What will the Coalition be remembered for on tax? Tinkering, blunders and lost opportunities


Robert Breunig, Crawford School of Public Policy, Australian National University and Kristen Sobeck, Crawford School of Public Policy, Australian National University

This article is part of a series examining the Coalition government’s record on key issues while in power and what Labor is promising if it wins the 2019 federal election.


Politicians often invoke the word “reform” to convey the significance, or gravitas, of a particular policy change they are proposing.

However, the tax policies implemented over the six years of the Abbott-Turnbull-Morrison government should be more aptly described as: no reform, lots of tinkering, two blunders and some lost opportunities.

To be fair to the leaders of the Coalition, both Abbott and Turnbull began their prime ministerships professing a large appetite for tax reform.

In opposition Abbott and his treasury spokesman Joe Hockey had promised a major inquiry. Hockey said it would pick up where Labor’s Henry Tax Review left off:

We thought the Henry Tax Review was going to be a proper process. Now, that has obviously been an abject failure. We’ve said – Tony Abbott announced
in Budget and reply speech – we will have a proper process for proper tax reform, and whatever comes out of that process, which will be a white paper, we will take to a subsequent election, seeking the mandate of the
Australian people – their approval.

Treasury’s Re:think tax discussion paper, which is as far as the tax white paper process got.
Source: Commonwealth Treasury

It got as far as a discussion paper, seeking submissions.

When Turnbull assumed the leadership, the draft white paper, which would have followed the discussion paper, was scuttled, and the process ended.

Tinkering…

Instead what resulted were marginal changes to personal income tax. One of the brackets was expanded and a new low and middle income tax offset was added.

Marginal changes to superannuation tax further added to the complexity of the tax system as a whole. The current superannuation system disproportionately rewards higher income earners because most contributions are taxed at the same low rate (15%) regardless of the taxpayers’ income tax rate.

The Coalition’s response was to apply a 30% tax on contributions for those earning $250,000 or more (down from the previous threshold of $300,000) and to cut the cap on concessional contributions from $30,000 ($35,000 for those aged 49 and over) to $25,000. And it capped at $1.6 million the amount that could be transferred into the “retirement phase” where fund earnings in retirement were exempt from tax.

It made the system much more complex, and it could have been done more simply, perhaps by reimposing tax on super earnings in retirement (at a low rate) or by taxing by contributions at a standard discount to taxpayers at a marginal rate, as recommended by the 2009 Henry Tax Review.

Alongside these marginal changes, there was also a failed attempt to cut the company tax rate (only the tax rates for small companies were cut) and a muddled discussion about the progressivity of the income tax system.

All in all, many a tinker, but no reform.

Blunders…

Human-induced climate change is compromising the sustainability of our planet. The only way to solve it is by changing incentives using the economic toolkit at our disposal. The Carbon Tax was a good tax. It shifted the costs of pollution onto those who created it, instead of subsidising processes that damaged the environment.

No solution to climate change is possible without corrective taxes.

At some point we’ll have to climb that mountain again, assuming the mountain is not underwater before politicians come to their senses.

The repeal of the Minerals Resource Rent Tax was also a step backwards. By taxing rents (excess profits) instead of profits, it avoided the disincentives created by traditional company taxes. And, it was a good example of the kind of taxes that could eventually replace or supplement company tax.

…and lost opportunities

Changing the GST could have ensured at least one significant contribution to overall tax reform. At 10%, the rate is relatively low by international standards and applies to a shrinking share of spending, as more and more of our money is spent in places or on goods that aren’t taxed.


Value-added (GST) tax rates in OECD and selected Asian countries.
Re:think, Treasury tax discussion paper, March 2015

These factors, combined with the fact that GST is difficult to evade and less costly to administer, suggest that broadening the base is low hanging fruit on the tax reform tree, ripe for picking.

Instead, it may as well be forbidden fruit from the Garden of Eden. We’ve gone in the wrong direction by adding even more exemptions and cutting short talk of increasing the rate.

The failed debate on company tax cuts was another missed opportunity.

What remains is a system that applies different rates to different company sizes, one of few remaining dividend imputation systems in the world, and no discussion about the sustainability of corporate income tax revenue in the future.

All up, the government’s approach over the past six years has largely been piecemeal. It also managed to dismantle two of the most significant tax reforms that could have contributed to a more sustainable tax base in the long run.

Would Labor be better?

