Are we finally ready to mention the dreaded T-word?
Only two things are certain in life, so the cliché goes. In our modern political life, we have grown accustomed to not talking about either taxes or death (our present prime minister’s allusions to the holocaust and governments “dying of shame” excepted).
Over the past two decades for the most part, serious debate about taxation has been studiously avoided. According to legend, John Howard fought and won the 1998 federal election on the basis of implementing a goods and services tax (GST). But it was a close-run thing. The Coalition lost the two-party preferred vote 49% to Kim Beazley’s Labor Party’s 51%, and Howard prevailed only because of the landslide result achieved at the 1996 ballot, having the previous year pledged to “never, ever” introduce the GST.
This was scarcely the Howardian masterclass in conviction politics the right-wing commentariat is fond of lauding. Howard and his treasurer Peter Costello’s real taxation legacy is the $34 billion tax-cuts package announced during the 2007 election. Kevin Rudd, fearful of not living up to his boast of “fiscal conservatism” and wishing to keep the election debate focused on Work Choices, climate change and broadband, fatefully matched the Coalition’s proposal, sans Labor’s $3 billion education tax refund. The rest, as they say, is history: the Commonwealth is now lumbered with a structural budget deficit that would exist with or without Labor’s stimulus packages of the global financial crisis era or the collapse in company tax receipts. Bill Shorten’s Labor Opposition, as much as Abbott’s government, is still living with the consequences of the major parties’ fiscal race to the bottom.
Labor’s taxing times on taxation policy are nothing new. Aside from its campaign to oppose and then rollback the GST between 1998 and 2001, Labor has been reluctant to talk tax for some time. In 2008, the Rudd government commissioned the Henry Tax Review but proceeded to ignore most of its 138 recommendations. It was then spooked by the specious “class war” campaign run against the various iterations of the resource super profits tax from a number of resource companies. Julia Gillard’s decision to legislate for a Greens-favoured carbon tax rather than re-prosecute Labor’s case for an emissions trading scheme proved unpopular and led to a further capitulation by Rudd at the 2013 election.
Today, both major parties would evidently like to increase taxation revenue – the Coalition, as signalled in its “re:Think” tax discussion paper, by raising the rate of the GST above 10% in tandem with its regressive budgetary measures, and Labor, through closing various corporate and superannuation taxation treatment loopholes – but each is extremely wary of a scare-mongering campaign waged by their respective opponents. Well, until now – for Labor, at least.
Amid recent calls for Shorten Labor to “stand for something” – some of which are justified, other cheap partisan shots less so – the federal party has begun to muscle up on taxation. Suddenly, ending the excessive generous superannuation taxation concessions afforded to the mega-wealthy is close to becoming a bipartisan position. Last month, Labor proposed a $1.9 billion package targeting multinational tax avoidance. Labor’s assistant treasurer, Andrew Leigh, has embraced the “sharing economy” pioneered by the likes of Uber, but insists they pay their fair share of taxes and respect workers’ rights. This week, a Senate inquiry into the tax practices of companies such as Google, Apple and Microsoft, chaired by NSW Labor senator Sam Dastyari, witnessed renewed calls for an end to corporate tax evasion.
The Australian experience mirrors developments in Britain. There, Ed Miliband’s Labour Party, while being susceptible on debt-and-deficit politics, has breathed new life into the otherwise moribund general election to be held next month. This week Miliband announced that Labour would scrap the United Kingdom’s non-domicile (or “non-dom”) rule by which wealthy individuals, despite residing permanently in Britain, avoid paying tax on their overseas earnings by the most ludicrous means, such as owning a burial plot abroad, or subscribing to an overseas newspaper. The previous Labour governments merely tinkered with the loopholes in the system enshrined by William Pitt the Younger during the Napoleonic wars.
David Cameron’s Tory government has seemingly been wrong-footed by the move, which will alleviate the budget deficit by hundreds of millions of pounds. Its “class war” counter-rhetoric sounds hollow and out of kilter with the mood of austerity-era Britain.
Maybe the decades-long pall of right-wing political correctness on taxation and other issues is lifting, or perhaps Australians’ renowned bullshit detector has begun to effectively function once more. As Mike Seccombe wrote late last year in The Saturday Paper: “Howard and Costello were lucky. The years of abundance allowed them to conceal their regressive economic agenda. But in these straitened times, there is no such cover. Not for Abbott and Hockey and not, in retrospect, for Howard and Costello. Abbott’s great mentor has gifted him as political inheritance a tax system that might yet destroy his government.”
Tax is back on the agenda. For Labor who have required a reputation for being able to generously spend taxpayers’ money in excess of the treasury coffers a debate over tax cannot be shirked. And, as with the best public policy formation, it is being driven by principle and pragmatism in equal measure. Or, alternatively, a morbid fear of electoral death.
Nick Dyrenfurth is the executive director of the John Curtin Research Centre. He is the author or editor of seven books, including A Little History of the Australian Labor Party, Mateship: A Very Australian History, A New History of the AWU and All That’s Left. Nick is an adjunct research fellow in the National Centre for Australian Studies at Monash University.