One in five privately-owned companies with revenues in excess of $100 million paid no tax last year, the Australian Tax Office has revealed.
Joe Hockey’s wife Melissa Babbage has confirmed that the fee for staying at her Canberra house remains at $271 a night, regardless of who is footing the bill.
The news came as a shock to Mr Hockey, who announced his retirement from politics yesterday after being dumped from the Treasurer position.
A spokesperson for Babbage said there was no reason for the tariff to be scrapped now. “Why would it change? It’s the same house, nothing’s changed. You’re not suggesting the amount was previously claimed simply because the taxpayer was paying for it? It would be strange to change the fee structure now, wouldn’t it?” she said.
She pointed out that there were other, cheaper accommodation options available in the area should Mr Hockey wish to stay in Canberra again.
Mr Hockey said he was currently searching for alternative accommodation options in Washington.
Former Treasurer Joe Hockey announced his retirement from politics today, saying it was time to devote more time to his beloved 2014 Budget.
Mr Hockey, who has been the member for North Sydney since 1996, said he was the only person who still believed in the budget. “It has never given up on me, and I have never given up on it. It is only 17 months old – it needs my full attention now”.
Mr Hockey said he felt he could still pass the budget. “But I can’t do that while I’m in the Parliament. That will now be something I do in the privacy of my own home.
“I will have more to say in due course, but for now I ask you to respect our privacy”.
A night in Melissa Babbage’s Canberra home will rise from $271 to $850,000 today.
The price hike was necessary after Babbage’s husband – Treasurer Joe Hockey – was ordered to pay 85% of his own legal costs for his defamation case against media outlet Fairfax.
“Yes it’s a bit of an increase, but it’s not cheap running a hospitality business these days, so I think it’s fair enough,” Mr Hockey said today, adding, “It’s still great value at $850,000 a night”.
There were no TripAdvisor reviews available of the tax-payer funded hotel.
Treasurer Joe Hockey during Question Time. Photo: Alex Ellinghausen
Never have I less looked forward to a budget. The one due in seven weeks is going to make me feel dreadful; not because of what it will do, but because of what it won’t do.
Last year’s budget (Abbott’s and Hockey’s first) genuinely attempted to bring spending and income into line. Sure, it gave away revenue by axing the mining and carbon taxes (fulfilling an election promise) but it also wound back the growth in pension payments, froze family payments and indexed fuel excise so it would grow over time.
Its gaping hole was any action on winding back Australia’s gargantuan and expanding network of tax concessions, most of which are for superannuation. Treasury’s most conservative estimate has the concession for contributions to super funds costing $15.5 billion this financial year, climbing to $18 billion over three years. The tax concession for the earnings of funds costs $12 billion and is set to almost double to $22 billion. By way of comparison, Medicare costs $20 billion.
Abbott and Hockey explained away the hole by saying the measures in their first budget shouldn’t be seen in isolation. They would be followed by a second package after they had received their tax white paper. It would tackle the benefits paid to high-income Australians through tax concessions in the same way that the first package tackled the benefits paid to low-income Australians through payments.
The discussion paper that was meant to kick off the process was expected in December. At the time, The Financial Review outlined its contents and the number of pages – about 200. But Abbott sat on it because he was in political trouble, promising to release it early in the new year. January, February and then most of March passed without any sign of it. Now Hockey says he’ll release it on Monday, just after the New South Wales election and three months late.
After the discussion paper was to come months of consultation and submissions ahead of a final paper at the end of this year. Unless Hockey extends the deadline, the process will have been severely truncated. If he does extend it, the white paper will be released so close to the next election as to make a bold second package impossible.
In any event, the Prime Minister has signalled there will be nothing bold about this year’s budget (and by extension next year’s budget, which will be just before the election). It will be “almost dull compared to last year”. It is “not going to involve anything like the kind of restructuring that we saw last year”.
In Labor’s last financial year in office, spending exceeded revenue by 5.4 per cent. This year it will exceed it by 13 per cent. The government says it has a plan to get the excess down, but that plan was struck when the iron ore price was $US90 a tonne. It’s now closer to $US50. And it was struck when the government thought it could get most of its measures through the Senate. It now knows it can’t. Many measures it won’t even put up.
So without the ability or the will to genuinely reform the budget this time round, what’s it going to do? It is going to put lipstick on it. It’s going to dress it up with measures that look good, even if they do harm.
