Pressure builds with more protests in Hong Kong, but what’s the end game?



According to organisers, two million people marched Sunday in Hong Kong, with many shifting focus away from a controversial extradition bill to the resignation of the Beijing-backed chief executive, Carrie Lam.
Jerome Favre/AAP

Caitlin Byrne, Griffith University

The latest protests in Hong Kong on Sunday, which organisers said brought some 2 million people to the streets, represented yet another striking show of “people power” in the semi-autonomous Chinese city.

Chief Executive Carrie Lam’s efforts to bring calm to Hong Kong included an uncharacteristic about-face on her position over the weekend, a rare apology and the indefinite suspension of the proposed changes to the city’s extradition laws, which sparked the initial protest against the government last weekend.

But laden with qualifications and a subtle rebuke of the protesters, Lam’s repositioning of the issue has had limited impact, suggesting that she may have seriously underestimated the anger and determination of her constituency. The protesters are now calling for nothing less than her resignation, making her the “lightening rod” for public anger in the face of growing resentment towards Chinese influence in Hong Kong.

As the people of Hong Kong continue to take to the streets, one wonders whether the real struggle has only just begun.

How the fight over the extradition bill mushroomed

For many, Lam’s controversial extradition bill represented the “thin edge of the wedge” of Chinese control. If passed, the proposed law could have seen local and foreign criminal suspects sent to mainland China to stand trial in a judicial system that is opaque and vastly uncompromising.

But there’s much more at stake for the people, identity and prospects of Hong Kong. For those concerned about China’s rising influence in the city, the legislation represented a dangerous break in the firewall that has preserved civil liberties for the people of Hong Kong within the “one country, two systems” framework.




Read more:
Two systems, one headache: Hong Kong twenty years after the handover to China


While its proponents claim the bill has a narrow application, many fear it would enable China’s leadership to target political opponents, entrepreneurs and activists as part of its wider strategy for exercising control over the region. The implications for Hong Kong’s reputation as a vibrant global financial, business and transit hub would be significant.

Of course, the latest demonstrations cannot be viewed in isolation – they are the latest chapter in Hong Kong’s longstanding tradition of public dissent. And there have been some notable successes in the past, including the indefinite suspension of plans to implement a national security law in 2003 and the reversal of a proposed comprehensive national curriculum in 2012.

Yet, as the 2014 Umbrella Movement protests revealed, the mood in Hong Kong appears to be taking on a more sombre tone. Much of this reflects the changing mood within China.

Protesters in Hong Kong wore black on Sunday night, a striking change from the white apparel worn last week.
Roman Pilipey/EPA

Under President Xi Jinping, civil protests — even those organised in the special autonomous region of Hong Kong — are increasingly fraught. Xi himself set the tone with a particularly hard-line speech during his 2017 visit to the city for Lam’s swearing-in.

Flagging new levels of intolerance for activities that might be interpreted as encouraging Hong Kong independence from China, Xi noted:

Any attempt to endanger China’s sovereignty and security, challenge the power of the central government … or use Hong Kong to carry out infiltration and sabotage activities against the mainland is an act that crosses the red line and is absolutely impermissible.

Despite the efforts of China’s state-run Global Times newspaper to lay blame for the “uncontrolled street politics” on “Western forces” and “malice from afar”, however, Chinese political authorities have remained relatively quiet on the Hong Kong protests this week.




Read more:
How a cyber attack hampered Hong Kong protesters


This is unsurprising. Coming just a week after the 30th anniversary of the Tiananmen Square protests, China was never likely to take an openly provocative stance against the protesters.

But it is clear Beijing is keeping a close eye on the situation, pushing back on criticisms from abroad and now possibly wavering in its support for Lam. Ever sensitive to external critiques that relate to questions of sovereignty, the Chinese government may decide to take a harder line should the protests continue to gather momentum.

Lack of foreign pressure

Thus far, the response to the protests has been relatively muted. The European Union has called for the rights of the Hong Kong people to be respected, noting its concern for the “potentially far-reaching consequences” of the extradition bill. UK Prime Minister Theresa May, meanwhile, has called on authorities to ensure the extradition arrangements “are in line with the rights and freedoms” set forth in the joint declaration when the British handed Hong Kong back to China in 1997.

US President Donald Trump has remained ambivalent so far, saying only last week, “I’m sure they’ll be able to work it all out.” But according to his secretary of state, Mike Pompeo, Trump is now expected to raise the issue when he meets Xi at the G20 Summit at the end of the month. This is only significant insofar as it reminds us of Trump’s transactional interest in the region.




Read more:
Hong Kong in crisis over relationship with China – and there does not appear to be a good solution


As for Australia, Foreign Minister Marise Payne issued a fairly neutral statement in support of the Hong Kong people’s right to protest. It left many, including those in Sydney, Melbourne and elsewhere who protested in support of Hong Kong last week, somewhat underwhelmed.

Beyond the protests, how the current tensions unfold will have serious implications for Australia’s engagement in the region and our ongoing relationship with China. The 2017 Foreign Policy White Paper reinforces the core values underpinning our international engagement, including support for political, economic and religious freedoms, liberal democracy and the rule of law.

How and when we articulate our commitment to these values, and reinforce their place in our region, will be the key test of our diplomacy going forward.

As protesters turn their ire on Carrie Lam, the Chinese government may retreat from its support for her.
Roman Pilipey/EPA

Where do the protests go from here?

Lam’s decision to suspend consideration of the extradition bill offers a necessary moment for pause. But it hasn’t taken the heat out of the protests.

At this stage, Lam hasn’t backed away from her intent to revive the bill at a later stage. It’s also likely the Chinese government will continue to press towards that outcome, though perhaps in a different form and even under different leadership. Much hangs in the balance.

Hong Kong’s protesters appear galvanised by their cause. But whether they can sustain the necessary momentum for the long game — where crossing red lines may come at a cost — is another matter altogether.The Conversation

Caitlin Byrne, Director, Griffith Asia Institute, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Advertisements

The budget super change that helps the wealthy at the expense of the young



File 20190402 177193 1rsqcrz.jpg?ixlib=rb 1.1
If your’re wealthy you’ll be able to put more money into super without even working.
Shutterstock

Brendan Coates, Grattan Institute

Another federal budget, and yet more tinkering to superannuation tax breaks. But the latest changes will only help older wealthier Australians. The losers are younger workers and taxpayers.

