taxpayers – the ones Morrison insists actually own the money and should get it back –will pay. As he put it, he had complete discretion over the GST carve-up. “Do I have to have an intergovernmental agreement to achieve this? No I don’t,” he crowed, making it clear that it might be the taxpayers’ money, but he was the one who signed the cheques.

His solution was, as so often, the quick fix: it solved one immediate problem and it might hold for a while, but buying your way out of trouble is unlikely to be a long-term answer. The more conservative program suggested by the Productivity Commission looked much more solid. But in any case, the need for GST reform goes far beyond playing with the margins in order to keep the states quiet, and Morrison, of all people, knows it.

When he started dickering with tax matters back in the start of 2016, Morrison was considering a major shift in which the GST was to be centrepiece. There were two principal considerations. One was the raft of exemption John Howard had negotiated with the Democrats to get his version through the senate. These were complex and confusing, and a playground for lawyers, accountants and, it must be said, rorters.

The whole point about a flat rate, broad based, indirect tax, is to make it universal, foolproof; its efficiency is the trade off for the fact that it is, by definition, regressive, penalising the poor more than the rich. Without efficiency the GST is just another, inequitable great big tax on everything with little to recommend it.

But Morison and Turnbull (particularly) decided unscrambling the eggs was too bloody hard, and passed. More seriously, Morrison also wanted to increase the GST rate, perhaps to 15 per cent: this would make room for worthwhile personal income tax cuts – the idea was that the voters would put up with a rise in the GST, which they did not notice much, and would be deliriously grateful for cash in the pocket.

But again, Turnbull pulled the plug: keep it simple, stupid, Jobs and Growth. So nothing was done then, and apparently nothing will be done now. Once again the Turnbull-Morrison partnership of frenemies makes a big press release but a pitifully small bang where it counts.

The good news, such as it is, is that it probably doesn’t matter. The changes, when they eventually materialise, will make no significant difference to the welfare of the population – it is all about satisfying the egos of the state treasurers and their respective bureaucrats. The voters hardly know what the designation Horizontal Fiscal Equalisation means, let alone how it is supposed to work: that is a mystery confined to the gnomes in their fastnesses in Canberra. But Morrison has got his headline, and that is what matters.

Unfortunately there is a somewhat more formidable problem looming: how to square the circle over the NEG, which has to be manoeuvred through the various state governments, the Liberal Party room, the Coalition parties room and finally the parliament – including the fractious and unpredictable senate – before declaring even partial victory.

And the religious fundamentalists of The Australian are ramping up their war for Catholic privilege – and particularly more money for Catholic schools, just in case Malcolm Turnbull was getting a little bit too smug about things.

But never mind, something will turn up. Or not.

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