They are the sort of measures Hockey used to complain about on budget night. He would put out a document printed in red ink outlining the tricks Labor had used to make it look as if the budget position was improving when it was actually getting worse.
This year Hockey and Co are investigating selling irreplaceable real estate. They’ve contracted PricewaterhouseCoopers to investigate selling the parliamentary triangle buildings that house the Treasury and Finance departments as well as the historic East Block and West Block buildings either side of the old Parliament House and the Anzac Park East and West buildings that flank the view of the War Memorial from Lake Burley Griffin.
Once sold, they would be leased back to the departments of Treasury and Finance and whoever needed to use them. For the next four years (as far out as the budget’s detailed forecasts go), Hockey’s accounts would look good. He would have raised serious money. Beyond that, his successors would be paying out serious rent.
The Howard government sold the purpose-built Foreign Affairs headquarters to the Motor Traders’ Association super fund for $217 million in 1998. By 2017 it will have paid out $311 million in rent. Foreign Affairs can’t move out, and what dressed up the budget nicely in 1998 will cost $20 million or more per year in rent forevermore.
The charter of budget honesty rules allow this sleight of hand for the sale of buildings but not for the sale of corporations, something Hockey is apparently planning to take advantage of.
Only a government that didn’t really care about its long-term finances would use such a loophole, only a government that had given up on doing the hard work it said needed to be done.
Peter Martin is economics editor of The Age
The new head of treasury, John Fraser, believes strongly in the virtue of austerity – the slashing of government spending during economic downturns. That’s helpful for Joe Hockey, who appointed Fraser, because it’s what Hockey also believes. Government spending is bad, because it leads to budget deficits and public debt, which are worse. Practically the government’s entire budget strategy is built around this idea.
Take the proposed GP “co-payment”, for instance. One way or another, the Australian government led by Tony Abbott is determined to put a “price signal” on visits to GPs. The plan has had various iterations since it was announced with virtually no forewarning as part of last May’s budget measures: first, co-payments of $7 for GP visits and $5 for prescription medicines; then a short-lived cut of more than $20 to the Medicare rebate for some consultations; now a $5 rebate cut for general patients that is scheduled to start in July. All iterations do the same thing: increase the out-of-pocket costs for patients when they visit the doctor or buy medicine doctors prescribe, and consequently reduce the amount the government pays through Medicare.
Why is this government policy? There are two reasons. The first is an application of simple economic logic. “Something that’s free is not valued,” said Commission of Audit chair Tony Shepherd last May. According to departmental figures, more than 80% of GP consultations are bulk-billed. When Shepherd discovered that each Australian visits the GP 11 times every year, he concluded that he just didn’t think we were that crook: a price signal would work, in theory, to correct some of the “distortion” presently in the system.
The second relates to what the government sees as the problem of public debt. The federal government’s share of public debt is presently between $350 and $400 billion. On that debt, the government pays interest – just under $1 billion every month. The opportunity cost of paying all that interest, according to Tony Abbott, is a “brand-new tertiary hospital every single month”. Every year the government records a deficit in its budgetary balance sheet – every year the government spends more than it receives in taxation revenue – it adds to the debt and interest burden. And one of the fastest rising components of government spending is Medicare. The Commission of Audit predicted that as the population ages, the cost of the Pharmaceutical Benefits Scheme will grow by 5.4% every year, the Medicare Benefits Schedule (which pays for some or all of the cost of seeing doctors) by 7.1% every year and hospitals by 10.4% every year. The government says “growth in health spending has become unsustainable”.
Of course, $5 here and $7 there wouldn’t do very much to make the system more sustainable. And given that the co-payment was originally going not into the budget but a new “medical research future fund”, the direct effect of the co-payment on the budget was probably going to be close to nil. But by adding a price signal to Medicare – in other words, by moving from bulk-billing towards a “user pays” model – Abbott and Joe Hockey hope, like Tony Shepherd and Abbott’s former health adviser Terry Barnes, that patients will be discouraged from seeing the doctor when they don’t really need to. The best way to cut the MBS component of the budget is not to claw back $5 from every GP visit, but to pay for fewer visits overall. Fewer GP consultations means lower MBS expenses and hopefully even lower PBS expenses, as surely part of the problem of the overuse of prescription medication is that patients are in doctors’ rooms too often in the first place.