What’s the plan?

From July 1 2020, Australians aged 65 and 66 will be able to make voluntary pre- and post-tax superannuation contributions without having to pass the Work Test, under which they are required to work a minimum of 40 hours over a 30-day period.

About 55,000 Australians aged 65 and 66 will benefit from these changes at a cost of A$75 million over the next four years.

It’s another boost for tax planning

Treasurer Josh Frydenberg says the changes will help Australians save for their retirement.

But most 65- and 66-year-olds still working to top up their superannuation are already eligible to make voluntary super contributions, because they satisfy the Work Test. Working 40 hours over a 30-day period – or little more than one day each week – is hardly onerous.

For every dollar contributed to super that genuinely helps Australians save more for their retirement as a result of these changes, there will be many more dollars funnelled into super to make extra use of superannuation tax concessions.

The biggest winners will be wealthier retired 65- and 66-year-olds with other sources of income, such as from shares or property, which they will now be able to recycle through superannuation.




Read more:
View from The Hill: budget tax-upmanship as we head towards polling day


They will be able to put up to $25,000 into super from their pre-tax income and then – because super withdrawals are tax-free – take the money back out immediately. Their contributions to super are taxed at only 15%, whereas ordinary dividends or bank interest is taxed at their marginal tax rate. The tax savings can be as high as $5,000 a year.

Such strategies aren’t costless: other taxpayers must pay more, or accept fewer services, to make up the difference.

It will mean larger inheritances

The government is also allowing 65- and 66-year-olds to make three years’ worth of post-tax super contributions, or up to $300,000, in a single year.

These changes will mainly boost inheritances.

Most people who make after-tax contributions already have large super balances and typically contribute from existing pools of savings to minimise their tax.

Grattan Institute’s 2016 report, A Better Super System, found that only about 1% of taxpayers have total super account balances of more than $1 million, yet this tiny cohort makes almost one-third of all post-tax contributions.

These changes will turbo-charge so-called “recontribution strategies” that minimise the tax paid on superannuation fund balances passed on as inheritances. When inherited, super fund balances originally funded by pre-tax contributions can be taxed at 17% (including the Medicare levy), depending on the age of the deceased and the beneficiary.

To avoid this tax on their estate, individuals can withdraw superannuation funds tax-free and contribute them back as a post-tax contribution, up to the annual post-tax contributions cap of $100,000 each year.

It fails the government’s own test

In 2016, the government tried – but failed – to define the purpose of superannuation as providing “income in retirement to supplement or substitute the Age Pension”.

The proposed objective rightly implied that super should not aim to provide limitless support for savings that increase retirement incomes.

The benefits of super changes should always be balanced against the costs of achieving them. The government’s latest changes fail that test.




Read more:
Expect a budget that breaks the intergenerational bargain, like the one before it, and before that


The Conversation


Brendan Coates, Fellow, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Why NZ needs to follow weapons ban with broad review of security laws


File 20190321 93032 1eqsodf.jpg?ixlib=rb 1.1
Within a week of the Christchurch terror attacks, Prime Minister Jacinda Ardern has announced a ban on semi-automatic weapons.
AAP/David Alexander, CC BY-SA

John Battersby, Massey University

Up until Prime Minister Jacinda Ardern’s announcement of a ban on military-style weapons yesterday, New Zealand had a system of licensing firearms holders and used a process of application, vetting, reference checks and attendance at firearms safety lectures.

Knowledge of the Firearms Code was required and tested. A firearms license holder was able to then legally acquire any number of firearms. New Zealand has not set up an arms register since the Arms Act was enacted in 1983.

There is no tally of how many firearms are in New Zealand, and no log of how many firearms any individual may have. There is an estimated 1.3 million firearms legally owned in New Zealand, and nothing beyond speculation about how many illegal weapons have found their way in.

New Zealand Prime Minister Jacinda Ardern announces a ban on military style semi-automatic weapons and assault firearms.



Read more:
Will the New Zealand gun law changes prevent future mass shootings?


Loop holes in gun laws

With a certain class of license, military style semi-automatic weapons (in unlimited numbers) could be acquired legally. Some 14,000 of these weapons are thought to be legally owned in New Zealand.

Loop holes in current legislation abound. These make it possible to modify weapons and obtain large magazines, and even to buy armour-piercing bullets. Why, in a peaceful, democratic and open society, does anyone need a military-style automatic weapon and armour piercing ammunition?

Prime Minister Ardern has shown the decisive leadership we should see from a leader who genuinely cares about the people she leads. She has finally grasped the nettle, exploiting the current situation to drive through the changes New Zealand should have made 23 years ago following the Port Arthur massacre. She has outwitted those who might oppose her move, because there is no argument that anybody could muster now that would in any way resonate with the vast majority of New Zealanders.

Ardern has announced the ban on a number of weapons, signalled changes to the firearms licensing regime and the need to keep tabs on the national recreational arsenal. But there is a tough road ahead.




Read more:
When gun control makes a difference: 4 essential reads


Rural, recreational use of firearms

Politicians have an unquestioning faith that legislation is sufficient, but it is largely impotent without adequate resourcing for the enforcement of new rules. With only an estimate to work on, New Zealand Police (the administrators of firearms regulations) will have to identify and locate the owners of these weapons and implement the buy-back and amnesty that will be required.

Many owners will give them up. Their humanity will outdo their desire to have them, but the shocking reality of panic buying of semi-automatics since the Christchurch tragedy signals that clearly there are those who will seek to subvert the government’s intent. Police will have to investigate those who fail to cooperate, safely seize the weapons and prosecute the offenders.

Most firearms license holders in New Zealand do not own military style semi-automatic weapons. Many are rural, recreational hunters or use their weapons on ranges. They look after their weapons responsibly, secure them safely, own them legally and use them at no risk to the general public.

Most who own semi-automatic weapons are no different. We should not demonise a section of society simply because of the horrific, obscene and brutally inhuman actions of one lonely individual who no more represents gun owners than he does any other group of New Zealanders.

