Peak silliness on taxation reform

This article discusses the peak silliness of taxation reform, specifically the removal of GST on tampons. It highlights the complexities of the GST and the challenges of tax reform. The article provides insights into the discriminatory nature of the GST and the difficulties in implementing comprehensive tax reform. Read more on Desklib.

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SE News
HD Peak silliness on taxation reform
BY Jennifer Hewett
WC 977 words
PD 6 August 2018
SN The Australian Financial Review
SC AFNR
ED First
PG 2
LA English
CY Copyright 2018. Fairfax Media Management Pty Limited.
LP
As gesture tax politics go, this rates up there for peak silliness. The Turnbull government is finally
removing the GST on tampons.
The states all agree - after years of resistance to losing money from any such change. Scott Morrison
and Kelly O'Dwyer are proudly claiming to have delivered overdue relief for millions of women.
TD
Of course it's discriminatory to apply the GST to female sanitary products but not to condoms and
razors.
The obvious correction would be to apply the goods and services tax to those items too. But the
money to be gained from their inclusion would never be worth the political pain. The only real relief is
no longer having to put up with protest demos featuring giant mock tampons.
The GST remains a morass of inconsistencies no government is going to attempt to unravel. The
Australian Taxation Office instead offers Monty Python-style explanatory notes, including detailed food
lists of what gets excused as GST-free fresh food or necessities of life and what doesn't. Bread and
bread rolls are GST-free, for example, but not if they have a sweet coating such as icing. A mere
glaze, however, is not sufficient to attract GST.
Buying Beef Wellington, as long as it is not hot, also doesn't attract GST because, unlike a sausage
roll, it contains raw meat. Biscuit mixes are mostly GST-free but not biscuits, even if they require
cooking, heating or thawing before consumption. And that's just a few selections from the list of
products beginning with B!
If a government were introducing the GST today, imagine the various lobby groups that could use
social media to attract enough outrage to insist on more exceptions. #Save our bakeries! #Hands off
the sausage roll!
It's another example of how much harder any sort of big-picture tax reform has become, certainly as it
involves any trade-off with the GST.
The memory of new Prime Minister Malcolm Turnbull and Treasurer Scott Morrison raising the notion
of increasing the GST to dramatically reduce personal and corporate tax rates seems more like a
political fairytale of times long past. Back then, Morrison was reminding audiences Australia's reliance
on personal and company income tax was second only to Denmark among OECD economies,
describing income tax as "the silent tax".

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"Income tax has become too often out of sight and therefore too often out of mind in comparison to the
GST," he said in late 2015. "Yet the taxes you are paying are just as real and a lot higher."
But within a few months, Turnbull had ditched his Treasurer's hopes and any prospect of a radical
trade-off between direct and indirect taxes in the way New Zealand had successfully managed.
The Prime Minister decided it was too politically difficult and not worth it anyway given all the
compensation payments that would have to be made to so many groups.
Following that retreat, the government instead pushed its plans for more modest reductions in
corporate and personal income tax spread out over many years.
Its long-term proposals to overhaul and reduce personal income tax rates, the centrepiece of the 2018
budget, did make it through the Senate in June with the support of enough crossbenchers. Hardly
surprisingly, the business tax cuts have had a much more antagonistic reception from both the Senate
and the public.
In a triumph of political positioning, Labor has continued to depict them as Turnbull looking after "the
big end of town", particularly those terrible banks. The impasse in the Senate ensured the attack
retained its potency.
Even so, government ministers remained hopeful their message was slowly gaining traction and hadn't
entirely given up on the persuasive powers of Senate whisperer Mathias Cormann. That was until the
byelection result in Longman convinced a rump of Senate crossbenchers and a lot of Liberals that
corporate tax cuts, at least for big business, are dead, buried and cremated.
Another inevitably frustrating encounter in the Senate will only reinforce that conclusion in cabinet. The
Business Council of Australia and its members will criticise the political logic leading the government to
back off when almost every other OECD country is going in precisely the opposite direction on
corporate tax rates.
A US economy barrelling along at a 4.1 per cent growth rate in the second quarter is exhibit A on the
ability of Donald Trump's massive tax cut package to boost growth, investment and confidence, with
wages also rising again.
But the relentlessly domestic focus and gotcha politics of the national tax debate mean this equation
won't be tested. Ironically, it's also the very modest and longer-term nature of the Australian version of
corporate tax cuts that would lessen any immediate pay-off here.
The alternative too easily becomes a variation of lose-lose for the government, as well as the
economy.
The best most in the Coalition hope for is to shift from corporate tax cuts for big business to accelerate
the impact of tax cuts for smaller and medium-sized businesses. That would still fit with its agenda of
reducing business taxes overall but limit Labor's political leverage in somehow equating more money
for big banks with less money for schools and hospitals.
Manoeuvring such a compromise through the Senate and persuading the public may be beyond the
skills of this government, particularly after a messy start. Despite the opposition's obvious
vulnerabilities on tax, it is having trouble convincing voters about the risks of Labor's proposed
increases, for example, as well as in framing corporate tax cuts as good for jobs and wages.
Time is running out. Cue the great tampons distraction. A pack of 20 costs about $5-$7 in a
supermarket. Simple maths, simplistic politics.
CO autaxo : Australian Taxation Office
NS e2112 : Indirect Taxation | gvuph : Upper House | e211 : Government Budget/Taxation | gpol :
Domestic Politics | ccptax : Corporate Taxation | estax : Sales Tax | c13 : Regulation/Government
Policy | ccat : Corporate/Industrial News | e21 : Government Finance | ecat : Economic News | gcat :
Political/General News | gpir : Politics/International Relations | gvbod : Government Bodies | gvcng :
Legislative Branch | ncat : Content Types | nfact : Factiva Filters | nfcpin : C&E Industry News Filter
RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
PUB Fairfax Media Management Pty Limited
AN Document AFNR000020180805ee860000t