All this requires economic literacy of the most elementary, supply-and-demand kind, and the obstinate refusal of Australia’s public to “get it” is causing Hockey extreme frustration. The only way to turn around Australia’s growing debt (and interest repayments) problem is to get the budget back into surplus. To achieve that, Australians need to accept either that they must pay higher taxes – and Abbott promised before the election that they wouldn’t – or that government must cut the amount it spends on services like health, university education and welfare. If the Senate continues to hold up the government’s austerity program, the debt (and interest repayments) will continue to balloon, and Australia will end up just like Greece.
Aside from the government’s media cheer squad and some well-placed business advisers, nobody is buying the above story. The Australian’s Janet Albrechtsen thinks that’s because the public is “selfish”, but it’s probably more the case that the public smells bullshit.
A number of obvious problems with Hockey’s story have emerged. The first is that Australia’s ratio of public debt to its national income – a more meaningful way of talking about debt than the sheer amount of it – is under 30%, as measured as a percentage of gross domestic product, GDP. That’s not high, either historically or comparatively. For the century until about 1970, Australia’s total public gross debt-to-GDP ratio was always above 30%, and it twice (the early 1930s and the late 1940s) peaked above 150%. Greece has a debt-to-GDP ratio of over 170%, and since it joined the European Commission (later EU) in 1981, its ratio has never been below 50%. Out of 50 countries listed by the website Trading Economics, Australia’s ratio is the ninth lowest. And Australia’s ratio is lower than three quarters of the G20 nations. So the government’s central claim – that Australia faces a “debt and deficit disaster” – is itself highly contentious.
Secondly, in leaving relatively untouched the budget amounts spent on wealthier people, Hockey lost all control of the story of his efforts to cut into pensions, welfare, health and education. Those efforts became about unfairness and inequality instead of debt reduction. On negative gearing (a tax-offsetting scheme that allows property owners to amass a portfolio of properties with government support) and tax concessions or rebates to superannuants, private health insurance consumers and trustees, the Australian government spends nearly $50 billion every year. Why did the 2014 budget target the spending that went to the poor but not that which went to the rich?
That the 2014 budget was “unfair” became quickly axiomatic. Early efforts by government ministers to assert that it wasn’t – such as Hockey’s suggestion that low-income earners would not be affected by the proposed unfreezing of the fuel excise because they “don’t have cars or actually don’t drive very far in many cases” – became further evidence that they were “out of touch” with the prevailing understanding of fairness in Australia. More recently, the government has attempted to recast the national conversation about inequality by claiming – as Hockey’s parliamentary secretary Kelly O’Dwyer did in a major speech to a free-market think tank recently – that its 2014 budget is all about “intergenerational fairness”. The question is not whether today’s poor are disproportionately being required to fix the federal finances. It is whether we are prepared to steal from our children to fund our profligate lifestyles today, now that the mining boom has ended the Howard-era good times. National debt, explained Tony Abbott himself to the National Press Club, is really just “intergenerational theft”.
What is government debt, and how is it raised? Could we really be building a new hospital every week if we didn’t need to pay the interest on the government’s present debt? Are we really stealing from our kids?
Governments raise funds in two ways: through taxation, which is politically difficult for obvious reasons, and by issuing bonds and notes. Such instruments are promises to repay whoever buys them at the full purchase price at maturation, which may be in two, five, ten or fifteen years’ time. Like any other loan arrangement, to make it attractive to the bond-buyer, the government must also compensate the bond-buyer during the time the latter holds the bond: it does this by paying interest at fixed intervals. By definition, the bond rate must be competitive with the prevailing price of money on the open market.
When the bond rate is very low, as it is now – the ten-year bond rate is at an all-time low of 2.55% – the government can borrow money and repay bondholders at that rate of interest for the next decade. By definition, if whatever project or investment the government spends that borrowed money on generates a return of greater than the bond rate, the debt is a very, very good idea. And it’s a much better idea to borrow now to fund an infrastructure project that’s predicted to generate high returns (like a new hospital, or a rail extension, or a justice reinvestment scheme to reduce prison spending) than to avoid borrowing and therefore leave that project to a future government that will probably need to borrow at a higher bond rate.