Illegal weapon imports

But this is not the issue. The issue is that the privilege of owning a certain class of weapons is not worth the terrible cost of 50 people being gunned down in prayer. New Zealand is already seeing the steady illegal importation of firearms, often tied to the increasing movement of illicit narcotics. Banning semi-automatics will increase the demand for the importation of these weapons illegally, adding extra pressure on law enforcement agencies.




Read more:
Why overhauling NZ’s gun and terrorism laws alone can’t stop terrorist attacks


For a ban on military style semi-automatics to have meaning, New Zealand’s long coast line, its airports and sea ports, through which illegal commodities are moving, will need resources that allow fit-for-purpose enforcement powers, people and tactics.

The changes New Zealand will now make will not guarantee it will be free of terrorism in the future. Other countries have much stricter firearms regulations, having taken far stronger measures years ago, but they have still suffered terrorist attacks. Firearms reform is one small step for a country that will need to address a plethora of gaps in its security approach.

New Zealand’s terrorism legislation is inadequate. It was found wanting when police attempted to apply it in 2007 during the “Urewera raids”, but charges could not be laid then. New Zealand’s then Solicitor General David Collins described the Terrorism Suppression Act then as incoherent and unworkable. How New Zealand manages social media needs review, and the traditional minimalist approach to national security will no longer suffice.

New Zealand has faced security crises before during the Russian scare in the 1880s and the second world war in the 1940s. It has often been caught out doing “too little, too late” to be saved only by its distance from any potential threat. The internet has extinguished that distance. It has brought the ills of the rest of the world to us. It is already too late. We must ensure that what we do now, is not too little.The Conversation

John Battersby, Police Teaching Fellow, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Will the New Zealand gun law changes prevent future mass shootings?



File 20190321 93048 zzezph.jpg?ixlib=rb 1.1
New Zealand Prime Minister Jacinda Ardern has announced a ban on certain military-style weapons.
AAP/David Alexander

Rick Sarre, University of South Australia

As she foreshadowed in the aftermath of the Christchurch massacre last Friday, New Zealand Prime Minister Jacinda Ardern has just announced a ban in that country on specific military-style firearms. It will soon become an offence to own or possess semi-automatic firearms and shotguns with detachable magazines capable of firing more than five cartridges.

Later this month, the government will consider further changes to the law that will tighten licensing requirements and impose limits on certain types of ammunition. There will be a gun buy-back scheme in place in due course that will provide compensation to those who possess soon-to-be-illegal guns. Preliminary advice suggests that might cost the country between NZ$100 million and NZ$200 million.




Read more:
Why overhauling NZ’s gun and terrorism laws alone can’t stop terrorist attacks


Thoughts immediately go to the aftermath of the 1996 Port Arthur tragedy in Australia. Then-Prime Minister John Howard had been elected only six weeks before the Tasmanian horror unfolded. He immediately set in train the gun control measures that no previous government, conservative or progressive, would ever have thought possible.

The government placed a ban on the sale, transfer, possession, manufacture, and importation of all automatic and most semi-automatic rifles and shotguns (and their parts, including magazines). More than 640,000 such weapons were thereupon surrendered and later destroyed at a cost to the taxpayer of around A$250 million.

In Australia today, there continues to be bipartisan political consensus and broad community support for what was titled the National Firearms Agreement (NFA). In 2017, it was reaffirmed by the Council of Australian Governments (COAG).

There has been some criticism that certain aspects of the original agreement have been watered down in some jurisdictions in recent years, but the requirements outlined by the agreement generally remain intact.

Did the Australian gun ban and buy-back scheme make inroads into the rate of firearm-related deaths? Did it prevent mass shootings? Jacinda Ardern appears to be convinced that answers to both questions are in the affirmative. Let’s look at the evidence from the past 23 years in this country to test her assumptions.




Read more:
No massacres and an accelerating decline in overall gun deaths: the impact of Australia’s major 1996 gun law reforms


Gun violence in Australia since the buy-back

It is unequivocal that gun death rates in Australia have been falling consistently since 1996. Some commentators object to the connection between this trend and the NFA, saying the downturn was simply a continuation of a long-term decline in gun violence generally.

But recent research found that, compared with the trend before 1997, there was a more rapid decline in firearm deaths after the implementation of the NFA.

However, this conclusion was quickly challenged by another researcher, who argued these findings were simply a consequence of the rarity of these events, and that the data were thus skewed.

The researchers on the first paper then set out to test the null hypothesis: that is, that the rate of mass shootings would remain unchanged after the introduction of the NFA. They concluded that while a definitive causal connection between this legislation and the 22-year absence of mass firearm homicides was not possible, there was nevertheless evidence that before 1996, approximately three mass shootings took place every four years. Had they continued at that rate, 16 incidents would have been expected by February 2018, but that pattern did not play out.

The evidence from the National Homicide Monitoring Program, collated by the Australian Institute of Criminology, concurs with the evidence provided by these authors. Its data indicate that the share of murders committed with firearms dropped significantly around the time of the buyback scheme. Indeed, the number of homicide incidents involving a firearm decreased by 57% between 1989-90 and 2013-14.

In 1989-90, firearms were used in 24% of homicides. In 2013-14, the figure was 13%.

Incidentally, in the United States, 60% of homicides are committed by firearms. To the extent that correlations are useful, there should be no surprises here. The US gun ownership rate (guns per 100 people) is more than five times the Australian rate.

Reducing access to firearms lowers the risk of gun deaths

The evidence that countries with higher levels of gun ownership have higher gun homicide, gun suicide, and gun injury rates is convincing. Anyone advocating gun ownership as a means of lowering levels of violence and crime is arguing against the weight of research.




Read more:
Christchurch attacks are a stark warning of toxic political environment that allows hate to flourish


Jacinda Ardern’s initiative cannot do her country any harm. Twenty-three years after Port Arthur and the NFA, firearm involvement in homicide incidents in Australia, including the involvement of handguns, remains at an historic low.

While it would draw too long a bow to assert conclusively that the downturn in firearm deaths in Australia can be attributed to the gun law reforms alone, the implementation of the NFA can be closely associated with the reductions in mass shootings and firearm deaths.

