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Issue #1710      November 11, 2015

Tax “mix”

Hitting battlers hard

“Everything is on the table” is the over-worked official expression to describe the looming “reform” of Australia’s taxation system. If only that were true. The options on government tables at the moment have certain features in common – they will further benefit and empower the corporate sector, they won’t touch the wealthy and they will clobber workers’ incomes and other interests. They will combine with other changes, such as the implementation of the TPP (see Editorial), to strengthen corporate dictatorship.

While the federal government won’t confirm increasing the GST or broadening its application as its preferred approach, it is clearly part of the reactionary “mix” about to be foisted on the Australian people. Turnbull & Co are taking part in a phoney “conversation” about taxation and how to fund what governments provide to the people of the country. There’s a White Paper on taxation on the way and the Productivity Commission will have much more to say on the issue.

Workers would be mistaken, however, to believe the propaganda about the coup being hatched, that it is being done to find the money needed to fund items like Medicare or a National Disability Insurance Scheme. This government, and its predecessors, have been implementing a global strategy to reduce the number of services provided by governments to the people and to turn those services into sources of private profits. “Self-provisioning” – for health, education, pensions and aged care – is the by-word of “reformers” in capitalist countries in the current era. The “reforms” being proposed are about boosting profits and making workers bear the brunt of the sluggish economy and worsening economic conditions to come.

Federal Treasurer Scott Morrison nearly lets the cat out of the bag. He insists Australia has “a spending problem, not a revenue problem.” He doesn’t want a bigger overall tax take; he’s a true blue neo-liberal, after all. He and the Prime Minister and every other servant of capital participating in the “conversation” taking place at the moment agrees that companies need to be “incentivated” to invest. Australia needs to be competitive in the international context to attract foreign investment. So if the tax take isn’t going to increase and the corporates will be paying less tax, where will the revenue come from?

Morrison et al say it will come from the increased business activity that will flow from the tax changes. Not many share the government’s declared optimism. After decades of de-industrialising capitalist globalisation, Australia’s economy has been left very vulnerable to fluctuations in commodity prices. Mineral prices are down on global markets.

“The RBA has revised down its forecast for economic growth this financial year to an average of 2.25 percent, a full half a percentage point below the budget forecast of 2.75 percent.

“Sensitivity analysis in the May budget indicated that a cut of half that size would add $5.6 billion to next year’s deficit if it was brought about by lower export prices,” as Peter Martin, economics editor of The Age points out. Wages growth is also down, thanks to attacks on the trade union movement. Governments are committed to lowering personal income tax, in any case. Negative gearing won’t be touched; it helps the wealthy. Superannuation tax concessions are untouchable for the same reason. Reducing the deficit and balancing the budget is going to be harder in future.

On the spending side, the Coalition won’t consider abolishing the hugely expensive Private Health Insurance Rebate or the diesel fuel rebate so helpful to the resource sector. It won’t cut military spending. There are more wars on the horizon.

So the government is left with the GST; the one “big tax on everything” that neo-liberals love. Workers don’t. Everyone knows it is a regressive tax that consumes much, much more of low income earners’ weekly budget than that of the wealthy. While the government plays down the role of the GST in worsening income inequality in Australia, it knows that the “Robyn Hood in reverse” aspect of the tax will need a sweetener. The idea of compensation through the tax system is being floated. This sets up a future debate about whether the government can continue with the current level of compensation or will need to reduce or scrap it.

Plans for how GST income will be passed on to the states are also “on the table”. States are struggling to keep public health and education systems running. But increased revenue from a GST jacked up by 50 percent or extended to basic items will come with strings attached. Contributions at a conference hosted by Melbourne University recently made this plain.

The Productivity Commission has been called the government’s “independent economic advisor” but it whistles the same tune on this and other fundamental economic questions.

“It seems reasonable to ask, if tax reform in the form of the GST is going to extend once-in-a-generation benefits to the states, as some have suggested, whether state-based policy and regulatory restrictions should not once again be on the table,” Productivity Commission chairman Peter Harris said. Treasurer Scott Morrison, who also spoke at the Melbourne conference, lapped it all up. The way the states deliver services in the fields of health and education, for example, will have to meet the federal government’s expectations. Look out for even more privatisation! “Barriers” to investment and hiring and firing will be considered.

Big business’ whip hand over workers, their wages and conditions will be strengthened considerably with these likely changes. An economic approach favouring workers and other exploited people would be to do the opposite of what is being “discussed” at the moment. The parliamentary Labor Party will have to be held to its stance in opposition to an increase in the rate of the GST or its extension. Throwing the direction of policy into reverse will require major political change in Australia, a strengthening of left and progressive forces and unprecedented unity. It’s a challenge but the consequences of failure will be dire.

Next article – Editorial – Not just a trade agreement

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