It remains to be seen whether a Labor government will be able to achieve more. Some of the party’s proposed changes, such as the treatment of capital gains, head in the right direction, but what it is offering falls short of comprehensive reform.

At the same time, many of its proposed changes will add additional complexity, fail to account for interactions within the entire tax system and use tax exemptions to reach goals that could be better achieved with payments.

Many an international tax reform was engendered by crisis, so there’s hope, of a sort. The opportunity still remains to get in early before weaknesses inherent in the current system become grossly apparent.

What we’ve got is unfair and its complexity rewards those with the resources to pay to understand and exploit it. It is overly reliant on income and company tax in place of indirect taxes, like consumption tax, and it tries to achieve too many disparate objectives, without consideration for the workings of the family and social security payments system.

There is much scope to improve things. What we need most are fearless leaders, from all sides of the political spectrum, who treat comprehensive tax reform as important and can work together to achieve it.




Read more:
What will the Turnbull-Morrison government be remembered for?


The Conversation


Robert Breunig, Professor of Economics and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University and Kristen Sobeck, Senior Research Officer, Crawford School of Public Policy, Australian National University

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

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How will Indigenous people be compensated for lost native title rights? The High Court will soon decide


William Isdale, The University of Queensland and Jonathan Fulcher, The University of Queensland

Today, the High Court of Australia will begin hearing the most significant case concerning Indigenous land rights since the Mabo and Wik native title cases in the 1990s.

For the first time, the High Court will consider how to approach the question of compensation for the loss of traditional land rights. The decision will have huge implications for Indigenous peoples who have lost their land rights and for the state and territory governments responsible for that loss.

For Queensland and Western Australia in particular, the outcome will likely provide clarity on the significant amounts of compensation they may be liable for in the future.

Western Australia, for example, has areas of determined native title that are collectively larger than the entire state of South Australia. Within those boundaries, there are a number of potential native title claims that could be compensable in the future.

In 2011, the state’s attorney-general, Christian Porter, reportedly described potential compensation claims as a “one billion dollar plus issue”.

Background on native title

The Mabo decision first recognised, and the Wik decision later clarified, how Australia’s common law acknowledges and protects the traditional land rights of Indigenous peoples. Following some uncertainty and political clamour caused by both of those decisions, the Native Title Act 1993 provided a legislative structure for the future recognition, protection and compensation of native title.




Read more:
Australian politics explainer: the Mabo decision and native title


The act provides a right of compensation for the “impairment and extinguishment” of native title rights in a range of circumstances. However, it provides little guidance on what compensation means in practice. Parliament decided to leave the details to the courts.

Surprisingly, it was not until the end of 2016 that the first-ever compensation claim wound its way to the point of judicial determination – in the Timber Creek decision.

The Timber Creek decisions

The case coming before the High Court today is an appeal following two earlier decisions by the Federal Court.

In Griffiths v Northern Territory (the first Timber Creek decision), Federal Court Justice John Mansfield made the first-ever award of compensation for loss of native title rights.

Mansfield awarded the Ngaliwurru and Nungali peoples AU$3.3m in August 2016 for various acts of the NT government going back to the 1980s. These acts included grants of land and public works affecting areas totalling 1.27 square kilometres near the remote township of Timber Creek.

Mansfield approached the compensation award in three steps:

  • Firstly, he worked out the value of the land rights in plain economic terms. He did this by looking to the freehold market value of the land, but discounting it by 20% to reflect the lower economic value of the native title. This is due to the fact its use is limited to rights under traditional law and custom, such hunting and conducting ceremonies, but does not include a right to lease the land, for example.

  • Secondly, he considered how to compensate for the loss of the non-economic aspects of native title, such as cultural and spiritual harm. This involved having to:

…quantify the essentially spiritual relationship which Aboriginal people … have with country and to translate the spiritual or religious hurt into compensation.

  • Thirdly, he gave an award of interest to reflect the passage of time since the acts of the NT government occurred.

The decision was quickly appealed to the Full Court of the Federal Court, which corrected a few errors and reduced the award to just over AU$2.8m. But in broad terms, it approved the three-step approach Mansfield used to calculate the award.

Whether the High Court will follow the same path remains to be seen. A number of new parties, including various state governments, have now become involved in the proceedings, each with their own barrow to push.

The challenge of valuing native title

The challenge is that conventional methods for valuing land may not be suitable to reflect the unique nature of native title rights and the significance of those rights to Indigenous peoples. New principles, or adapted versions of old ones, may be needed.