The choices made by the Ardern government to eliminate certain firearms from New Zealand to improve community safety are consistent with the long-term evidence from Australia.The Conversation

Rick Sarre, Professor of Law and Criminal Justice, University of South Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How moving house changes you



File 20190115 152965 1hkce4q.jpg?ixlib=rb 1.1
To make a success of moving home, to the country for example, it helps to be open to the ways a place will change you.
Rachael Wallis, Author provided

Rachael Wallis, University of Southern Queensland

Many people move in the summer months, but not everyone realises that moving starts a process of identity transformation that never really stops.

I first noticed something about place changing a person when I moved to Canada. While Canada and Australia share many similarities, there were still significant differences. The clothes worn were one, and occasionally a phrase would seem unfamiliar. I was teased for saying “queue” instead of “line up”, and “no worries” instead of “no problem”.

When I moved back to Australia, to tropical Cairns, I found myself in a world that moved on “tropical time”. It could hardly have been more different from the fast-paced world of North America. I had to adapt.




Read more:
Meet the new seachangers: now it’s younger Australians moving out of the big cities


Identities are created and evolve in places. Places can be physical, geographical areas and can also be places inhabited virtually, including online games, forums and blogs, or in discourse, such as books and magazines. These places continually shape our identities, changing as we live our lives day by day.

When we move to a new house, especially if it’s a big move such as from city to country or from one country to another, the process of moving inevitably changes us. For a start, we are now a newcomer and the “locals” will speak of us that way. That shapes how we are perceived and perhaps even whether and how we are accepted socially. The norms and morés of the new community may influence us in other ways, even prescribing how we are “supposed” to act in the new area.

‘City girls’ and ‘country girls’

In my recent research into how media affect lifestyle migrants in rural Queensland, I looked at how place changes people. Many of the women I spoke to described themselves as a “city girl” or a “country girl”. These women framed their identity in relation to their location.

The women who called themselves a “city girl” often chose activities that took them to places where they felt they could relate more – such as the shops, galleries and other amenities of the city. Their identification with the city resulted in weaker bonds locally and sometimes meant that they chose to return to the city. Certainly, they were less satisfied with country life.

On the other hand, women who identified as a “country girl” engaged in activities accessible in their rural locations, including crafts, cooking, gardening and outdoor activities. Their free time reinforced their emplaced nature and strengthened their ties to their place and the people in it. They adapted to being in the country and were happy with where they lived.




Read more:
Imagining your own SeaChange – how media inspire our great escapes


How do you adapt to your new life?

Knowing what to do in certain places is a form of capital, as Pierre Bourdieu outlines. Capital describes the knowledge needed to play the game in a particular place.

There are different types of capital, including cultural, economic and educational. Knowing how to act when working at a major company, for example, is different from knowing how to get on when unemployed. These are different fields, which require different capitals. One requires corporate smarts, the other stipulates smarts in various other areas.

Even if our fields don’t change as dramatically as described above, we still use differing capitals when at work, at home, with friends and as a parent.
The way we learn how to act, or adapt, is achieved through the expansion of what’s called habitus.

Ordering coffee is part of many people’s daily ritual, but don’t expect a cafe on every corner outside the city.
Jacob Lund/Shutterstock

Habitus is the stuff we do without thinking – the beliefs, norms and ways of doing things that are a part of us. If we were in a witness protection program, these are the things that would trip us up and lead the bad guys to us. It’s simple stuff, like ordering coffee a certain way, or bigger things like thinking about the world through a particular framework or liking blue or living in the city.

To expand our habitus, we need to see new ways of doing things and imagine these for ourselves. This could happen by watching TV shows, reading books, travelling to other parts of the world or seeing someone else do something differently. It’s hard to change habitus, because we need to be open to new ideas that permeate our reality and we need to like them enough to decide to adopt them and let them become a part of us.

When we move, we are changing the field we occupy. To adapt to this, we watch how other people play the game and, to fit in, we most likely adopt these ideas within our habitus and change a bit. At the same time, we might influence the people around us, changing them a little bit too. It works dynamically.

So, yes, moving countries or to the country from the city is an identity-altering project, and the more the fields are different, the more we have to adapt.The Conversation

Rachael Wallis, Lecturer and Research Fellow, University of Southern Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Stranger than fiction. Who Labor’s capital gains tax changes will really hurt



File 20190118 100292 zxkvtl.jpg?ixlib=rb 1.1
The losers from Labor’s capital gains tax policy aren’t all where you would expect them to be, whatever you expect.
Shutterstock

Ben Phillips, Australian National University and Matthew Gray, Australian National University

Labor is going into the election promising to tax capital gains more heavily. Depending on who you listen to, it’ll either hit the very highest of earners, or middle earners – people such as teachers and nurses. The same critics have claimed different things at different times.

The truth is even stranger. In part because people who present as being part of one income group are often better described as being part of another.

It’s certainly stranger than fiction.

What are capital gains?

Capital gains are the profits made from buying something at one price and selling it at another. These profits are typically taxed at only half the rate of other income. (Technically, only half of each capital gain is taxed.)

The discount, introduced by Prime Minister John Howard in late 1999, was sold as ensuring that profit takers wouldn’t be taxed on the workings of inflation, a concession that was already built into the system, although in a more complicated way.

But because inflation had fallen so dramatically, the 50% discount went much further. It taxed capital gains, so-called “unearned income”, at a much lower rate than income earned in the form of wages and salaries, and also at a lower rate than bank interest and other forms of income.

In the lead up to the coming election (and the last one) the Labor Party has promised to wind back the discount, cutting it from 50% to 25% for newly-purchased assets held for more than a year, meaning that for those assets three quarters of each gain will be taxed instead of one half.

There are two (apparently contradictory) views about who the changes will hit, both of them spelled out in the pages of The Australian, and both sourced to the treasurer Josh Frydenberg.

Frydenberg/Bowen tweets

On January 5 the treasurer said investors would pay the “world’s highest tax” under Labor’s changes.

But that would only be the case if they were the very highest earners, on more than A$180,000. And it would only be the case for a short time where the capital gains are a one off.



Mr Frydenberg quoted a rate of 36.75% for capital gains tax, which would be three quarters of 49%, which itself would be made up of the top marginal rate of 45% plus the 2% Medicare levy plus the 2% temporary budget repair levy that Labor plans to reintroduce for two years.

That top marginal rate only applies to Australians on more than A$180,000.

Then ten days later on January 15, Mr Frydenberg said most of the workers hurt would be on much lower incomes, of up to A$80,000.



