EDITORIAL COMMENT: IS IT A PLAN, OR A FANTASY THAT WILL MAKE US ALL WORSE OFF?
According to the PLAN, increased productivity in the economy will deliver us from inflation and debt. Apparently, Australia is soon to become a “Renewable Energy Superpower” with a broadened industrial base providing capacity to actually process our raw materials for export of “value add”. The first step in achieving the PLAN is of course, the ‘unionisation of everything’. Having unions calling the shots on industrial relations, along with most other policy areas, will help to reduce the flexibility of business to engage its workforce and or adopt technology. Expanding union power is a necessary part of the PLAN despite full employment and rising wages in high demand jobs. This is because election payback is due. The PLAN’s big union payback will also ensure that critical infrastructure can never be completed on time or on budget, if at all. It is important that SMEs also come more under union influence so that they are hamstrung with regulation and unable to fulfil their role as the engine room of the economy. The next step in the PLAN is to discourage investment and the efficient allocation of investment capital. This is achieved by setting prices, interfering in markets, and further regulating business. Once that is complete, the PLAN is for Treasury to tap into our their $3.4 Billion superannuation “honey pot” and ensure that is invested in all the now “un-investable” projects such as build to rent social housing and other money pits that are being dreamt up. Chalmers is already working on re-defining the purpose of superannuation to better suit these purposes and keep Industry Super’s support of the unions and ALP camouflaged. The PLAN also ensures the cost of energy remains high by mandating use of energy sources and infrastructure that are unproven or don’t yet exist, and empowering China by importing from them limited life batteries, wind turbines, and panels all destined for future landfill to create the next environmental ‘emergency’. The PLAN is steadfast in refusing to consider sensible energy alternatives, such as Uranium or even gas, both of which we have in abundance, and which use existing transmission infrastructure. Opening up immigration will further assist the PLAN by putting more pressure on existing urban infrastructure and increasing the welfare base just as businesses reduce their workforces to cope with higher costs and regulation, and the looming recession. Gig economy jobs for new immigrants will evaporate once these roles gain ‘employee’ status and are unionised. The final step in the PLAN is the alteration of the constitution to create an extra layer of government which will inevitably slow legislative and approval processes and confuse and confound government policy.
The PLAN works in conjunction with the VIBE. It is important all along for the PLAN to maintain the voter base of individuals perceiving they benefit from voting for a living or for a VIBE that allows them to feel virtuous. Working the VIBE is greatly facilitated by our shortening attention spans. To get the VIBE people can quickly skim over media grabs which are carefully crafted by armies of spin doctors. Our children can feel good about Net Zero, gender and racial identity, and the Voice, all whilst blissfully not bothering to switch off lights or appliances when not in use. The VIBE is great as long as involves spending other people’s money or building stuff in other people’s backyards. Vibers can revel in receiving more money for less input, oblivious to the simultaneous erosion of their purchasing power and standard of living. Politicians and mainstream media will work as a team to ensure the VIBE prevails and to obfuscate important detail. No way can the VIBE effectively operate if bogged down with messy little details such as how the ‘Voice’ will actually operate.
The problem with socialism is that at some point it has no choice but to eat itself alive because the money always runs out. A great example of this is the recent Victorian state budget. Suddenly people on the Danistan public payroll are seeing their jobs evaporate and at the same time are being hit with Land Tax on their investment properties and holiday houses. Oh Dear!
Clients who were at the coal face during the Whitlam era are saying this is worse. Interesting times to come.
With all the preoccupation with minorities and identity politics, and the division it is creating, the potential impact on society of technology and artificial intelligence seems to be flying under the radar somewhat. This has the potential to eliminate or majorly disrupt a lot of occupations in a very short timeframe. On the downside it also will have the ability to disinform us on steroids. If there are productivity gains to come out of AI, it will be all too late to rescue our current ‘productivity team’.
UNCERTAINTY, INEQUITY, AND INEFFECIENCY ARE AN UNNECESSARY HANDBRAKE
Tax reform is an essential element of raising productivity. Our political system appears to have evolved in such a way that meaningful tax reform is actually impossible. Everybody who has ever really thought about it, knows that increasing and broadening the GST and perhaps looking at some other transactional taxes that can use technology to ‘clip the ticket’ are the way to go. In Australia, taxes on personal income, profits and gains make up 42% of the total compared to the OECD average of 24%, and that is not counting Payroll Tax! These are complex, inequitable, and inefficient taxes that are a waste of economic effort, including the effort expended trying to get around them. For example, taxes such as Stamp Duty and Payroll Tax are an outright disincentive to transact or do business. There needs to be a pathway to enable us to unravel the mess of taxes that distort the way we do things and consume so much wasted time and money.
What is instead happening is that indebted, spendthrift governments are becoming more reliant on these inefficient taxes and stifling investment by sudden opportunistic changes to market regulation, taxes, and royalties. State and territory governments for example, are busy trying to leverage extremely wide definitions of taxable wages to levy Payroll Tax on remittances of patient fees collected on behalf of medical practitioners by practice administration companies. Medical services are already in short supply or out of reach of many people. How does adding a direct cost of up to 6.85% (ACT) assist that? We also need to be increasingly mindful of Land Tax and other potential taxes on property. It is no accident that more and more properties are creeping over thresholds and rates that never change despite rapid increases in value. The ultimate “bracket creep”. The progression of valuations is made worse by the trend over the last decade or so for the government valuers to switch from conservative to aggressive valuations. The satisfaction from receiving a hefty valuation increase on your property is pretty short lived. Victoria has recently announced a new annual 1% property tax on commercial and industrial properties changing hands after 01/07/2024. This will replace one off transfer duty (rates ranging from 1.4% – 6.5%). Other states will no doubt follow the apparently very lucrative shift.
Federally, the lack of tax reform is making common business and investment structures problematic. Instead of trust tax reform, Treasury and the ATO have decided to re-purpose and weaponise S100A. This is a provision of the 1936 Tax Act. We actually have two tax acts running in parallel, 1936 and 1997. Another incomplete tax reform project and a story for another time! Section 100A was originally introduced in the 70’s to prevent unrelated parties trafficking in trust losses and other tax attributes. This blatant policy shift has blindsided the tax profession, created unbearable uncertainty, and added again to the already onerous burden in administering a trust. Because of this, clients will have to micromanage their trusts, incur more cost, pay more tax, and perhaps consider simplification or alternative structures. Whilst family arrangements using company structures and perhaps multiple classes of shares might look like a compelling alternative to trusts now, who knows what might be instore there! There is no doubt Dr Chalmers still has his eyes on franking credits for instance.
INTERESTING FACTS
