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We don’t need no stinkin’ white paper

Scott Morrison’s decision to not continue with the green and white papers on taxation reform should come as no surprise to anyone.

Despite Scott’s assurances that he is going to keep talking, it is patently obvious that he is not going to do any listening, a trait that saw him eventually ousted from his job at Tourism Australia (which, ironically enough, was gifted to him by Joe Hockey in an act of blatant cronyism).

“Morrison fought running battles with Tourism Australia’s nine-strong board. Its members complained that he did not heed advice, withheld important research data about the controversial campaign, was aggressive and intimidating, and ran the government agency as if it were a one-man show.”

After enjoying success with “stop the boats” using a similar strategy, Scott has now planned his new campaign. The spin team have decided on the marketing strategy. Prepare yourself for a barrage of new slogans and buzz words:

Jobs and growth

Work, save, invest

Innovation, Entrepreneurs, Incentivisation, Competition, Agility, Disruption, Commercialisation

But you won’t hear anything about tax concessions for superannuation, negative gearing and capital gains. You won’t hear anything about a land tax or including the family home in asset tests. You won’t hear anything about fossil fuel subsidies or private health insurance rebates or dodgy financial advisers. You won’t hear anything about corporate tax evasion but you will be told endlessly that company tax must be reduced and the only way to pay for that is a hike in GST.

Will the same people who screamed blue murder about a carbon tax meekly accept the inevitability of a great big new tax on literally everything? Every time a price goes up, that increase will compound, unlike any compensation that might be offered which will be quickly whittled away. Do the people who boast about reducing red tape realise the work that will be involved in repricing all stock and reprogramming tills and computers? Have the champions of small business ever considered that a 5-15% price increase may be enough to send some businesses broke as they lose customers?

Morrison assures us we don’t have a revenue problem and that we must decrease the overall tax burden. This is completely at odds with Treasury secretary John Fraser (and everyone else who can read the figures), who pointed out that successive falls in tax receipts have been the “main driver” of every budget downgrade since 2014.

Australia is facing yet another year of below-trend growth, lower than expected tax receipts, and lower income from falling commodity prices with nominal GDP growing at 50-year lows.

“Much of the deterioration in the budget position has been the result of revenue collections falling short of forecasts as we experience the flipside of the mining investment boom,” Mr Fraser said.

“Income tax receipts are being weighed down by lower than expected working-age population growth and weaker wages growth, as well as declines in commodity prices and weaker equity markets.”

And Morrison wants to reduce income tax even further? Removing the carbon tax and the mining tax did nothing to stimulate investment or create jobs.

After wading through the Liberal Party’s National Innovation and Science Agenda Report, it is apparent their plan to boost “jobs and growth” is to protect investors.

“Innovation is critically important to every sector of the economy and the Government’s tax and business incentives under the NISA will encourage smart ideas to encourage innovation, risk taking and build an entrepreneurial culture in Australia.”

The new measures will:

  • provide new tax breaks for early stage investors in innovative startups. Investors will receive a 20% non-refundable tax offset based on the amount of their investment, as well as a capital gains tax exemption;
  • build on the recent momentum in venture capital investment in Australia, including by introducing a 10% non-refundable tax offset for capital invested in new Early Stage Venture Capital Limited Partnerships (ESVCLPs), and increasing the cap on committed capital from $100 million to $200 million for new ESVCLPs;
  • relax the ‘same business test’ that denies tax losses if a company changes its business activities, and introduce a more flexible ‘predominantly similar business test’. This will allow a startup to bring in an equity partner and secure new business opportunities without worrying about tax penalties; and
  • remove rules that limit depreciation deductions for some intangible assets (like patents) to a statutory life and instead allow them to be depreciated over their economic life as occurs for other assets.

“The Government will also reform insolvency laws which currently focus on penalising and stigmatising business failure. We understand that sometimes entrepreneurs will fail several times before they succeed – and will usually learn more from failure than from success.

“The reforms will:

  • reduce the default bankruptcy period of 3 years to 1 year;
  • introduce a ‘safe harbour’ for directors from personal liability for insolvent trading if they appoint a professional restructuring adviser to develop a plan to turnaround a company in financial difficulty; and
  • ban ‘ipso facto’ contractual clauses that allow an agreement to be terminated solely due to an insolvency event if a company is undertaking a restructure.

“The NISA fosters an environment that incentivises and rewards innovation, science and taking risks to succeed. These measures are the next step in building a more innovative and agile economy.

They state that “The Internet is breaking down barriers to entry and presenting an enormous platform for innovation.” This vital piece of infrastructure “currently passes 1.5 million premises, with construction to begin in areas covering almost 7.5 million premises over the next three years”, a far cry from the vision that Labor offered and Tony Abbot’s promises in his campaign speech that “every household gains five times current broadband speeds – within three years and without digging up almost every street in Australia – for $60 billion less than Labor.”

