Julia Gillard’s big week

This will be a critical week for the Gillard government.

Two key pieces of legislation are to come before the House of Representatives.

A vote on the carbon tax is expected on Wednesday.

The government will also ask the lower house of Parliament this week to approve its plan to change the law to put its proposed Malaysia solution beyond legal challenge.

Julia Gillard says that would undercut the present people smuggling trade.

Oddly enough, the government’s highly controversial carbon tax legislation should pass, safely enough, through the House with the support of a Green MP and key independents.

The likely fate of the so-called Malaysian solution, though, is far from clear.

That, essentially, is because Ms Gillard is leading a minority government – and key independents have still to declare their position on this issue.

So Ms Gillard could well be humiliated by losing a vote in the House of Representatives, the House in which Australia’s Federal governments are traditionally made and broken.

With the Prime Minister trailing badly in the polls, that would be a black day for Labor.

That spectre could be avoided by simply stepping back, and abandoning the deal the government has reached with Malaysia, on processing Afghan and other refugees.

But that, too, would be a humiliation for the Gillard government.

Malcolm Fraser – and other prominent citizens – urged the government, at the weekend, to abandon offshore processing of refugees, altogether.

However, the Prime Minister believes that would be politically reckless.

The government’s situation, though, is far from hopeless.

If it can find the single vote it needs, to win approval for its Malaysian solution, the clouds which now surround it could clear.

The public, after all, will be well compensated for the carbon tax itself.

Indeed, with a higher tax threshold due next July, along with other reforms, many Australian families will soon find themselves better off, overall, tax-wise.

And the government still has two years of its present term, to run.

Much can change in that time.

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Tax system must provide incentive:Swan

Australia’s tax system must provide incentive for people who work hard, Wayne Swan says.

The Treasurer was speaking to reporters just before talks began on the second – and final – day of the Federal government’s Tax Forum in Canberra.

“When you’re looking at the principles of a tax system, it’s got to be fair.

“It has got to provide incentive for people who work hard.

“It has got to be sustainable over time.

“They’re the principles I bring to this discussion,” Mr Swan said.

Delegates at the Forum today are debating issues related to personal income tax and superannuation taxes.

Mr Swan said he had seen a lot of commitment and enthusiasm in debate on the first day of the Forum yesterday.

“…and I think we will see the same again today,” he said.

However he flatly rejected a suggestion that the Goods and Services Tax be extended, to items like food, to permit abolition of inefficient State taxes, such as stamp duty.

That suggestion was made by a South Australian Liberal MP, Jamie Briggs.

“Let me make it really clear,” Mr Swan said.

“The government absolutely rejects any attempt to increase the rate or the base of the GST, because that would make life really difficult for many working families,” he added.

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The Tax Forum:Day One

Tony Abbott’s charge that the Federal government’s Tax Forum is “a pointless talkfest” has the ring of overstatement about it.

Nevertheless there were few signs of agreement among the 200 delegates emerging, at the end of the first session of the two day meeting.

Predictably, industry and union delegates had disagreed.

Unions greeted a call for lower company tax with a declaration that this would be “unjustifiable.”

Julia Gillard, though, insisted that the Forum is, essentially, about gathering good ideas for a better tax system.

Her Treasurer, Wayne Swan, agreed, saying tax reform is about “hard yards, not easy victories.”

Heather Ridout, who is Chief Executive of the Australian Industry Group, put it more succinctly.

“The tax system has a critical role to play in the ability of businesses across the economy to transform and to play a role in the broader transformation of our economy and society,” she said.

The government tried hard, in the first session of the Forum, to encourage delegates to take a medium to long term view of their objectives.

Opening the discussion, the Prime Minister said:”Even in difficult days in the global economy, we live in the right part of the world.

“The Asian middle class was anticipated to grow to 1.2 billion by 2020, which provided opportunities to Australia,” she added.

However Ms Gillard warned that Australia must be ready to seize these chances.

Mr Swan developed this theme, urging delegates to look beyond the present mining boom and prepare for what is to come.

But Heather Ridout admitted that she was disappointed the corporate tax rate had not been reduced to 25 per cent as recommended by the Henry tax review.

The ACTU secretary Jeff Lawrence later urged that the forum not become a podium for “self-serving business interests” lobbying to lower the corporate tax rate.

And Mr Abbott, himself, came under criticism, for rejecting the government’s invitation to attend.

The Greens Leader Bob Brown said he was “missing in action”.

“Mr Abbott is absent.

“That’s an indictment of the opposition’s credentials as an alternative government,” Senator Brown said.

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Think beyond the boom:Swan

 The Treasurer, Wayne Swan, urged delegates at the Federal government’s tax Forum in Canberra today to look beyond the present mining boom.

He was speaking shortly after the Prime Minister, Julia Gillard, had welcomed some 200 delegates to the Forum.