Then shadow treasurer Chris Bowen entered the debate, calling Fyrdenberg’s second claim “silly”. He said 70% of the total amount of capital gains tax discounts claimed was claimed by the top earners.

But he didn’t address the treasurer’s contention that most of the beneficiaries are lower earners.



What the data says

The Australian National University’s microsimulation model of the tax and social security system, PolicyMod, and the Australian Tax Officie’s Taxstats 2015-16 enable us to get at the truth.

Using a 2% sample of the tax returns submitted, including the information about capital gains and capital losses, we are able to work out who is the hardest hit by capital gains tax by income, age and gender.

At first blush we find that almost all capital gains tax collected – 85% – is paid by the top 10% of income earners. The bottom 10% (and also the bottom 20%) pay nothing.

It shouldn’t be surprising. High earners pay more tax than low earners because they earn more. The top 10% of earners also pay 51% of personal income tax.

Not many people pay capital gains tax

Around 900,000 Australians report capital gains per year, a figure used by the treasurer to suggest capital gains are widespread.

But after taking losses into account, the number reporting net capital gains falls to 670,000. Only about 540,000 of them pay capital gains tax. The others have taxable incomes below the tax-free threshold.

Of the 540,000 who do pay capital gains tax, 29% are in the top 10% of earners by taxable income.

A very high 12.7% are in the top 3% of earners, meaning they are on the very highest tax bracket, earning A$180,000 or more.

Small in number though they are, the Australians in the top 3% who pay capital gains tax, pay 74% of it. They pay 30.7% of all personal income tax.

They’re often retirees, and women

Older Australians pay only 5.6% of all personal income tax but about 29% of all capital gains tax.

Surprisingly, partnered women are also over-represented, paying 19.4% of personal income tax but an outsized 28.7% of capital gains tax. This is what you would expect if couples planning to minimise tax put the asset they were planning to buy and sell in the name of the lower paid partner.

Persons with wages and salaries are underrepresented, paying around 88% of personal income tax but only around 47% of capital gains tax.

But these figures are misleading.


Partnered women pay 19.4% of personal income tax but an outsized 28.7% of capital gains tax.
Shutterstock

It gets stranger still

By definition, most people’s incomes will be high in the year in which they pay capital gains tax. Examining their total income in that year, as we have done, will wrongly make it look as if it is mainly high income people who pay capital gains tax.

An alternative measure would be to rank people by their taxable income after deducting their capital gains. It’d rank them by something more like their normal income.

When we do that we find that the share of capital gains tax paid by the top 10% of earners is nothing like the 85% we first found. It’s a much lower 38%.

This measure produces another, very odd, result.

The bottom 10% turn out to pay, not none of the capital gains tax collected as we had thought, but an overweight 20%.

Stranger still, the next-bottom 10%, the people who fit somewhere between the bottom 10% and the 20%, pay only 4% of the capital gains tax collected.

Our lowest earners embrace capital gains…

There’s something odd at the bottom for those reporting capital gains. The clue lies in what they are at the bottom of. They are at the bottom of the taxable income scale.

And they are indeed odd.

The bottom 10% claim an awful lot of capital gains – an average of A$161,000 per capital gains tax payer, which is more than that claimed by any other income group, including the top 10%.

Capital gains make up a large share of their taxable income, larger than for higher income groups, and far lower than for other low income groups. Only around 8% receive government pensions or allowances.

Although their taxable incomes, after deducting net capital gains, are in the bottom 10%, their actual wealth and living standards are likely much higher up the distribution. Many own shares and businesses or have negatively geared investment properties. They get dividend imputation cheques and report business losses.

…although they don’t act like low earners

To get closer to the unvarnished truth, we would need to compare capital gains by household, examining the combined income of each household, which is less easy to manipulate than the income of an individual. But Australia’s tax system is built around individuals, so it’s hard to do. We would also like to know more about their typical income and whether capital gains were likely a one off or something more permanent.

Here’s what we can say:

Labor’s change will “grandfather” existing assets, meaning they will continue to be taxed under the present, more generous, arrangement. This means Labor’s change won’t have much of an effect for years, making any simple guess of how much money it makes an overestimate.




Read more:
Capital gains tax concession is too generous: economists poll


At the moment, personal taxpayers pay A$6.7 billion per year in capital gains tax. Labor’s changes could potentially reap half that amount, but they would build up to it slowly, and by the time they got there, fewer people would look for capital gains as a means of escaping tax, meaning they would never get there, and giving a boost to other kinds of tax revenue.

It’s pretty certain that those who would feel it most would be higher income earners, older Australians, partnered women, quite often on behalf of their higher income partner.The Conversation

Ben Phillips, Associate Professor, Centre for Social Research and Methods, Director, Centre for Economic Policy Research (CEPR), Australian National University and Matthew Gray, Director, ANU Centre for Social Research and Methods, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Government needs to slow down on changes to spying and foreign interference laws


File 20180608 137315 1qkiuu4.jpg?ixlib=rb 1.1
Attorney-General Christian Porter wants the legislation passed before the “Super Saturday” byelections on July 28.
AAP/Lukas Coch

Tony Walker, La Trobe University

What’s the rush? If you believe Federal Attorney-General Christian Porter, unless two pieces of security legislation are in place in the remaining two weeks of parliament before the winter recess, the country will be in peril.

This was the line Porter was taking yesterday on the release of the Advisory Report on the National Security Legislation Amendment (Espionage and Foreign Interference) Bill.

His argument is nonsense. Labor should also be taken to task for being party to a hasty process that appears on the face of it to be expedient. Labor’s persistent concern is to avoid being wedged on security issues.

Under the proposed legislation, bodies such as Amnesty International that have been critical of Australian government policies may be vulnerable.

Porter wants two separate tranches of legislation – the Espionage and Foreign Interference Bill and a Foreign Influence Transparency Scheme Bill – to be passed before the Super Saturday byelections on July 28.




Read more:
Grattan on Friday: Government and Labor unite to erect the barriers against foreign interference


Porter’s argument appears to be that unless the legislation passes in the concluding two weeks of the midyear session of parliament, those byelections will be conducted in a perilous atmosphere. He said:

There’s an unprecedented level of foreign intelligence activity in Australia and that means more foreign agents and more foreign power using more tradecraft and more technologies to engage in espionage and foreign interference and the attempted foreign influence of our democratic processes.