There are many problems with equating all public indebtedness with “intergenerational theft”. One, as explained above, is that it ignores occasions when borrowing can (like using a mortgage to fund the purchase of a house) help the government improve the national asset stocks and actually generate “returns” that over time reduce its reliance on taxation revenues. Another is that such a discourse highlights the Abbott government’s repeal of the carbon price, which was demonstrably working to slow the greatest intergenerational theft of all time: the burdening of future taxpayers with the problem of climate change, which will only become more and more expensive to reverse.
A third problem with the government’s “intergenerational theft” analogy is that it fundamentally misrepresents the nature of public debt and government budget deficits, and their relation to private debt. For some time now in Australia, governments of both colours have sought to persuade voters that budget deficits are bad (because they lead to debt and interest payments and now intergenerational theft) and budget surpluses are good. But mostly what a surplus means is that the government is taxing more than it is spending on infrastructure and services. In other words, surpluses take money out of the economy, which is sometimes a good idea – as in during times of inflationary risk like economic booms – but is sometimes a bad idea – like during recessions and economic downturns. If a budget surplus is desirable it’s because it reflects, rather than generates, good times. Pursuing a surplus at all times is like expecting the full cart to somehow push the horse uphill rather than drag it down to the bottom. The only inevitability is, in fact, a gigantic crash.
The Abbott government’s preferred method of generating a surplus – expenditure cuts – can be described as a program of mild austerity. But as Europeans have (not?) learnt since the 2008 global financial crisis, austerity programs don’t often work as intended. As John Maynard Keynes recognised in his General Theory (1936), if consumption is the final goal of economic activity in market economies, then reducing the spending power especially of people at the lower end of income scales during downturns or recessions when their jobs are less secure will tend to exacerbate the downturn across the whole economy. As Mark Blyth argues in his more recent history of Austerity (2013), the recession-augmenting effects of austerity policies have actually been demonstrated on practically every occasion for the last two centuries. It’s no surprise that those European countries that have followed the austerity prescriptions of Brussels have been the slowest to recover, if they’ve recovered at all. It’s also no surprise that Australia, whose government flipped its fiscal policy in line with Keynesian theory and borrowed and spent heavily, was one of the few OECD countries to avoid a technical GFC recession.
Implementing a price signal in Medicare-funded transactions is an austerity measure that aims to dissuade patients from seeing the doctor or purchasing prescription medicine except when they really need it. Putting aside for the moment the odd idea that the number of hypochondriacs who have nothing better to do than to see their GP for no good reason is significant enough to respond with public policy, public health experts have warned the government that cracking down on primary health expenses will very likely push some patients – especially those on lower incomes, who are also statistically the least healthy – into the tertiary health system (that is, hospitals), which is much more expensive. Even if there is evidence of the overuse of GP appointments – and this is highly contentious at best – that probably reflects a working allocation of resources, given that the alternative is even more expensive. Shouldn’t we be encouraging people to see the doctor, if just for checkups, so that problems are identified early? And isn’t it preferable to remove the question of the patient’s capacity to pay from each primary health transaction, and deposit it – as we do already with the Medicare levy, which the government forgets about when it says middle class people should pay to go to the GP – in the taxation system?
The sad experience of unintended consequences pervades the history of austerity, as governments focus too much on nominal fiscal amounts and not enough on what costs those investments are preventing down the track. Likewise, the Abbott government’s desire to claw back a chunk of what it “spends” on university education may well, according to at least one analyst, have the unintended consequence of further blowing out the debt, by increasing the number of bad student debts and triggering higher inflation.
Why is the Australian government pursuing policies of mild austerity, aimed at low-income earners, during a time of rising unemployment, stagnant wages and slow inflation? For that matter, why do some of the world’s most important economic organisations – the International Monetary Fund, the European Union and the Organisation for Economic Co-operation and Development – so often prescribe austerity for countries experiencing poor economic conditions? Mark Blyth traces a long march through the institutions of economists trained in the theories of the Austrian school (like Friedrich Hayek), which found renewed favour among Western policymakers during the 1970s. In other words, the belief in the benefits of austerity is more ideological than empirical.