However Ms Gillard also warned that suggested tax cuts must be matched by the clever ideas needed to fund them.

“Money spent has to be paid for,” she said.

Mr Swan admitted that the mining boom is “a big positive” but he, too, added a warning.

“Nothing lasts forever,” he said.

“We are a high-tech, high-skill country with world-class manufacturing and services – yet right now, mineral resources account for around half of our exports,” Mr Swan said.

The Treasurer said Australians – now – must invest wealth from the present boom wisely.

“We owe it to future generations to invest those returns well – in infrastructure, in skills, in savings for retirement, and in productive businesses right across the economy,” Mr Swan said.

There is much more to the Asian Century than a mining boom, he added.

“The middle class in the Asia Pacific is growing by 110 million a year.

“…this means opportunities for tourism, education and manufacturing.

“So there will be new opportunities, well beyond the boom. 

Mr Swan said Australia’s tax system is at the heart of the nation’s economic decisions.

He said he wanted to hear from every one at the Forum, from “the kitchen table” as well as from the nation’s boardrooms.

“Despite our varied backgrounds, I think everyone in this room understands that many of the most important decisions are not made by politicians, but in boardrooms, family businesses and across the kitchen tables of millions of Australian families,” he said.

“And because the tax system is at the heart of so many of these decisions, it is central to our economy and our society,” Mr Swan added.

“That’s why all of my public life I’ve seen tax as the basis for the first-rate public services people need and deserve, as well as the best way to build the right incentives into our economy,” he said.
 

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Look at what we’ve done:Swan

Wayne Swan is urging Australians to study both what the government  has already done – and what it is already planning – on tax reform.

The Treasurer was speaking on the eve of the Federal government’s two day tax Forum, in Canberra.

His appeal amounted to a tacit admission that the Gillard government has not yet been effective getting its tax reform message across to the public.

That has been largely due to the, so far, successful campaign of relentless bluster, run by Tony Abbott and Joe Hockey.

Mr Swan insisted, though, that the government would be looking – at the Forum – for ways to build on the reforms it has already introduced or announced.

“…. the Tax Forum over the next couple of days will help us identify the next steps in tax reform,” Mr Swan said.

But what has the government already done – and what has it already announced – by way of tax reform?

Mr Swan was adamant in his answer to that question.

“We are implementing or have implemented something like 32 measures from the tax review, ” the Treasurer said.

He was referring, of course, to the Review of Australia’s tax system, which the government asked a former Treasury Chief, Ken Henry, to undertake.

“….it’s important we understand what has been done there,” Mr Swan said.

“For example, we have already implemented $47 billion worth of tax cuts over three years.”

The Treasurer also said that there had also been “a very big boost to the single pension.”

The single rate pension had risen by $148 a fortnight.

“We’ve introduced paid parental leave,” Mr Swan said.

And some “very important” tax changes would commence from July next year.

These would include:-
 
* a cut to the corporate rate of taxation

* a very big cut in tax for small business – some 2.7 million small businesses will receive the $6,500 instant asset write-off and

* “as part of our carbon pricing package we are tripling the tax-free threshold from $6,000 to $18,000, removing something like 1 million people from the income taxation system,” Mr Swan said. 

“So these are all measures which flow directly from the original tax review and they are working their way through the policy-making process, working their way through the Parliament and they commence from 1 July next year,” he added.

” I make those points because what we will be doing at the forum is building on a very substantial record of tax reform that the Government has put in place,” Mr Swan said. 

He dismissed suggestions, though, that the GST should be increased, to fund tax cuts in other areas.

Mr Swan described those suggestions as “lazy” reform.

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Interest – and tax – decisions due this week

The Reserve Bank will, once again, be under pressure to cut interest rates, when its Board meets tomorrow.

A senior opposition figure, Andrew Robb, reflected this when he said recently that key sectors of the Australian economy are already in recession – and need a boost.

The bank’s Governor, Glenn Stevens, though, is cautious.

He acknowledges that Australia’s housing, retail and manufacturing industries are facing tough times, but it insists that holding the line is “prudent” right now.

The bank aims to keep Australia’s inflation rate between 2 and 3 per cent, over the course of a business cycle.

At present the nation’s headline inflation rate is 3.6 per cent.

However, on the bank’s own figures, the underlying rate – which removes volatile items – is a much more modest 2.5 per cent.

And it is the underlying rate, not the headline figure, that the board studies, when it reviews rates.

So why won’t it act?

Two reasons, mainly.

There’s a huge amount of money – hundreds of billions of dollars in fact – in the mining industry’s investment pipeline, right now.

And the bank fears this pipeline could burst, spilling nasty inflationary consequences, if too many projects get going, too quickly.

It is worried, too, about rumbling instability in world financial markets.