For example, in most cases where a piece of land is resumed by a government for an infrastructure project or some other purpose, the principal measure of compensation is the market value of the land.

But in the case of native title rights, there is no market to value the land. Native title cannot be sold, mortgaged or leased. Further, native title is different in every case, with no uniform content. Native title rights can include everything from a right to exclusive possession of land to a very limited right to conduct traditional ceremonies on a piece of land.




Read more:
How can we meaningfully recognise cities as Indigenous places?


Whether the Federal Court has taken the right approach – or whether a new approach should be adopted – will be the subject of debate in the High Court.

The Ngaliwurru and Nungali people contend the correct approach would have seen them awarded roughly AU$4.6m. The NT government is arguing, however, that the amount should be no more than about AU$1.3m.

The politics of Timber Creek

Just as Mabo and Wik resulted in political furore, so, too, may Timber Creek.

One sore point is between the federal government and the states and territories over who will pay any compensation. Under both the Keating and Howard governments, the Commonwealth undertook to pay 75% of the compensation a state or territory may be required to pay in future claims (with some exceptions).




Read more:
Friday essay: the untold story behind the 1966 Wave Hill Walk-Off


But in 2011, Porter tabled in the WA parliament a letter from Prime Minister Julia Gillard renouncing any Commonwealth obligation “for the cost of native title compensation settlements”.

Porter may now find himself on the opposite side of the table, having shifted from state supplicant to his new position as a Commonwealth purse holder.

Just how much political friction there will be will depend on the High Court’s approach to determining compensation and the potential cost if hundreds of other native title groups pursue compensation claims in the future.The Conversation

William Isdale, Postgraduate Research Student, T.C. Beirne School of Law, The University of Queensland and Jonathan Fulcher, Program Director, Energy & Resource TC Beirne School of Law, The University of Queensland

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

Australian Politics: 19 July 2013


Compassion seems to have been lost in the asylum seeker debate in Australia, with the Kevin Rudd led Labor government taking a massive shift to a hardline position in refugee policy. The links below are to articles reporting on the new stance.

For more visit:
http://www.heraldsun.com.au/news/breaking-news/rudd-surprises-with-hardline-boat-plan/story-fni0xqi4-1226682198196
http://www.guardian.co.uk/world/2013/jul/19/christine-milne-day-of-shame



Leadership tensions developing in the Liberal Party perhaps?

Australian Politics: 16 July 2013


Today in Australian politics there was a stoush over butlers and pillows between the Queensland Premier Campbell Newman and Kevin Rudd. It all seems a bit too much Campbell (he started it), trying to deflect attention from his own pay rise issues I’d suggest.

For more visit:
http://www.dailytelegraph.com.au/news/breaking-news/rudd-has-a-cushion-carrier-qld-premier/story-fni0xqi3-1226680183388

Kevin Rudd also announced the end of the carbon tax and a move towards an emissions trading scheme from July 1, 2014. Measures to cover the lost revenue were also announced.


Cricket: The Ashes Report – 15 July 2013


In the end it was a very close match that England won and Australia lost. The first test of the current Ashes series is over with plenty of controversy and action a plenty. It was a great game, though sadly it will be remembered for the controversy surrounding the DRS as much as for the game itself. But having said that, Australia really did a bad job in the way it used the DRS system, while England handled the DRS masterfully and full credit to them. With just 14 runs between the two sides, the second test has a lot to live up to following this match.

I can’t really make any useful comments on the English team, but as far as Australia is concerned I think it is time for Ed Cowan to be shown the door and for David Warner to return. Failing the return of Warner, who I believe has been sent to Africa with Australia A for some batting practice, perhaps it is time for the return of Usman Khawaja. The Australian batsmen really need to lift their game, because in reality the match was a lot closer than it should have been and they have the lower order to thanks for that – particularly the bowlers.

As for the bowling effort – work needs to be done also. There was far too much waywardness in the fast bowling ranks. Thankfully Nathan Lyon should be banished to the sidelines given the performance of Ashton Agar – a spinner who actually spins the ball and he can bat, which is very handy in the absence of a reliable upper order.