Blyth also records a long-held suspicion of public debt among Western liberal thinkers. For liberals going back to Adam Smith, David Hume and John Locke, the modern state is a necessary evil – necessary to police the inequalities generated by markets and protect private property from the more numerate have-nots who would inevitably steal or destroy it; evil because any institution powerful enough to do so is also powerful enough to turn against them. (That’s not a Marxist view. It was Adam Smith who wrote, in The Wealth of Nations, that “civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.”) When the state needs money, it either taxes (for classical and neoclassical liberals, a bad thing) or raises debt. And despite the largely happy, productive story of public debt over the past two centuries, liberals have always worried that it imposes “unfair” burdens on current and future generations. Hume famously campaigned for most of his 18th-century life against the “degeneracy” wrought by Britain’s public debt, which continued to grow and grow and grow throughout the century of its unchallenged global economic dominance after its war with Napoleonic France ended in 1815.
Australia’s new treasury boss, John Fraser, is at one with Hume in his suspicion of public debt and government budget deficits. He’s more ideologically suitable to the Abbott government than his predecessor, Martin Parkinson, who resigned when he was told he didn’t have Abbott’s confidence. On 25 February this year, Fraser told a Senate estimates hearing that he believes strongly in US President Ronald Reagan’s tax cuts in the 1980s and their claimed (but unproven) “trickle-down” effects. He doesn’t like public debt because it “leaves you liable to the vicissitudes of the market”: when interest rates go up, too much of national budgets are taken up with interest repayments.
Not that that’s a problem for the foreseeable future, however. If Australia faces a debt crisis right now, it’s a crisis of private debt. Never have Australians owed more to banks and other lenders as a percentage of GDP – not even during the recession of the early 1890s. And reducing public debt almost always means private debt will fill in the gaps. Right now, public debt pales into relative insignificance against the level of private debt (more than $2.3 trillion), which makes calls on individuals rather than on risk-pooling states. During the mid 1990s, private debt was less than double government debt ($395 billion to $217 billion in 1995). Private debt then rose exponentially during the period of the Howard government, and at one point in 2008 it was over one thousand times greater than the level of government debt. Not surprisingly, private debt only began to level off – and then only mildly – when the Rudd government switched the fiscal policy direction in response to the GFC. But individuals are now so loaded with household and credit card debt that they can no longer respond as intended – by borrowing and consuming more – when the Reserve Bank lowers the cash rate. What the policies of Abbott and Hockey would achieve, even if they were successful at lowering public debt, would be to send private debt careering even higher.
John Fraser was chairman and CEO of UBS Global Asset Management in London for over a decade from 2001. He was in that role when UBS, which was implicated in the US subprime mortgage crisis and later settled two lawsuits for over $1 billion brought by a US government agency and private investors, suffered among the greatest losses of any European bank out of the financial crisis in 2008-09. UBS received huge bailout injections from the Singaporean and Swiss governments, but Fraser remains “suspicious” of government spending. Mark Blyth argues that the European response to the financial crisis, encapsulated in a banks initiative agreed in Vienna in January 2009, was in the end all about saving the banks’ bond holdings — and it was the pensioners and other welfare recipients who had to shoulder the burden. This is the experience Fraser brings with him into the Australian treasury.
If the government wants to get more bang for its buck, there are countless things it could do. It could stop the billions that flow to already-wealthy Australians through tax offsets. It could legislate to require food companies to stop externalising the cost of obesity, which now means a significant portion of what the government spends on health goes directly to tackling obesity. It could require tobacco, alcohol, energy and indeed other private companies from externalising the costs of their own industries too. It could direct the states to pursue justice reinvestment programs that prevent criminal behaviour instead of locking up prisoners at a daily cost of between $300 and $600 per prisoner despite no rehabilitation benefits. But this government doesn’t want to do those things. It wants instead to pursue debt-reduction programs that have demonstrably failed elsewhere and which will only reduce the stability of young people’s employment and burden future generations with our deferred infrastructure and our climate change problem. If that’s not intergenerational theft, it’s difficult to imagine what is.
Economists contacted by Fact Check offered a range of responses to Mr Hockey’s claim.
Richard Robinson, from business research and forecasting firm BIS Shrapnel, says it is “a reasonable claim” yet points out Australia’s total debt remains low by world standards. “So I would not say we are at a tipping point…yet,” Mr Robinson added.
“I think it’s a bit alarmist,” Jakob Madsen of Monash University told Fact Check, while noting Mr Hockey’s sums are correct.
Professor Madsen also said that while the $100 million a day figure sounds “astronomical”, Australia’s deficit measured as a proportion of gross domestic product is a better measure and at 2.5 per cent is “not too bad” in historical terms.