The new Tax Forum, which the Federal government is hosting in Canberra, tomorrow and Wednesday, offers a little more hope.

But don’t expect immediate tax relief.

Or surging benefits.

The host, Wayne Swan, is making no secret of the fact that the Federal government is in a tight spot right now.

He has promised to get the Federal budget back into surplus by 2012-13.

But even Mr Swan, himself, is admitting that the instability, in the global economy, is making this very hard.

“…government tax revenues have taken a big hit, because of global economic instability,” he said.

Last summer’s cyclones and the strong $A had added to the government’s problems, too, Mr Swan said.

“It’s obvious, in this environment, that we can’t just talk about cutting or abolishing certain taxes without looking at the other side of the equation,” he warned.

Even so, the government plans “to listen” rather than talk, at the Forum, Mr Swan said.

He insisted, though, that Australia has a good tax system.

But even the Treasurer admits that it could “be better.”

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Tax:A government admission

Australia needs a better tax system to cope with a rapidly changing world.

And the Federal Treasurer, Wayne Swan, says that’s exactly what he wants from next month’s Tax Forum.

He says the Forum, to be held on October 4 and 5, will be “an important opportunity to talk about further ways the tax system can work better for businesses.”

Mr Swan says, too, that, he will be looking, particularly, to help those “outside the fast lane of the mining boom.”

He says the government has already implemented some 32 reforms, recommended by the Henry Review, which studied Australia’s existing tax systems.

The first recommendation, in the Henry report, had been to impose a resource rent tax.

“Well, we’ve got that legislation coming into Parliament in a month or two’s time,” Mr Swan told a television interviewer.

“And that’s a very important piece of tax reform, because it gives us the capacity to give a tax cut to many businesses that are doing really tough…” he added.

However the Treasurer warned:”…tax reform has to be paid for.”

“We’ve got to have a debate and a discussion about where all the loopholes are in the system, for example.”

Mr Swan said what he is most interested in is tax reform that is not only fair, but which also “provides the incentive to drive wealth creation in our economy.”

“New investment can is a way struggling businesses can pay for a new lease on life,” Mr Swan said.

“That’s why the government is introducing, from July 1 next year, an instant write off of any asset worth up to $6,500 – and the first $5,000 for cars vans and utes – for small business,” he added.

Mr Swan admitted that the present tax system sometimes discourages “sensible risk taking.”

That is because investors sometimes don’t receive full value for their tax deductions.

Back in July, the government released a paper, outlining what it expects to be discussed at the forum.

The government has placed the paper on the internet.

So what does it say about small business and long suffering PAYE taxpayers?

On small business, the paper says:”Complexity imposes a significant cost on Australia’s 2.4 million small businesses.

Mr Swan also said:”Our small business package provides practical benefits to help reduce complexity and improve cash flow.

“?The Government will introduce an instant write-off for small business assets costing up to $5,000.

“Many small business purchases will be able to be written off in the year of purchase.

“This will also help cash flow.

“Most other assets will be able to be depreciated in a single pool, at a rate of 30 per cent, cutting down on complex tax calculations.

Small business companies will also benefit from an earlier start to the cut in the company tax rate.

And on individuals the paper admits:”Tax time can be complicated and, as a result, seven in ten Australians pay a professional to do their tax return.

“From 2012-13, the Government will provide taxpayers with the choice of a $500 standard deduction to replace deductions for their work-related expenses and the cost of managing their tax affairs.

“This will increase to $1000 from 2013-14, potentially benefiting 6.4 million Australians.
We will also improve incentives for Australians to save for their future.

“From 1 July 2013, Australians will be entitled to a tax discount equal to 50 per cent on up to $1000 of interest income, including interest earned on deposits, bonds, debentures and annuity products.

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PM targets State taxes

The Prime Minister, Julia Gillard, says the Federal government will target State taxes at next month’s Tax Forum.

She served notice of her intentions in Federal parliament, warning that State officials should be prepared for that.

“The Henry review showed that there are a large number of inefficient State taxes,” Ms Gillard said.

“I will be encouraging State representative to bring proposals for less taxes,” she warned.

Stamp duty, which adds thousands of dollars to the cost of buying a new home, is probably the most unpopular.

Speaking at question time, Ms Gillard also claimed that the total tax take in Australia had declined significantly since the Federal Labor government was elected.

Talking above protests from opposition members, the Prime Minister said the total tax take had reached a record height in the final years of the Howard government.

Tax- as a share of gross domestic product – had reached 24.1 per cent in 2004-05 and 2005-06 Ms Gillard said.

This financial year it would be just 21.8 per cent, the Prime Minister added.
A Coalition front bencher, Christopher Pyne, rose to protest.

“The government is still using question time to slam the opposition,” he said.

However the Speaker, Harry Jenkins, ruled that the Prime Minister’s reply was in order.

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