PASSWORD RESET

Magazine of Socialist Action in Australia

Tax reform on the horizon?

Reading Time: 3 minutes

Tax reform is back on the agenda. Well sort of. In recent months the Turnbull government has raised the spectre of changes to the tax system, while the ALP have put forward their own plans for changes to negative gearing and capital gains tax (CGT).

Turnbull has since moved to rule out a number of reforms, so any changes made will happen after the next federal election. The issue of tax reform will be forced onto the agenda of whoever wins the election, as government revenues are in decline and big business seeks to shift the tax burden to working people.

The 2015 budget handed down by Abbott and Hockey recognised that government revenue was falling. It also pointed to the need to reduce the budget deficit which stands at around $37 billion. This can only be achieved by either cutting spending or increasing government revenues, or some mix of the two. The question is who will face cuts and who will pay?

The change in leadership from Abbott to Turnbull has not changed the overarching strategy of the government. That said the task of introducing reforms to make ordinary people pay more is made harder as 2016 is an election year. The Turnbull government will not want to face the polls straight after handing down a budget full of harsh cuts.

The government released a tax discussion paper in March 2015 and one of the measures was a proposal to increase and/or broaden the base of the Goods and Services Tax (GST). The GST is a flat rate tax disproportionately impacting those on low incomes.

The GST continues to be applied to feminine hygiene products, effectively adding an extra tax for women. Neither major party proposed to change this.

Shorten and the ALP saw changes to the GST as being a hugely unpopular move and launched a populist offensive against it. This resulted in a number of Coalition MPs becoming increasingly nervous about losing their seats. In response Turnbull has moved to quash debate on this issue, effectively taking any change to the GST off the table in the short term.

Having accepted the Coalition mantra over the past few years of the need to fix the budget, Shorten has unveiled his own plans to change rules governing negative gearing and CGT in order to boost the governments’ bottom line.

While Morrison has attacked Labor over their plans, both he and Turnbull initially indicated that they were open to changes in these areas. Under pressure from vested interests in the property sector however Turnbull has since moved to quash this debate too.

Research shows that 50% of the benefits from negative gearing go to the top 20% of income earners and 75% of the benefit of the CGT exemption on the sale of primary residences goes to the top 10% of income earners. From the point of view of reducing taxpayer subsidies to the rich, negative gearing and CGT exemptions need to change.

However, the ALP has promoted these changes as part of addressing housing affordability. Some modelling has shown that the ALP policy would slow the growth of house prices somewhat, but this does little for people who already can’t afford a house, or are struggling to make rent.

A far better plan to address housing affordability would involve a massive expansion of good quality public housing. Not only would it provide for the thousands of people on public housing waiting lists, it would also provide jobs at a time of rising unemployment.

Socialists support a tax system that raises taxes from those most able to pay. Currently 1 in 3 big companies pay no tax at all in Australia. Many of these companies rake in billions of dollars in revenue. Significantly raising the company tax rate and closing the loopholes that allow them to reduce their tax bill would raise money to properly fund schools, hospitals, and other important services.

Bringing those big companies into public ownership and removing the profit motive would free up billions more which could be invested to raise the standard of living for all.

By David Suter

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