And former Reserve Bank economist Paul Bloxham, from investment bank HSBC, said that, strictly speaking, Mr Hockey’s assertion that Australia can’t continue borrowing is not correct.
“The market is currently prepared to lend to the Australian government at an historically low interest rate of 2.5 per cent for 10 years,” he said.
This means the market clearly believes Australia’s budget deficit is sustainable at this stage, Mr Bloxham said.
Gordon Menzies, another former Reserve Bank economist now at the University of Technology, Sydney, said if you think of government debt in terms of a household or business debt, then a relevant comparison is that borrowing to buy a house or factory is quite different from borrowing to have a party.
“Some government spending, such as infrastructure spending, will yield ongoing benefits even if the government has to borrow to do it,” Dr Menzies told Fact Check.
Mr Bloxham also said if government spending is directed to investing in future growth, then the spending itself could help to support growth and pay the interest associated with the budget deficit.
“This is why the right question is not if the deficit is sustainable, because it clearly is,” Mr Bloxham said. “It is whether the spending is well allocated to building capacity to support medium-term growth.”
As for whether Australia is living beyond its means, Mr Robinson said the Government’s main problem is that it doesn’t have enough revenue to match expenditure.
“In my opinion, a large chunk of the revenue problem is due to large tax benefits to already wealthy people, with the largest of these being superannuation breaks, capital gains tax breaks and negative gearing,” Mr Robinson said.
Mr Hockey is using a conservative figure to estimate the daily cost of borrowing the difference between the Government’s expenditure and its revenue.
But economists said his statement that we are at a “tipping point” is more open to debate.
They point out Australia’s debt and deficit are not at particularly high levels historically, or internationally, and that investors are prepared to lend more to the federal Government. They also point out that some spending goes towards building infrastructure and investing in future economic growth.
My advice would be to ensure you include that prediction in your memoirs to show that at least you were thinking of them. But I wouldn’t spend any more time on it than that. You may rest assured that life in 2165 will be vastly different from ours today and such trivial matters as retirement will not be getting too much attention. Feeding them, yes. Retiring them, no.
While speaking with Neil Mitchell on 3AW this morning Joe explained how his son had broken his leg over Christmas and after several consultations and X-rays, he only had to pay $40 for a waterproof cast. Wow, that much?
“That’s wrong,” Joe said. “The fact we are living longer is great news. It’s kind of remarkable that somewhere in the world today, it’s highly probable that a child is being born that is going to live to 150. That’s a long time.” Yes, it is, Joe. It’s certainly longer than you or I will live.
However, I hope you also took note of the quality of the service your son received at what I presume was a public hospital. If you felt that as a high income earner you were paying too little, then why don’t you abolish the private health insurance rebate, and raise the Medicare levy for high income earners so that the quality of service you received can be better funded?
“The question is how we live with dignity and ensure we have a good quality of life the whole way through. This is the conversation we are going to have with Australia over the next few months,” he added. Well, if you continue trying to cut Medicare funding, you should be more concerned about the good quality of life we have today instead of worrying about the state of things in 2165.
Trying to make us feel guilty about what we pay today compared with the state our hospitals in 150 years tells me that you are not living in today’s world, that you are not in touch with today’s people, except of course, the high income earners for whom $40 is not even a drop in the ocean.
You should not have paid anything for your son’s accident. Your Medicare levy should have covered it. If you think paying $40 was wrong, then perhaps you should increase the levy to 3% for high income earners. That way, you might share the burden more equitably with those on lower incomes who pay the same rate you do.
If you are, as you suggest, planning to have a conversation in a few months about the health prospects for the nation in 150 years’ time, I don’t like your chances of cutting through. Most of us are struggling enough just getting through today.
THE CABIN ANTHRAX, MURPHY, N.C. (CT&P) – Republican presidential candidate and well-known kook Dr. Ben Carson was declared legally insane this morning by a judge in Michigan, Carson’s home state. The judge relied on evidence given by physicians from Johns Hopkins Hospital and testimony from individuals close to the Carson campaign.
Carson’s speech to the RNC’s winter meeting outside San Diego last Thursday seems to have been the tipping point that forced aides, Republican operatives, and loved ones to take action.
