Tax reform needed, not a circus
Not that old chestnut. Didn't they say it was wacky?
The stage lights focused on Tony Abbott, who lampooned Rudd for being a copycat. It was our idea first, said Abbott, omitting the inconvenient detail that, while the Coalition had coyly ventured the idea of a special economic zone a while ago, it soon performed a triple backflip with pike.
As soon as the Labor government ridiculed it, that is. But now, apparently, it's back on. Gina Rinehart was "ecstatic" that both parties had embraced her special northern economic zone.
The election circus rolls on. The political acrobats flip and fudge their way around proper tax reform while they perform their incredible spending feats.
A failed mining tax, the acrimony of the carbon tax, the recent fringe benefits tax kerfuffle and now the special northern zone, again - sideshows all. When it comes to tax, voters have the choice between the lame policies of the government and the invisible policies of the opposition.
Under Rudd Mark I, the Henry Tax Review was commissioned then mostly ignored. Under the Coalition, who knows? They are hardly inclined to spook voters by announcing a credible policy. It would be shot down in a scare campaign, a la their own efforts on the carbon tax.
If there were a shred of credibility left in either party they would put everything on the table. That means the GST, a financial transactions tax - everything.
Privately, most agree there will need to be radical reform to fund the nation's future. Yet governments are increasingly cowed by lobby groups and the spectre of their scare campaigns. Look no further than the admission of the superannuation industry over the weekend that it has geared up for a media blitz at the first suggestion anyone might dare to adjust the world's most generous middle-class welfare system.
This from an industry that would not exist but for government decree.
Lobby groups are increasingly the enemy of democracy. Try to tax the big miners, they eject you from office. Try to tax the finance industry, try even to tighten the loopholes. They are yet to try.
Two news events in recent days illustrated the challenge for governments and their tax regimes.
On the one hand we saw the federal budget deficit billow to $30 billion, thanks to the end of the mining boom and falling tax receipts. On the other, we saw Commonwealth Bank's bottom line billow to $7.8 billion a few days later.
CBA's sharemarket value now towers at $118 billion. It nets $21 million a day - even in a climate of low credit growth - and, like its peers in the banking oligopoly, it is underwritten by taxpayers.
We stand behind them with our taxes, we guarantee their deposits, we own their risk. Even so, the banks vow to pass on the cost of any deposits tax, should it occur, straight to depositors. That is cheek for you.
While there is no doubt the luxury of taxpayer protection should come at some price, particularly in light of the heady profits made by banks while the economy merely trundles along, a deposits tax should be Plan B.
Plan A should be a financial transactions tax, a so-called tax on speculation or a "Robin Hood" tax. It would not undermine investment, or core revenues of the banks. But it would tax useless derivatives and high-frequency traders, and ironically - as they have been drained by the financial crisis and the actions of speculators in the first place - refill government coffers.
Frequently Asked Questions about this Article…
The special northern economic zone is a revived policy idea to create a favourable economic area in northern Australia, recently promoted again by Kevin Rudd. The article notes both major parties have flirted with the idea and that mining interests (for example, Gina Rinehart) have welcomed it — investors should watch for any zone-related incentives or regulatory changes that could affect resource projects and regional investment prospects.
The piece criticises short-term political moves and says real, broad tax reform is needed to fund the nation’s future, pointing to past failures like the ignored Henry Tax Review, the failed mining tax and the carbon tax battles. For everyday investors, meaningful reform could reshape revenue sources and influence markets and public spending priorities.
The article argues governments should consider everything on the table — including the GST — but highlights a financial transactions tax (a so‑called 'Robin Hood' tax) as Plan A because it targets speculation, derivatives and high-frequency trading. A deposits tax is described as Plan B, to be used only if other measures aren’t feasible.
According to the article, an appropriately designed FTT would largely target speculative activity — derivatives and high‑frequency trading — rather than undermining ordinary investment or banks’ core revenues. The suggestion is that it could raise revenue while having limited impact on long‑term investors.
The article highlights the Commonwealth Bank’s recent $7.8 billion profit and its $118 billion market value (about $21 million a day), noting that banks operate with taxpayer underpinnings — deposit guarantees and implicit support. It criticises banks’ public stance that any deposit tax would simply be passed on to customers.
No — the article describes a deposits tax as a fallback (Plan B). The preferred option promoted is a financial transactions tax that targets speculative trading, with the deposits tax being a less desirable alternative given its potential direct impact on depositors.
The article argues that lobby groups increasingly shape policy by mounting media campaigns and scare campaigns; it gives the superannuation industry as an example that is ready to resist any suggestion of changing what the article calls a generous middle‑class welfare system. That lobbying pressure can deter politicians from pursuing bold reforms.
The article points out the federal deficit swelled to about $30 billion due to the end of the mining boom and falling tax receipts, while banks continued to post large profits. For investors, that divergence increases the likelihood of policy responses — including tax reform — which could influence sectors differently and is worth monitoring when assessing portfolio exposure.
Call 1300 880 160
Start a chat
Schedule a call