Instead of investing in education in Australia, they intend to “change the visa system to attract more entrepreneurial and research talent from overseas.”

“To get the skills that businesses need now, the Government has been refining its visa settings – including by improving 457s for startups so that they can access the workers they need right now.”

We are told that “Every Australian will benefit from an agenda that puts innovation and science at the heart of government.” Personally I would prefer the scientific community to be running the show rather than the flat earthers who currently occupy the government benches and I am not sure that talk of entrepreneurial risk resonates with the majority of voters.

We have inflation below the RBA’s target zone and stagnant wage growth. This government’s solution is to cut penalty rates, import 457 visa workers, and destroy unions. To address falling revenue, they plan to cut income and company tax rates and give finance and risk protection to startups who are expected to fail more often than not.

Meanwhile, the consumers who would create demand, the labour who would produce the goods, the students who could provide the skills of the future, will all be paying more, working and earning less, and accumulating more debt.

No wonder Scott doesn’t want anyone discussing his plan.

 

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33 comments

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  1. John Hermann

    Kaye, thought it might be worth pointing out that you have used a double negative.

  2. Sir ScotchMistery

    Actually the guy in the middle looks a lot like Joe Hockey, currently removed former minsier for a few things and member for somewhereorother.

    Or are my eyes playing up again?

  3. cornlegend

    Kaye Lee,
    knowing a wee bit of your background , this is more in your line
    “We don’t need no education ”
    Pink Floyd- Another Brick in the Wall

  4. Kaye Lee

    And what a period of my life THAT was cornie, listening to that album. Brings back a lot of memories. Alice Cooper’s School’s Out from the same era.

  5. pierre wilkinson

    thank you Kaye for another brilliant article which admittedly states the bleeding obvious, but is somehow overlooked by the MSM and their sheeple….
    it is still a distinct possibility that Malcolm has intentionally gifted this poison chalice portfolio to scott the dog in order to make him look worse than he already presents
    interesting times indeed

  6. cornlegend

    Kaye Lee,
    I still give “The Wall” a flogging, usually when I drive to Canberra .Think I might nick up there for Wed/Thursday to see if I can get a bit of enthusiasm for politics back

  7. Kaye Lee

    I rather like Lily Allen when thinking about this government

  8. Kaye Lee

    And of course Judy Small

  9. corvus boreus

    ‘All alone, or in twos, the ones who really love you, walk up and down outside the wall.
    Some hand in hand, and some gathered together in bands, the bleeding hearts and artists make their stand.
    And when they’ve given you their all, some stagger and fall, after all, it’s not easy,
    Banging your heart against some mad bugger’s wall’.

  10. Terry2

    Clive Palmer is showing the way when it comes to relaxing – or perhaps manipulating – insolvency laws.

    As the Queensland Nickel saga unfolds we find that the Palmer owned company that became insolvent and is now in administration didn’t actually have any assets, it was merely providing refining services to another Palmer company that owns all the assets and is not in administration.

    So it seems that the job of the administrator has been complicated to the extent that, should he decide that liquidation is the only way to pay employee entitlements and creditors generally – the normal way that these things go when the business model is no longer viable – there won’t actually be any assets to liquidate.

    So, employees and creditors won’t get paid, not to mention site remediation which will cost many millions and probably was the reason that BHP gifted this business to Palmer.

    Do we really need to make it easier for entrepreneurs to rip off the taxpayer ?.

  11. Kaye Lee

    “Do we really need to make it easier for entrepreneurs to rip off the taxpayer ?.”

  12. townsvilleblog

    Morrison is a man possessed by fanatical religion, he thinks he knows it all and doesn’t listen to anyone. The LNP are heading for a huge defeat come election time.

  13. cornlegend

    Kaye Lee
    “I rather like Lily Allen when thinking about this government”

    I rather like “little boy”
    an old joke I know but I like it 😀

    A little boy goes to his dad and asks what is politics?

    Dad says well son let me try to explain it this way. I’m the Prime Minister of the family so let’s call me
    capitalism.
    Your Mum she’s the administrator of the money so we’ll call her the government.
    We’re here to take care of your needs so we’ll call you the people.
    The nanny we’ll consider her the working class.
    And your baby brother we’ll call him the future. Now think about that and see if that makes sense.

    So the little boy goes off to bed thinking about what dad had said.

    Later that night he hears his baby brother crying so he gets up to check on him. He finds that the baby has
    severely soiled his nappy. So the little boy goes to his parents room and finds his mother sound asleep. Not
    wanting to wake her he goes to the nanny’s room. Finding the door locked he peeks in the keyhole and sees
    his father in bed with the nanny.