Latest Persecution News – 13 June 2012


Christians in Pakistan Allege Seizure of Graveyard

The following article reports on the latest news of persecution in Pakistan’s Punjab Province, where a Christian graveyard is being lost to corruption.

http://www.compassdirect.org/english/country/pakistan/article_1592468.html

 

Injuries Severe after Bauchi, Nigeria Suicide Bomb Attack

The following article reports on the bombings of Christian churches by Boko Haram and alleged military involvement.

http://www.compassdirect.org/english/country/nigeria/article_1594492.html

 

Iranian Authorities Shut Church in Tehran

The following article reports on the continuing persecution of believers in Iran and the closure of a church in Tehran.

http://www.compassdirect.org/english/country/iran/article_1595449.html

 

The articles linked to above are by Compass Direct News and  relate to persecution of Christians around the world. Please keep in mind that the definition of ‘Christian’ used by Compass Direct News is inclusive of some that would not be included in a definition of Christian that I would use or would be used by other Reformed Christians. The articles do however present an indication of persecution being faced by Christians around the world.

Pastor, Church Official Shot Dead in Nigeria


Muslim militants of Boko Haram blamed for killings in Borno state.

JOS, Nigeria, June 10 (CDN) — Muslim extremists from the Boko Haram sect on Tuesday (June 7) shot and killed a Church of Christ in Nigeria (COCIN) pastor and his church secretary in Maiduguri, in northeastern Nigeria’s Borno state.

The Rev. David Usman, 45, and church secretary Hamman Andrew were the latest casualties in an upsurge of Islamic militancy that has engulfed northern Nigeria this year, resulting in the destruction of church buildings and the killing and maiming of Christians.

The Rev. Titus Dama Pona, pastor with the Evangelical Church Winning All (ECWA) in Maiduguri, told Compass that Pastor Usman was shot and killed by the members of the Boko Haram near an area of Maiduguri called the Railway Quarters, where the slain pastor’s church is located.

Pona said Christians in Maiduguri have become full of dread over the violence of Boko Haram, which seeks to impose sharia (Islamic law) on northern Nigeria.

“Christians have become the targets of these Muslim militants – we no longer feel free moving around the city, and most churches no longer carry out worship service for fear of becoming targets of these unprovoked attacks,” Pona said.

Officials at COCIN’s national headquarters in Jos, Plateau state, confirmed the killing of Pastor Usman. The Rev. Logan Gongchi of a COCIN congregation in Kerang, Jos, told Compass that area Christians were shocked at the news.

Gongchi said he attended Gindiri Theological College with Pastor Usman beginning in August 2003, and that both of them were ordained into pastoral ministry on Nov. 27, 2009.

“We knew him to be very gentle, an introvert, who was always silent in the class and only spoke while answering questions from our teachers,” Gongchi said. “He had a simple lifestyle and was easygoing with other students. He was very accommodating and ready at all times to withstand life’s pressures – this is in addition to being very jovial.”

Gongchi described Usman as “a pastor to the core because of his humility. I remember he once told me that he was not used to working with peasant farmers’ working tools, like the hoe. But with time he adapted to the reality of working with these tools on the farm in the school.”

Pastor Usman was excellent at counseling Christians and others while they were at the COCIN theological college, Gongchi said, adding that the pastor greatly encouraged him when he was suffering a long illness from 2005 to 2007.

“His encouraging words kept my faith alive, and the Lord saw me overcoming my ill health,” he said. “So when I heard the news about his murder, I cried.”

 

Motives

The late pastor had once complained about the activities of Boko Haram, saying that unless the Nigerian government faced up to the challenge of its attacks, the extremist group would consume the lives of innocent persons, according to Gongchi.

“Pastor Usman once commented on the activities of the Boko Haram, which he said has undermined the church not only in Maiduguri, but in Borno state,” Gongchi said. “At the time, he urged us to pray for them, as they did not know how the problem will end.”

Gongchi advised the Nigerian government to find a lasting solution to Boko Haram’s violence, which has also claimed the lives of moderate Muslim leaders and police.

The Railway Quarters area in Maiduguri housed the seat of Boko Haram until 2009, when Nigerian security agencies and the military demolished its headquarters and captured and killed the sect’s leader, Mohammed Yusuf, and some of his followers.

The killing of Pastor Usman marked the second attack on his church premises by the Muslim militants. The first attack came on July 29, 2009, when Boko Haram militants burned the church building and killed some members of his congregation.

On Monday (June 6), the militants had bombed the St. Patrick’s Catholic Church, along with other areas in Maiduguri, killing three people. In all, 14 people were killed in three explosions at the church and police stations, and authorities have arrested 14 people.

