Van Badham theguardian.com, Thursday 12 June 2014
When it comes to the ethics of taxation, Abbott is a world leader with a domestic example that lends him zero credibility
'Abbott’s budget actions are actually in opposition to the taxation ideology of his own electorate'. Photograph: Mona Chalabi/The Guardian
Wherever the prime minister travels, he’s still Tony Abbott. That the pomp and solemnity of the D-day commemorations may aid his flailing reputation vanished in his incoherent attempt to somehow compare the Normandy invasion with the partisan politics of carbon price repeal. That's not to mention his clumsy schoolboy French, which, while amusing, somehow lessened any possible positive brand association of Abbott with the centre-right’s poster-boy PM, Canada’s Stephen Harper.
At home, he’s besieged by leadership speculation of sufficient intensity to see his conservative allies resort to public verbal knife-fights. “Someone else” and “I don’t know” are outpolling him as preferred Liberal leader. His massively unpopular first budget is not only still being discussed, but still being opposed, and as his own ministers trip over measures they cannot sell, and long politically-dormant populations of students, pensioners and union members amass on the streets.
This week, Tony Abbott On Tour has finally reached America. And with the majority of world governments now vindicating the carbon price policies that Abbott has so loudly admonished, the prime minister finds himself facing off against president Obama, who’s just committed to decrease his own nation’s power station emissions by 30% by 2030.
Our prime minister’s response? Shame? Strategic silence? Tactical recalibration? No. Abbott’s few remaining apologists in the domestic media have vaingloriously announced today that our prime minister is putting the mighty US “on notice” about tax evasion.
I can only suspect that his advisers have been reading Sun-Tzu in political desperation. The ancient Chinese war strategist advises “make a feint to the east while attacking in the west”. Translated, this means demanding just taxation policies from America to divert attention from your wholesale restructure of the Australian economy to protect unjust taxation policies at home.
There is, of course, everything right about demanding that the US lead global efforts to stop multinationals dodging tax. Large companies have been licensing intellectual property to their own subsidiaries in lower-taxing countries in these kind of dodges for years. It’s great to hear a statement like “we need global tax rules to ensure businesses pay tax in the countries where they earn revenue” from our prime minister, because the taxation revenue denied to nations by gigantic companies through offshoring mechanisms are vast.
The political problem is that when it comes to the ethics of taxation, Abbott is a world leader with a domestic example that lends him zero credibility. The Tony Abbott lecturing the American president on taxation fairness is, of course, the one who as Australian prime minister is presiding over policies of taxation amnesty for the richest Australians who have themselves offshored their hidden wealth, capping their taxable liability to merely the last four years. The Tony Abbott lecturing the US president on tax is the one claiming a “budget crisis” in Australia, where government revenue could be restored to surplus if tax rates were restored to the tax brackets of 2006. The Tony Abbott lecturing the American president on taxation fairness is the same one whose Coalition government perpetuates one of the greatest inequities in the Australian economy – namely, the tax concessions for superannuation contributions, which flow disproportionately to the richest 20% of Australians.
If the prime minister wants to have a discussion with anyone about taxation fairness, talking through the specifics of unfair superannuation provision in his own economy are a really good place to start.
Presently, the taxation rates that apply to income tax do not apply to superannuation; these tax concessions allow wealthy Australians to offset their surplus income into their super at far lower taxation rate than they would pay on the money as income. The impact of these concessions on revenue are dire; while tax concessions were introduced to superannuation to incentivise Australians to invest in super rather than rely on the pension, economists predict in only two years the cost of the tax concessions will actually supersede that of the cost to the public purse of the entire pension itself.
Realising this, former treasurer Wayne Swan pursued a legislative path with a low-income super supplement the Coalition quashed outright in their first six months of government. At the same time that Australia’s richest are gouging benefits from super’s tax iniquity, Abbott’s budget is stripping the welfare safety net out of the post-war Australian social contract with scaremongering, justificatory rhetoric of debt, crisis and emergency. But rather than looking increasing taxation revenue beyond the tokenistic, nominal and easily avoidable “budget repair levy” applied to a tiny percentage of high-income earners, Abbott is instead infamously furnishing the “repair” of his own manufactured crisis with policies to cut spending – the slashing of services, medical co-payments and uncapped fee introductions, asset sales and privatisations.
After marches, protests and public outrage, Abbott has grasped that “there’s been a political cost” to the budget, but he remains so enamoured of the small government, low-taxation ideology espoused by the North American centre right that he may fatally not understand why.
In this regard, reading the results of a recent study may help. While Abbott lectures counterparts in the United States who govern a nation famously hostile to both taxation and government spending, Abbott’s budget actions are actually in opposition to the taxation ideology of his own electorate. On 6 June, progressive think-tank Per Capita released the findings of its annual tax survey, completed in advance of this year’s federal budget and drawn from a representative sample of Australians.
In what may explain why the first budget of the Abbott government is still dominating public conversation five weeks after its announcement, Per Capita’s findings reveal that 70% of Australians support an increase of government spending on public services. Less than a quarter support Abbott’s Commission of Audit recommendations of privatising services, or outsourcing them. In what should concern the Coalition, only a tiny 8% of Australians actively endorse the government’s policy commitment to spending less.
Unlike our American cousins, a clear majority of Australians (53%) believe that they are paying the right amount of tax, with an overwhelming majority (72%) believing high income earners pay too little. For budget redress, survey respondents suggested not only increasing taxation on the richest 5% of Australians, but a combined 69% supported removals of tax concessions on housing – and on superannuation, wouldn’t you know.
So if Abbott wishes to influence president Obama by example, he’d do well, perhaps, to heed the leadership of his own electorate on the subject of taxation fairness. Until he does, one can’t really imagine the American president particularly swayed by remarks that conform to the pattern of Abbott’s international trip – of yet more empty rhetoric, more inelegant diplomacy and yet another awkward moment for a burgeoning national cringe.