And that increase in volume is detectable even in the period of time that this piece of legislation has been under consideration by the committee.

No reasonable person would argue against the need for beefed-up legislation to deal with challenges to democratic processes such as those witnessed during the recent US election.

Russian cyber interference in the US political process is hardly in question, nor attempts by Russian agents of influence to suborn the system. The question is to what degree?

What is proposed in Australian legislation foreshadowed by Prime Minister Malcolm Turnbull late last year is a new and far-reaching suite of laws aimed at limiting foreign interference.

An initial version of the bill was poorly drafted. It represented an unreasonable threat to individual liberties and freedom of expression.

It was particularly antagonistic to journalists operating in the security space. Long jail terms for publication of unauthorised security material were incorporated.

The insertion of a public interest amendment has somewhat alleviated that risk.

Fairfax Media’s publication overnight of leaked documents dealing with alleged war crimes by members of the Special Air Service might have fallen foul of such provisions, and may still do so.

Media coverage of the draft amendments to the Espionage and Foreign Interference Bill has been relatively favourable. However, this might have less to do with the merits of the legislation than with relief the bill is less threatening to legitimate inquiry than an earlier draft.

In all, parliament’s Joint Committee on Intelligence and Security made 60 recommended amendments to the Espionage and Foreign Interference Bill.

Most of these recommendations are cosmetic, except those relating to journalistic inquiry. They include the need for security certifications to be validated before proceedings could be initiated for an espionage or secrecy offence, and a review of the legislation by the National Security Legislation Monitor after three years.

Urging quick action on the Espionage and Foreign Interference Bill, Porter argued that a second bill, the Foreign Influence Transparency Scheme Bill, was required to complement the main piece of legislation.

This refers to legislation that sought to proscribe involvement in Australian political processes not just by foreign governments and their agents, but by entities like GetUp, which has drawn part of its funding from foreign sources.

The scope of this proposed legislation – which is yet to be agreed by the JCOIS – has now been limited to foreign governments, foreign-related entities, foreign political organisation and foreign government-directed individuals.

Foreign companies would be excluded from this provision unless it could be demonstrated they were closely connected to a foreign government or political organisation.

In such cases, government-dominated companies, even those associated with friendly nations, would be required to register under the proposed law.

In efforts to guard against interference by individuals or companies who might be connected with a foreign government, the Attorney-General’s Department would be empowered to issue “transparency notices” to identify such individuals or companies.




Read more:
New foreign interference laws will compound risks to whistleblowers and journalists


An appeals process against these findings would be available through the Administrative Appeals Tribunal. Porter said:

It’s vital that our national security legislation and framework reflects the modern challenges that we face … that framework remains dangerously incomplete while these two remaining and critical bills remain unlegislated.

As interested parties digest the provisions of the proposed amendments, it’s likely more objections will be raised, such as those by Claire O’Rourke, one of Amnesty’s Australian representatives.

O’Rourke told The Guardian that under the Foreign Influence Transparency Scheme Bill charities like Amnesty that hold the Australian government to account on its human rights record could face criminal charges. She said:

This is clear government overreach and a cynical exercise by both sides of politics to shield themselves from the scrutiny of Australian society, including charities.

The ConversationThe upshot of all this? Quite simply, more time is needed to review proposed amendments.

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article was originally published on The Conversation. Read the original article.

ReachTEL polls: Labor trailing in Longman and Braddon, and how Senate changes helped the Coalition


File 20180605 175451 c2xlbw.jpg?ixlib=rb 1.1
Bill Shorten and the ALP will need to work hard to win July byelections in Longman and Braddon.
AAP/Tracey Nearmy

Adrian Beaumont, University of Melbourne

Sky News ReachTEL polls, conducted last week in the seats of Longman and Braddon from samples of over 800, gave the LNP a 52-48 lead in Longman and the Liberals a 54-46 lead in Braddon.

These polls represent a three-point swing against Labor in Longman, and a six-point swing in Braddon since the 2016 election. Longman and Braddon are two of the five seats that will be contested at byelections on July 28.

Primary votes in ReachTEL polls do not exclude undecided voters, and thus understate major party vote shares. In Braddon, primary votes provided were 47% Liberals, 33% Labor and 6% Greens. In Longman, primary votes were 38% LNP, 35% Labor, 2% Greens and 14% Others. Strangely, One Nation, which won 9.4% in 2016, does not appear to have been listed.

ReachTEL uses respondent allocated preferences, and this is helping the LNP in Longman. The major party primary votes appear to be about the same as in the 2016 election, but the LNP is benefiting from a stronger flow of preferences.

While the Longman poll is bad for Labor, it is a one-point gain for Labor since a ReachTEL poll for The Australia Institute conducted after the May budget. Individual seat polls have not been accurate in the past. With more than seven weeks left until the election, Labor can reasonably hope to hold Longman.

The March 3 Tasmanian election was a disaster for Labor, and this appears to have flowed into federal Tasmanian polling. Tasmania uses the same electorates for its state elections as the federal Tasmanian electorates. In Braddon, the Liberals won 56% at the state election, to just 27% for Labor and 4% for the Greens.




Read more:
Liberals romp to emphatic victory in Tasmanian election


Analyst Kevin Bonham says that the Tasmanian federal election results have been closer to the state election if the federal election came soon after the state election. In this case, the scheduling of the byelections for July 28 has helped Labor by putting more distance between the state election and the federal byelection for Braddon.

Another problem for Labor in Braddon is that the Liberal candidate is the former MP Brett Whiteley. As Whiteley is well-known in that electorate, Labor’s Justine Keay will not benefit as much from a “sophomore surge” effect.




Read more:
Centre Alliance’s Rebekha Sharkie most vulnerable at byelections forced by dual citizenship saga


National ReachTEL: 52-48 to Labor

Sky News also released a national ReachTEL poll, conducted last week from a sample of over 2,000. Labor had a 52-48 lead in this poll, unchanged from early May. Primary votes were 35% Coalition (down one), 34% Labor (down one), 11% Greens (up one) and 9% One Nation (up three).

This poll was probably taken before Pauline Hanson and Brian Burston had a falling-out. Bonham estimated this poll was 53-47 to Labor by 2016 election preferences.

