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It is hard to go past Ross Gittins' summation of the tax reform announced yesterday by the Federal Government. His comments of "picking the easy bits" and "very little courage" will resonate as the light of day hits the many press releases churned out on Sunday afternoon.
The current Rudd Government formula of grand statements (in this instance "root and branch" tax reform) followed by little in the form of follow up (read only a handful of recommendations adopted out of 138) would make someone think this was just another day in the life of the Rudd Government not an historic day for our nation.
Indeed it stands in stark contrast to the Howard Government who when confronted with the need to tackle tax reform took a GST to an election. A tough decision that helped forge the economic framework that set Australia up to withstand the recent GFC and provided funds to address the huge shortfall in unfunded superannuation liabilities. It was conviction politics based on policy reform that was in the interest of the future of Australia.
So today surely we have to ask the question why everyone but mining companies will be supposedly better off under the guise of tax reform? It is almost as if Julie Andrews can add another line to her song of favourite things for everyone in Australia to include tax reform. Well, at least until after the election. So Kevin, fancy an election on what needs to be done or throw more cash at the voters and call it tax reform? For the record this is a rhetorical question.
On the issue of the resources tax the principle appears noble but, like any of these announcements let's consider the detail. What we need to see is the impact this has on the cost competitiveness of mining assets more broadly and for New South Wales our assets specifically. It is one thing to share in the upside of the next mining boom and to invest proceeds across the economy but, it is another to shift long term investment from this country to another.
The NSW Treasurer has been silent on this point so we will today be asking the Prime Minister for modelling to be released showing how this tax impacts our overall competitiveness taking into account both current mining assets and those expected to come on line in the next decade. My hope is that this work has been done but, it is critical it is released to allay these very real fears.
From a State perspective the big issues remain just that - big issues without direction. The vertical fiscal imbalance remains with no direction or timetable on when it might be addressed. Most of our State taxes are labelled inefficient and the Henry report clearly tells Premiers that they should keep their GST revenue above any other tax they currently receive.
In a deeply concerning point, it is not a stretch to suggest that Ken Henry would have advised every Premier in this country to keep their GST rather than give it away under last week's badged policy of the day "health reform". This revelation certainly demands Kristina Keneally answer some serious questions not the least being did she read this report before giving up a tax that Henry is urging all States to retain?
We again note that health reform is needed but why have we given up the GST when the Federal Government's own Tax Advisor essentially recommends against it?
So the much hyped tax reform is a damp squid for States and until modelling is released leaves some long term economic questions for our mining industries. In terms of vertical fiscal imbalance the Federal Government needs to grow some policy courage but in an election year all we are getting is well - more money. Today the mining industry has been found to help the Government with its latest cash splash but, in terms of cash that has been splashed before - the next few Governments will have to sort that one out.
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