Flat White

Simpleton central

22 February 2022

4:00 AM

22 February 2022

4:00 AM

George Orwell once observed:

Some ideas are so stupid that only intellectuals believe them.’

What would Orwell say about Australian academics?

There is a Federal election coming and so out come all the grand ideas. A particular favourite is tax reform which is really a euphemism for tax increases. And stepping up to the plate, yet again, is the academic op-ed writer in chief, Profession Richard Holden of the University of NSW.

Writing in the AFR, Professor Holden notes:

Whichever side of politics wins the federal election will need to face up to the urgent task of tax reform. A decade on from the Henry tax review, our tax system is even more outmoded and inefficient than it then was.’

True. But contributing to Australia’s outmoded and inefficient tax system is the fact that a decade on from the Henry tax review, government spending is even greater and more bloated than it was then also.

I also love the constant references to the Henry Tax review as if Ken Henry brought these ideas, written on tablets, down from Black Mountain in Canberra; to be used as some shiny shibboleth to distinguish the truly fiscally responsible from the rest.

In reality, the Henry review was full of delusional, unimplementable and constitutionally questionable tax ideas such as the mining tax.

The reality is that this Commonwealth Government, yes looking at you Scomo and JoFry, is running a $100 billion budget deficit and has built up $1 trillion of debt. No amount of tax reform will fix this.

Underpinning these disgraceful numbers is that the Commonwealth is running a structural deficit of approximately 2 per cent of GDP. That is, spending is significantly out pacing taxing. This is not a tax problem. This is a spending problem. This is an incompetent Treasury and Finance Department problem. This is an incompetent government problem.

And to ask which party, Labor or Liberal, would be better financial managers in Australia is like asking which party will drive Australia faster off the fiscal cliff. They are both incompetent, rubbish and dangerous.

But back to Professor Holden and his magical tax reform plan:

Each adult Australian would receive a $7500-a-year “GST-free” spending threshold. That is, the first $7500 of consumption attracts a GST rate of 0 per cent. Beyond that, all goods and services are taxed at a rate of 15 per cent. Even those that are now exempt, such as fresh food, health and education.’

So how does Professor Holden propose to implement such a genius plan?

Presumably some technology will be required? But let’s have a look at the track record of this Government and technology implementations. Robo-Debt. The census. The Commonwealth’s Covid tracking app. Gee. They worked a treat. And these are just in the last couple of years.

Then there is the data and privacy perspective, another area Australian government excels. Punters will need to somehow claim back their $980 odd dollars of GST on a line by line basis disclosing all sort of micro spending information on ALL Australians to the Commonwealth Government. Would this include children also? Now parents of newborn babies will need to register for tax file number for their children at the same time their register their birth.

And won’t there be additional public servants, accountants and advisors to manage this anti-productivity cancer? No doubt. But these are but details for others to work out. Intellectuals and academics only need to come up with ideas to write for newspapers and book editors.

On top of the actual implementation is the politics; not only getting this nonsense passed by the Parliament but negotiating with the states and territories, because all the GST goes to the states. So opines Professor Holden:

In 2022 this (his idiotic idea) would raise in the ballpark of $40 billion a year. By our calculations the inbuilt compensation stemming from the $7500 exemption would be about $20 billion. This leaves the government with $20 billion a year in fiscal improvement from the progressive GST. Of course, the rate could be higher or lower, and the exemption threshold could be as much as $10,000.

There is also the tricky issue of how the money would be shared with the states. But that’s why it’s called tax reform, not tax entertainment.’

So now Canberra needs to not only have a fight about the relative allocations of the GST between the states and territories but also have a fight about how much of the total booty to share.

Yeah. Good luck with that.

Untouched of course would be the Commonwealth Government’s allocations to Australian universities.

Just remember boys and girls, these are the people who are teaching our children. Sleep well on that.

Stephen Spartacus regularly writes at Sparty’s Cast.

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