By 49-43, voters supported reducing the company tax rate to 25% for “all” businesses, a similar result to an Ipsos poll in early April (49-40 support). However, a late March ReachTEL that asked about tax cuts for “big” companies had voters opposed 56-29.




Read more:
Poll wrap: Newspoll not all bad news for Turnbull as Coalition’s position improves


Voters were more favourable to the company tax cuts in Braddon (56-38 support) and Longman (58-33 support) than nationally.

By a narrow 47-45 margin, voters nationally opposed refugees on Nauru and Manus Island being allowed to settle in Australia. Opposition was far stronger in Braddon (60-31) and Longman (66-28). By 59-27, voters nationally agreed that there should be a 90-day limit on refugee detention.

National Essential: 54-46 to Labor

This week’s Essential poll, conducted May 31 to June 3 from a sample of 1,025, gave Labor a 54-46 lead, a three-point gain for Labor since last fortnight. Primary votes were 37% Labor (up one), 36% Coalition (down four), 10% Greens (steady) and 8% One Nation (steady).

Essential still uses the 2016 election preference flows, so this poll would be 53-47 by Newspoll’s new methods. Labor’s position in the national polls has improved since late May, when Parliament resumed its sitting.

Turnbull’s net approval was up two points since early May to a net zero. Shorten’s net approval was down nine points to -13. Turnbull led Shorten by 41-27 as better PM (40-26 in May).

37% both approved and disapproved of cutting the “tax rate for businesses from 30% to 25%, estimated to cost $65 billion over the next 10 years”.

50% thought the Newstart payment of $270 per week for a single person with no children was too low, 26% about right and 9% too high. At least 64% agreed with five statements about Newstart that implied it should be increased.

How the Senate has changed since the 2016 election

At the 2016 election, the Coalition won 30 of the 76 senators, Labor 26, the Greens nine, One Nation four, the Nick Xenophon Team (NXT) three and Others four. The four Others were Bob Day, David Leyonhjelm, Derryn Hinch and Jacqui Lambie. 39 votes are required to pass legislation through the Senate.

On a right vs left count, the Coalition, One Nation, Day and Leyonhjelm were right-wing senators, and Labor and the Greens left. If all of the right-wing senators voted for Coalition legislation, they needed three of the five centrists on bills opposed by Labor and the Greens. As the NXT controlled three senators, the Coalition needed to work with them.

Since the election, there have been several changes to party composition.

  • In February 2017, Cory Bernardi resigned from the Liberals to start his own Australian Conservatives party.
  • In April 2017, the High Court disqualified Bob Day, and he was replaced by Lucy Gichuhi, the second candidate on Family First’s South Australian Senate ticket. Gichuhi joined the Liberals in February 2018.
  • In October 2017, the High Court disqualified One Nation’s Malcolm Roberts, and he was replaced by Fraser Anning, who promptly resigned from One Nation. On Monday, Anning joined Katter’s Australian Party.
  • In November 2017, Lambie resigned owing to the citizenship fiasco, and she was replaced by Steve Martin. Martin joined the Nationals in May 2018.
  • In November 2017, NXT Senator Skye Kakoschke-Moore resigned over the citizenship fiasco, and was replaced in February 2018 by Tim Storer, who had been expelled from the NXT.
  • Last week, One Nation leader Pauline Hanson and Brian Burston had a falling-out after Burston said he would vote for the company tax cuts, in opposition to current One Nation policy.

As a result of these changes, the Coalition has gained one net seat to have 31 senators, Labor and the Greens are unchanged, One Nation is down two to two, the Centre Alliance (formerly NXT) is down one to two, and Others are up two to six. Others now include Bernardi, Anning, Storer and Burston, but not Day or Lambie.

Bernardi, Anning and Burston are right-wing senators. Including One Nation and Leyonhjelm, there are now 37 right senators. If they all vote the same way, the Coalition requires either the two Centre Alliance senators, or Hinch and Storer, to pass legislation opposed by Labor and the Greens.

The changes to the Senate have improved the Coalition’s position, as they now have two options rather than one if Labor and the Greens oppose legislation.

In brief: Spanish conservative government falls, Italian populist government formed, Ontario election June 7

On June 1, the Spanish conservative government lost a confidence vote, and was replaced by a Socialist government. Three months after the March 4 Italian election, a government of two populist parties has been formed. You can read more at my personal website.




Read more:
Newspoll round-up: Labor leading in Victoria and tied in New South Wales; populists dominate in Italy


Canada’s most populous province of Ontario holds an election on June 7, with polls closing at 11am on Friday Melbourne time. Ontario uses First Past the Post. After 15 years of government by the centre-left Liberals, the Conservatives looked likely to win this election in a landslide.

The ConversationHowever, the NDP, the most left-wing major party, surged, and is currently tied with the Conservatives in CBC analyst Éric Grenier’s Poll Tracker, but the Conservatives are shown as winning a majority of seats. The Conservative leader, Doug Ford, has been compared to Donald Trump.

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Viewpoints: could Labor’s tax changes make the system fairer or hurt investors?


Danielle Wood, Grattan Institute; Brendan Coates, Grattan Institute; Gordon Mackenzie, UNSW, and John Daley, Grattan Institute

The Australian Labor party will scrap a system that refunds more than A$5 billion a year to low or zero tax paying investors, should they win government.

Franking credits” are designed to stop tax being paid twice on Australian corporate profits, allowing shareholders a credit for the tax paid by the company. But when shareholders don’t pay taxes at all they can claim a cash refund for unused credits from the tax office.

Scrapping cash refunds on unused franking credits could make the tax system fairer according to Danielle Wood, Brendan Coates and John Daley from the Grattan Institute.

But according to Gordon Mackenzie from UNSW, these cash refunds incentivise people to invest in Australian companies, and ending them could see super and self-managed super funds, in particular, pulling their investment from local companies.

Labor proposes to abolish cash refunds of unused franking credits for individuals and superannuation funds. Not for profits and universities, which do not pay income tax, will continue to receive cash refunds for franking credits.


A piecemeal move towards a fairer tax system

Danielle Wood, Brendan Coates and John Daley, Grattan Institute

Labor’s proposal is not comprehensive tax reform. But in the absence of that holy grail, it is a piecemeal move towards a more equitable tax system. The change will primarily affect wealthy retirees.

