Zeal for tax reform not new
To label Labor’s evident newfound zeal on tax reform ‘bold’ ignores the fact the Government has been grappling with the issue, without great enthusiasm, for years.
If there is a local template for today’s discussion paper, it can be found in a speech given by Tom Koutsantonis’s predecessor as Treasurer, Jack Snelling, in a December 2012 speech to the Australian Tax Research Foundation.
In it, the then-Treasurer earmarked two major areas in need for reform, political inertia notwithstanding: changing the GST mix and abolishing stamp duty.
His successors as Treasurer, Jay Weatherill and Koutsantonis, have already bristled with predictable ideological ire at any suggestion of increasing or broadening the GST.
“I don’t think GST is a modern solution to the challenge,” Weatherill said today.
But Snelling advocated just that. Welcoming any push to remove state general-purpose grants from the GST pool, he urged further reform – bolder, even.
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“I think a more comprehensive review should investigate the current rate of GST and the consequences of broadening the base,” he said.
“It’s well understood among economists that broad-based taxes such as the GST are less distortionary and less harmful to growth than other taxes. Such taxes are also better at encouraging saving and investment.”
But his greater concern was stamp duty, a “relic from colonial days when an actual stamp was impressed on all contracts to make them legally binding”.
He said the average South Australian home was subject to stamp duty of around $16,000, such that “a family buying an average home ends up paying back an extra $150 to $170 per month.
“So they pay their stamp duty, and almost as much again to the bank,” he said.
“Stamp duty is arbitrary and unfair because it taxes people not on their ability to pay, but simply on how often they move.”
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Further, he argued, it is “not only a cost we feel in our hip pocket, it has environmental costs and impacts upon our happiness”.
Land tax, Snelling claimed, was “less distortionary” and “a fairer tax because it’s based on the value of people’s assets, not on how frequently they move”.
Much, indeed, like the Emergency Services Levy.
Koutsantonis has already pumped up his revenue by removing an existing remission on ESL bills; what he hasn’t done is balance the other side of the ledger, by tackling stamp duty.
Snelling’s caveat on reform was that they must be at least revenue neutral; State Governments, he said, couldn’t afford to sacrifice those rivers of gold without sacrificing services.
Snelling certainly was no reforming radical as Treasurer; indeed, with at least one eye on a future premiership tilt, he was consensus-conscious to the point of conservatism.
But his talking points of more than two years ago were still more radical, more bold than much of what his successors put on the table today.
Weatherill can hardly expect to be taken seriously as a taxation progressive driven by outcomes when his Government instinctively blocks any suggestion of GST reform.
Snelling, as it happens, even inadvertently flagged today’s consultation, and identified the political challenges inherent with following through on its recommendations.
“It’d be foolhardy for any Treasurer to implement significant reform without a proper review,” he said, “and any change to the tax mix would only take place after the 2014 election.”
That’s now unlikely even before the 2018 poll, making another observation by the former Treasurer particularly prescient: “When politicians talk about tax reform, the public is perhaps rightly suspicious.”
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