    He gives up and goes back to bed

    The next morning the little boy says to his father “Dad I think I understand the concept of politics now.”

    The father says “Good son tell me in your own words what you think politics is all about.”

    The little boy replies “Well while the Prime Minister is screwing the Working Class the Government is sound

    asleep the People are being ignored and the Future is in deep shit.”

  14. Kaye Lee

    lolol 🙂

  15. Max Gross (@Max_Gross)

    What was that quote about “the banality of evil” again…???

  16. Kaye Lee

    …..the man displayed neither guilt for his actions nor hatred for those trying him, claiming he bore no responsibility because he was simply “doing his job”. Eichmann was not a fanatic or sociopath, but an extremely average person who relied on clichéd defenses rather than thinking for himself and was motivated by professional promotion rather than ideology. Banality, in this sense, is not that Eichmann’s actions were ordinary, or that there is a potential Eichmann in all of us, but that his actions were motivated by a sort of stupidity which was wholly unexceptional….

    Yup Max….very apt

  17. totaram

    “Much of the deterioration in the budget position has been the result of revenue collections falling short of forecasts as we experience the flipside of the mining investment boom,” Mr Fraser said.

    Indeed. And this is the hand-picked neo-liberal who was brought in to head treasury from some investment bank, after Martin Parkinson was given the boot because he had served under Wayne Swan and was probably not neo-liberal enough. Even he knows that Scott Morrison understands nothing about macro-economics.

    Yes, the government has a spending problem: it is trying to cut expenditure which makes it harder for the private sector to reduce its debt, which is currently at record levels around 150% of GDP.

  18. Faye Cox

    Thanks Kaye.
    Those songs actually give me hope.

  19. Matters Not

    startups who are expected to fail more often than not

    .

    The failure rate for what Turnbull is talking about is rather high. And tax breaks are only part of the mix.

    Nine out of ten startups will fail. This is a hard and bleak truth, but one that you’d do well to meditate on. Entrepreneurs may even want to write their failure post-mortem before they launch their business.

    http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/#73d4764b55e1

    In the early days of the Abbott government there was talk of investigating ‘patent box’ incentives but nothing further. Perhaps it’s discussed in the papers referred to. But there are downsides as well. There’s a few lessons from history to be learnt re patents.

    How many of us use powerboards to plug in all of our appliances?

    In 1972, Kambrook invented the first electrical powerboard.

    Unfortunately, Kambrook failed to patent the powerboard and ended up sharing the market with many low-cost competitors.

    According to Frank Bannigan, the founder of Kambrook, “I’ve probably lost millions of dollars in royalties alone. Whenever I go into a department store and see the wide range of power-boards on offer, it always comes back to haunt me.”

    Going back further.

    Even back in the nineteenth century when Thomas Edison invented the first light bulb, protecting your IPR was important – right? Wrong. Edison didn’t invent the first light bulb – it was Humphry Davy in 1800. Edison was, however, the first to successfully patent the light bulb in 1880. It’s U.S. Patent No. 223,898.

    Edison was in fact one of the most successful and prolific inventors and businessmen of his time, with 1,093 registered patents, which he used to effectively protect his business empire.

    Get it?

    How much does it really cost to protect your intellectual property rights?

    The United States used to lead the ‘patent’ race but now that mantle well and truly lies with China. They now pursue those (some anyway) who do not respect patent rights.

  20. kerri

    Why is the investment community not outraged at the obsession this government has with letting entrepeneurs attempt something, fail, and walk off Scott free??? Is this not a licence to abuse the system? How many clever young “entrepeneurs” will see the benefit in starting up and failing deliberately whilst sinking investments into material goods owned by their partners and children? This is lunacy! If an entrepeneur has a go and fails it is their problem and not something a responsible, mature, incorrupt, government should be encouraging!

  21. Matters Not

    totaram:

    after Martin Parkinson was given the boot because he had served under Wayne Swan and was probably not neo-liberal enough

    Not quite. Parkinson was inaugural Secretary of the Department of Climate Change from its establishment in December 2007. It was in that role where he crossed swords with Abbott. It was Abbott who insisted that he depart and against the advice of Hockey.

    His recall by Turnbull was a deliberate ‘backhander’ by Turnbull to Abbott. Yes they are colleagues. All part of the one happy family. Apparently.

  22. Leighton Smith

    Everything is on the table? How about taxing religious institutions?

  23. Backyard Bob

    I wonder if taxing religious institutions wouldn’t ultimately be a Pyrrhic victory given the enormous contribution they make to social welfare.