In the speech, Carson compared ISIS militants to American patriots who took up arms against the British during the Revolutionary War.
“A bunch of rag-tag militiamen defeated the most powerful and professional military force on the planet,” said the unhinged neurosurgeon. “Why? Because they believed in what they were doing. They were willing to die for what they believed in. Fast forward to today. What do we have? You’ve got ISIS. They’ve got the wrong philosophy, but they’re willing to die for it while we are busily giving away every belief and every value for the sake of political correctness. We have to change that.”
Later in the speech, Carson compared Nazi SS troops to the Salvation Army and the Shining Path guerrillas to civil rights protestors in the 1960’s. Carson went on to compare Adolph Hitler to Abraham Lincoln and Pol Pot to John F. Kennedy. “You really have to admire these people for their willingness to do whatever it takes to achieve the objective,” said a sweating, trembling Dr. Carson.
“This is just one in a long series of weird, disjointed ideas emerging from Dr. Carson’s damaged brain,” said Dr. Frank Black of the Banzai Institute in Holland Township, New Jersey. “We’re really not sure if his mental condition is due to environmental pollutants or a series of mild strokes. We think that the damage has been done over the last decade or so, because it would be almost impossible for someone this wacked-out to make it through medical school.”
Dr. Carson continues to insist ad nauseam that he is “completely rational and perfectly sane.” He has appeared to protest his abuse by the “liberal media” on several Fox News programs such as the O’Reilly Factor, a right-wing apologist show that is a favorite in whites-only nursing homes across the United States.
“Well of course the dude is going claim he’s sane and everything is a liberal conspiracy,” said Dr. Black. “When was the last time you heard a psychopath tell you he was nuts and danger to society? I mean, this guy thinks the earth is 6000 years old, Noah put dinosaurs on the Ark, and America is the modern incarnation of Nazi Germany. He’s a fucking freak!”
Dr. Carson will be placed in McClean Mental Hospital in Boston for a minimum of one month while he undergoes further testing and observation. The staff there has already arranged for a series of town hall-style debates between him and Secretary of State John Kerry, who was admitted only last week. The debates will no doubt be wildly entertaining, considering the fact that one guy is a goofball and the other a raving lunatic. The debates will be moderated by Vice President Joe Biden, who is the only person on the planet fully qualified to understand the two men.
An aide to Dr. Carson told the Washington Post that the decision to place the Tea Party favorite in a mental hospital would in no way affect his candidacy for the presidency. “Since when has being legally insane been a problem for GOP candidates? We have just as good a chance at the nomination as any of those other wing nuts.”
UPDATED: The minimum wage in Australia is facing a major shake-up following today’s release of the much-anticipated report from the National Commission of Audit.
In a surprise recommendation, the commission has suggested that the way minimum wages are set through an annual review overseen by the Fair Work Commission should be scrapped.
Instead, it is proposing a “minimum wage benchmark”, which would fix minimum wages well below what they are now at 44% of average weekly earnings. If implemented tomorrow, it would mean slashing the minimum wage by almost $140 a week.
The recommendation, which has provoked a strong response from the union movement and fuel further criticism that the Commission of Audit – dubbed the ‘Commission of Cuts’ – has delivered on a business wish list, was one of 86 in the 428-page report that was publicly released today.
The report is the product of a five-person Commission of Audit, chaired by Tony Shepherd, a former President of the Business Council of Australia.
They were commissioned by Treasurer Joe Hockey to audit all Commonwealth Government expenditure and identify cost savings to allow the Abbott Government to achieve its fiscal strategy of a surplus of 1% of gross domestic product by 2023-24.
The 86 recommendations released today would generate savings of $60-70 billion a year by 2023-24, the report claims.
But it will do so through controversial measures such as slugging all patients with a $15 fee every time they visited a doctor, slashing the age pension and family payments, and selling government assets like Australia Post.
An estimated 15,000 public sector jobs would be slashed – 5% of the Commonwealth workforce – and the states would also be encouraged to collect their own taxes, while Medicare and Centrelink could be merged into Australia Post outlets.
The recommendations, which take aim at the 15 largest and fastest growing areas of government expenditure, also cast doubt over the future of the National Disability Insurance Scheme and the ‘Gonski’ reforms to school funding.
Mr Hockey was tight-lipped during a short visit to the media lock-up this afternoon, saying that the government’s position on the recommendations would be announced in the Federal Budget in two weeks’ time.