The wealthiest 20% of retirees own 86% of shares held by older Australians outside of super. And among self-managed superannuation funds (primarily held by wealthier retirees), half of the refunds are currently going to people with balances over A$2.4 million.

Abolishing cash refunds for individuals and superannuation funds will raise about A$5 billion a year in extra revenue. About 33% will be paid by individuals (mostly in high wealth households), 60% will be paid by self-managed superannuation funds (typically held by wealthier retirees), and the remaining 7% will be paid by Australian Prudential Regulation Authority regulated superannuation funds.


ABS Survey of Income and Housing 2015-16, Author provided

Cash refunds on franking credits were introduced in 2001 for shareholders who had more franking credits than the tax they owed. The theory was that people with no or low income should have the same incentives to invest in Australian companies as other investors.

At the time, the decision cost the budget little – around A$550 million a year – because very few people with low income also owned shares.

But new superannuation rules in 2006 relieved retirees from paying any tax on their superannuation withdrawals. Retirees also pay no tax on their super fund earnings. As more people with significant super balances retire, an increasing number qualify for cash refunds on unused franking credits.

And a series of changes to the Seniors and Pensioners Tax Offset increased the proportion of over-65s paying no tax on earnings outside of super.

The cash refund system now costs the federal budget more than A$5 billion a year. But abolishing cash refunds on dividends won’t be costless.

The franking credit regime was set up for a variety of good reasons. It aimed to bias Australians towards investing in Australia. In practice this appears to have led to Australian companies being funded more through equity and less through debt, improving financial stability.

In theory it would also lead to more physical investment in Australia, although there is less evidence that this has happened.

In practice, franking credits also encourage Australian companies to pay dividends rather than inefficiently hoard cash or invest in low-return projects.




Read more:
How the government can pay for its proposed company tax cuts


So abolishing cash refunds, but keeping franking credits for those who do pay income tax, is probably not the ideal policy. It abandons the principle that all company profits should be taxed at an investor’s marginal rate of income tax. And it reduces the incentive for retirees to invest in companies from Australia rather than overseas.

On the other hand, the decisions not to tax superannuation withdrawals and to increase the effective tax-free threshold for older Australians have led to wealthy retirees contributing very little to government revenues relative to younger households.

Even though the wealth of older generations has jumped in line with asset prices, the share of senior Australians who pay income tax has nearly halved – from 27% to 16% – in the past two decades.

In an ideal world the federal government would reintroduce a number of higher income and wealthy older Australians to the tax system by taxing superannuation earnings and abolishing age-based tax rates. But in the absence of the political will to make these changes, abolishing cash refunds provides a big boost to the budget bottom line from more or less the same group.


The changes could bring distortions to investors

Gordon Mackenzie, Senior Lecturer, University of New South Wales

Chasing franking credits is one of the few tax issues that super fund investment managers take into account when investing, and is a significant consideration for self-managed super funds, according to my research with Professor Margaret McKerchar.

As the previous authors mention, franking credits are intended as an incentive for certain investors to invest in Australian companies. Under the rules, super funds and self-managed super funds don’t pay tax when they are paying a retirement pension, if the account balance is below a certain level.

Since they pay no tax, it is worthwhile for these funds to invest in Australian companies that will pay franking credits. Doing so allows them to claim credits from the tax office.

But this also means that if cash refunds on franking credits are done away with, it is an implicit 30% tax increase on super and self-managed funds that invest in Australian companies. This creates an incentive for them to put their money elsewhere.

If these funds invest in something like a government bond then they will pay no tax on the profits. If they invest in an Australian company, the company will pay the corporate tax and there will be no way for super funds to claim the tax back.




Read more:
Tax reform aside, there’s no real case to kill off dividend imputation


Many self-managed super funds have accounts for paying a pension to the member and another account for accumulating funds, but not paying out anything. Self-managed super funds will likely replace Australian shares in their pension accounts with assets such as bonds or managed funds.

This is important, as data shows that Australian shares are one of the largest asset classes held by self-managed super funds, ranging between 21% and 30.8% of the entire portfolio, depending on the size of the fund.

The response of other types of superannuation funds will probably be more muted. While they do value imputation credits, they also care about diversifying their portfolios – there will still be benefits to holding some Australian shares.

The ConversationOverall, then, imputation credits are important to superannuation funds, both big and small. The refund not only makes certain types of investment attractive, but also drives how much is invested in that type of investment.

Danielle Wood, Program Director, Budget Policy and Institutions, Grattan Institute; Brendan Coates, Fellow, Grattan Institute; Gordon Mackenzie, Senior Lecturer, UNSW, and John Daley, Chief Executive Officer, Grattan Institute

This article was originally published on The Conversation. Read the original article.

McCormack puts Chester back on frontbench in cautious changes


Michelle Grattan, University of Canberra

Victorian Nationals MP Darren Chester, controversially dropped from cabinet by Barnaby Joyce, has been restored to the ministry in a minimalist reshuffle by new party leader and Deputy Prime Minister Michael McCormack.

Chester takes McCormack’s old posts of veterans’ affairs and defence personnel. He also replaces McCormack as deputy leader of the house. He will be in the outer ministry rather than in cabinet, as he was previously, but is believed to be happy with the outcome.

The dropping of Chester in the December reshuffle – on the stated grounds that the election of Bridget McKenzie as deputy meant Victoria would be over-represented in the Nationals’ cabinet line-up – sparked much criticism. It added to the pressure on Joyce when the news of his affair with a former staffer broke.

In other changes, Queenslander Keith Pitt, also dropped by Joyce, becomes assistant minister to the deputy prime minister.

Mark Coulton, from New South Wales, is elevated to assistant minister for trade, tourism and investment.

Two assistant minister have been relegated to the backbench – Damian Drum from Victoria and Luke Hartsuyker from NSW.

McCormack has rewarded supporters but has been cautious in making changes. Rumours were flying among some in the jittery Nationals of much wider changes though these never seemed likely, given the new leader needs to settle the party down. McCormack said in a statement that “ultimately my focus was on maintaining stability so the government can get on with the job of delivering for the nation”.

The ConversationOn Monday, McCormack was sworn into the infrastructure and transport portfolio that Joyce took from Chester in December.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.