  24. margcal

    Over the years, how many home-grown innovators, who managed to get an education without going bankrupt, left the country to pursue their work overseas because the government wasn’t interested?
    Haven’t seen anything in this new dawning of the value of innovation that suggests that this cohort could and should be encouraged to “stay home”.
    Might be something to do with de-funding the CSIRO.

  25. John Hermann

    Yes I agree Totaram, the only spending problem that the federal government has is that IT IS NOT DOING ENOUGH SPENDING.

    One of the main insights we obtain from the study of modern money systems is that – where there exists a pure fiat money system of currency (like ours is) – taxation is not imposed for the purpose of gaining revenue. But rather, taxation is imposed in order to keep a lid on inflation and also to ensure that the population will continue to use the currency created by the government rather than some alternative currency. Moreover, any money paid to the tax office is simply destroyed from the money supply. These facts are consistent with the fact that no monetarily sovereign government is revenue constrained and can never go broke.

    Our federal government is the only entity within the economy which can create net financial assets and inject them into the real economy, which it does in practice via the process of deficit spending. The only constraint on its doing so is where the economy has saturated its capacity to produce goods and services, in which case further spending would run the risk of producing an unacceptable level of inflation. But we are so far removed from such a situation at the present time (owing to the modern fetish for cutting deficits and imposing austerity) that there is no risk of inflation whatsoever. And actually we have far more to fear currently from the risk of deflation — which is far more severe in its social consequences than a modest level of inflation.

  26. gangey1959

    Great article Kaye Lee.
    Alice Cooper’s ‘Poison’ is another one worth digging out of the vaults whenever one hears a politician speaking.
    I like Leighton-Smith’s idea. I reckon about 80% should cover the back dues.
    And when we get to the election, scotty m will have yet another 3 word set for us. “I’M NOT LISTENING”
    None of which will matter, because I’m sure uncle rupert has a full set of front pages ready to go.
    Unless Ms Hall screws him to death first.
    Go Jerry !!!!!!!!

    PS, Whether he was truly evil, plain stupid, or just a very naughty boy, Eichmann was hanged. Maybe the red sea pedestrians have their own version of ‘RULE 303’. I guess he kinda took one for the team, too.

  27. totaram

    “And actually we have far more to fear currently from the risk of deflation — which is far more severe in its social consequences than a modest level of inflation.”

    How true. However, the coalition has no interest in “social consequences” – not the sort of interest you and I have anyway. By the way, I am fully in agreement with what you have written, but I don’t mention MMT because for most people it is a bridge too far. The fact that this government is not spending enough can be justified by the enormous private sector debt (150% of GDP) which needs to be brought down. Simple sectoral balances dictate that this is harder if the government cuts spending. No one can argue with sectoral balances and the national accounting identity because it is simple arithmetic and quite independent of whether it is a fiat currency or not.

  28. 5ime0n

    I am amused at the backwards thinking used when generating these coalition policies. To have innovation, you require individuals who can think up new ideas. Surely funding a world class education system for all, is more likely to create individuals who can challenge old ways of thinking and invent these innovations the government wants investors to support.

    Carl Sagan once wrote in The Demon-Haunted World (pg 384) that suppose you were Queen Victoria and in 1860 you wanted to commission the invention of a way for your voice to carry across impossible distances. This would have been impossible without the discoveries made by James Clark Maxwell, seeking answers because he was curious and driven. Without his discovery that electricity and magnetism join together to become light, we would never know about radio waves.

    Education, especially science education, leads to drive and curiosity. One person cannot innovate a miracle, but generations of educated men and women can build upon the lessons of the past to discover the most amazing things.

  29. KamNam

    Came across this while reading and thought it worth passing on:
    Have you wondered why politicians aren’t what they used to be, why governments seem unable to solve real problems? Economist Yanis Varoufakis, the former Minister of Finance for Greece, says that it’s because you can be in politics today but not be in power — because real power now belongs to those who control the economy. He believes that the mega-rich and corporations are cannibalizing the political sphere, causing financial crisis. In this talk, hear his dream for a world in which capital and labor no longer struggle against each other, “one that is simultaneously libertarian, Marxist and Keynesian.”

    Link to Article:
    http://www.informationclearinghouse.info/article44093.htm

  30. benway

    Wondering the context of ‘not including the family home in asset tests’? I’m pretty sure my pensioner father has been told he must do this by Centrelink.

  31. Matters Not

    Yes ME, it really is a ‘magic pudding’. Everyone’s a winner. There’s no need for a Green Paper, nor a White paper because ‘everyone’s a winner’. Game, set and match. No need to ‘discuss’ or ‘debate’ because there are no losers.

    Can’t believe they can get away with this crap.

    As for the asset test, they want to include my 2 million$ boat which is so, so important to my lifestyle. Just jokin.

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