The Distillery: Tax tricks

Scribes pore over the Coalition tax changes, praising proper process, lashing the FBT call and warning of a budget war.

The tax changes announced by Treasurer Joe Hockey yesterday have jotters jumping in several directions. Given the election promises, most see them as a welcome process of crossing the Ts and dotting the Is. But the reversal of FBT policy gets one scribe really fired up, while another notes the opportunity for Labor to finally get on the front foot.

Meanwhile, the latest quarterly result from the Commonwealth Bank has scribes again in raptures about the profitability of our big banks. However, one commentator can’t help but note niggling concerns. 

Elsewhere, there is renewed hope the glass ceiling in executive boardrooms is gradually cracking, while Hockey receives advice to be more assertive on the GrainCorp takeover.

First to the widespread tax changes. The Australian Financial Review’s Laura Tingle views the announcements as the first shot in a budget war. Labor, it seems, will have the opportunity to return the favour for what it views as years of Coalition grandstanding on the true budget issues.

“Joe Hockey has been dramatically recasting the political debate on the economy since the election. The ‘’budget emergency’’ has disappeared, it seems,’ Tingle notes.

“But after enduring years of Coalition attacks over the budget bottom line and the suggestion there is a budget emergency, Labor will be relentless in its pursuit in the next few months of the Coalition’s about-face on the need to reduce the budget deficit.”

Fairfax’s Malcolm Maiden also delivers a broad assessment of all the changes and comes to the conclusion that much of the hard work is now behind the Abbott government.

“The bulk of the clean-up is done, business is still paying a share of the new money that is being raised, and the government has honoured pre-election promises without severely denting the budget outlook.”

If true, that’s a pretty good result so early into a first term.

Meanwhile, the Herald Sun’s Terry McCrann praises yesterday’s announcement as a victory for proper regulatory process over bowing to the 24/7 media cycle.

“Hockey simply went about quietly addressing this issue of all the announcements on proposed tax changes that had been made, but never actually legislated. He was, in a word, governing. Then when all the important Ts and Is had been crossed and dotted, he made the announcement. No dramas. Just the department doing what's it's supposed to do; the minister (and cabinet) doing the same.”

McCrann does, however, warn of the risk of the plan to tax income in super funds becoming “an on-again/off-again issue at every future election”.

Fairfax’s Michael Pascoe also spots a problem, taking aim at the one Gillard government tax move the Coalition shouldn’t have messed with: the fringe benefits tax on company cars.

“The reality of the FBT rort [is] a relatively small proportion of Australians are having their purchase of a new car subsidised by the rest of us. It's patently dumb policy, a nonsense that Treasury has been trying to get rid of for years but hadn't been able to find politicians with the integrity necessary to deal with the few vested interests that would lose some rent.”

They found them and then lost them in a simple case of a good decision getting shoved aside by smart politics.

In finance, the Commonwealth Bank’s strong quarterly result has Business Spectator’s Stephen Bartholomeusz confident the country’s biggest bank is performing as well, if not better, than its peers.

“While the September quarter earnings do have something in common with the recent full-year results of CBA’s peers – further reductions in impairment charges and references to cost discipline – a 14 per cent increase in cash earnings relative to the same quarter last year is a very strong outcome within the industry context of meagre credit growth.”

AFR columnist Michael Smith, on the other hand, issues two warnings within the context of acknowledging the strong performance.

“One is that reserves set aside for loans that borrowers cannot repay are low. While in line with regulatory requirements, this could backfire if unemployment rises and people cannot repay loans.”

The other was that earnings per share for the major banks actually declined in the second-half if you strip out lower provisions for bad debts.

Still, on the whole, shareholders have plenty to be pleased about.

In other company news, the proposed takeover of GrainCorp by Canada’s Archer Daniels Midland is in the limelight as a Nationals-Liberals rift threatens to widen. The rising tension, Bartholomeusz explains, was inevitable as soon as the honeymoon period ended for the new government.

The Australian’s Judith Sloan agrees that political games were always on the cards, but makes it clear what Hockey should do: “stare down the misguided opponents of the transaction and demonstrate that Australia is open for business”.

That is easier said than done, but Hockey’s comments that ‘he won’t be bullied’ suggest that he is ready to make a tough political decision.

Meanwhile, the AFR’s Chanticleer columnist, Tony Boyd, highlights a real crack in the executive glass ceiling. While there’s been plenty of false starts, Boyd believes there is long overdue “momentum for change”.

Fairfax’s Elizabeth Knight is also confident of surging momentum, with the creation of the Male Champions of Change an important step toward addressing the gender imbalance in management positions.

Finally, The Australian’s David Uren makes the case for why Australia isn’t at risk of becoming a ‘banana republic’, while the Herald Sun’s Terry McCrann wonders if Australia is truly ready to embrace the dairy opportunity.

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