The Boko Haram name is interpreted figuratively as “against Western education,” but some say it can also refer to the forbidding of the Judeo-Christian faith. They say the word “Boko” is a corruption in Hausa language for the English word “Book,” referring to the Islamic scripture’s description of Jews and Christians as “people of the Book,” while “Haram” is a Hausa word derived from Arabic meaning, “forbidding.”

Boko Haram leaders have openly declared that they want to establish an Islamic theocratic state in Nigeria, and they reject democratic institutions, which they associate with Christianity. Their bombings and suspected involvement in April’s post-election violence in Nigeria were aimed at stifling democracy, which they see as a system of government built on the foundation of Christian scripture.

Christians as well as Muslims suffered many casualties after supporters of Muslim presidential candidate Muhammudu Buhari lost the April 16 federal election to Goodluck Jonathan, a Christian. Primarily Muslim rioters claimed vote fraud, although international observers praised the polls as the fairest since 1999.

Nigeria’s population of more than 158.2 million is almost evenly divided between Christians, who make up 51.3 percent of the population and live mainly in the south, and Muslims, who account for 45 percent of the population and live mainly in the north. The percentages may be less, however, as those practicing indigenous religions may be as high as 10 percent of the total population, according to Operation World.

Report From Compass Direct News
http://www.compassdirect.org/

 

Suspected Islamists Burn Down Two Homes in Ethiopia


Two thatched-grass structures belonged to evangelist who received threats.

NAIROBI, Kenya, April 21 (CDN) — A Christian near Ethiopia’s southern town of Moyale said suspected Islamic extremists on March 29 burned down his two thatched-grass homes.

Evangelist Wako Hanake of the Mekane Yesus Church told Compass he had been receiving anonymous messages warning him to stop converting Muslims to Christ. The Muslims who became Christians included several children.

“Inside the house were iron sheets and timber stored in preparation for putting up a permanent house,” said Hanake, who is in his late 30s. “I have lost everything.”

The incident in Tuka, five kilometers (nearly three miles) from Moyale in southern Ethiopia’s Oromia Region, happened while Hanake was away on an evangelistic trip. A neighbor said he and others rescued Hanake’s wife and children ages 8, 6 and 2.

“We had to rescue the wife with her three children who were inside one of the houses that the fire was already beginning to burn,” said the neighbor, who requested anonymity.

Church leaders said neighbors are still housing Hanake and his family.

“The family has lost everything, and they feel fearful for their lives,” said a local church leader. “We are doing all we can to provide clothing and food to them. We are appealing to all well wishers to support Hanake’s family.”

Hanake said he has reported the case to Moyale police.

“I hope the culprits will be found,” he said.

An area church leader who requested anonymity told Compass that Christians in Moyale are concerned that those in Tuka are especially vulnerable to a harsh environment in which religious rights are routinely violated.

“The Ethiopian constitution allows for religious tolerance,” said another area church leader, also under condition of anonymity, “but we are concerned that such ugly incidents like this might go unpunished. To date no action has been taken.”

Tuka village, on Ethiopia’s border with Kenya, is populated mainly by ethnic Oromo who are predominantly Muslim. The area Muslims restrict the preaching of non-Muslim faiths, in spite of provisions for religious freedom in Ethiopia’s constitution.

Hostility toward those spreading faiths different from Islam is a common occurrence in predominantly Muslim areas of Ethiopia and neighboring countries, area Christians said, adding that they are often subject to harassment and intimidation.

Ethiopia’s constitution, laws and policies generally respect freedom of religion, but occasionally some local authorities infringe on this right, according to the U.S. Department of State’s 2010 International Religious Freedom Report.

According to Operation World, nearly 40 percent of Ethiopia’s population affiliates with the Ethiopian Orthodox Church, 19 percent are evangelical and Pentecostal and 34 percent are Sunni Muslim. The remainder are Catholic (3 percent) and ethno-religious (3.7 percent).

 

Jimma Violence

In Jimma Zone in the country’s southwest, where thousands of Christians in and around Asendabo have been displaced as a result of attacks that began on March 2 after Muslims accused a Christian of desecrating the Quran, the number of churches burned has reached 71, and two people have reportedly been killed. Their identities, however, were still unconfirmed.

When the anti-Christian violence of thousands of Muslims subsided by the end of March, 30 homes had reportedly been destroyed and as many as 10,000 Christians may have been displaced from Asendabo, Chiltie, Gilgel Gibe, Gibe, Nada, Dimtu, Uragay, Busa and Koticha.

Report from Compass Direct News
http://www.compassdirect.org