“This is not the Budget,” he said. “This is a report to the Government, not of the Government.
“We have carefully and methodically gone through the recommendations. There are a number of recommendations that would be described as courageous to use a term familiar to some in Canberra. There are some recommendations that represent common sense.”
The report claims that the Australian Government is living beyond its means, spending is wasteful and poorly justified, and business as usual is no longer viable.
• Cutting the real value and tightening eligibility to the age pension, disability support pension, carers’ allowance and other payments.
• Extending the retirement age to 70 by 2054.
• Privatising nine government agencies, including Australia Post, abolishing another seven and merging 35.
• Charging $15 for every visit to the doctor, while forcing more people to take out private health insurance.
• Establishing a ‘minimum wage benchmark’ of 44% of average earnings.
• Winding back redundancy payments under the Fair Entitlements Guarantee.
• Altering the Gonski reforms to primary and secondary education funding by reverting to a system that allows the states more control over schools policy and funding.
• Delaying the full introduction of the National Disability Insurance Scheme.
• Scrapping or reducing funding to a range of industry and trade promotion assistance programs, including those for the auto and steel industries, and the Clean Energy Finance Corporation.
• Slashing at least 15,000 public sector jobs, or 5% of the Commonwealth workforce.
• Requiring young job seekers to move to different parts of the country, even interstate, or lose their allowance.
• Expecting the elderly to pay more of their aged care costs themselves.
• Abandoning Tony Abbott’s paid parental leave scheme for a more modest one, and putting the savings into childcare, including for at-home nannies.
Mr Shepherd argued that an incremental and phased approach to many of the cuts in the report would avoid pain for ordinary Australians.
“We must bring future expenditure and future expenditure commitments in line with our means,” he said. “It’s no good signing up for stuff we can’t afford, and that will increase national debt.
“If we kick the can down the road and leave it too late to make this correction, then the correction will be sudden, it will be difficult and it will be painful.
“And that has been the European and the UK experience . . . So what we are suggesting is let’s take a longer term view of this. Let’s do this over time, let’s do it incrementally and let’s do it fairly.”
But the Australian Council of Social Service said most of the recommendations failed the test of fairness, and had squibbed on the opportunity to look at the real problem of falling government revenue.
ACOSS CEO Cassandra Goldie said if the report was adopted, the community would lose many essential social protections and services.
“A balanced review, which looked at the revenue side as well as spending, would review superannuation tax concessions, one third of which goes the top 10% of wage earners,” she said. “These cost the public purse around $40 billion each per year. They are growing more quickly than the age pension and they are unfair and grossly inefficient, yet they remain untouched.”
And the Community and Public Sector Union warned that the real number of jobs at risk from the recommendations was up to 25,000 given the scope of work the Commission of Audit wants to cut or outsource.
“The Abbott Government and their big business backers need to be reminded that public sector workers are real people not just figures on a spread-sheet,” said CPSU National Secretary Nadine Flood. “They have families and mortgages just like other Australians. Why should their livelihoods be held hostage to this radical ideological agenda?”
The recommendation to scrap the national minimum wage in favour of a new minimum wage benchmark, and to allow the states to set their own minimum wages, will open the Commission of Audit to new criticism that it is implementing a big business agenda – particularly as last year, the BCA, of which Mr Shepherd was then President called for something similar in a pre-election policy manifesto.
The commission’s terms of reference did not ask it to consider Australia’s wage fixing system, as this does not have any direct relevance to government spending – and Mr Shepherd used the limited terms of reference to defend the commission for not investigating new methods of revenue raising.
But recommendation 28 argues that “an excessively high minimum wage is … likely to act as an impediment to government programs to get people back to work.
“Australia’s minimum wage is high by international standards. Containing growth in the minimum wage would improve job opportunities and the effectiveness of the government’s employment policy programs.”
Under its proposal, growth of the minimum wage would be slowed by raising it by the rate of inflation, minus 1%, each year for the next decade until it had reached 44% of national Average Weekly Earnings.
Under a model similar to that of the US, states and territories would then be free to set their own different minimum wage each year, in line with the growth of average earnings in the state.
Australia’s minimum wage is currently $622.20 a week, or 56.3% of average weekly earnings are $1105. At 44% of average weekly earnings, it would be $486.20, or $12.79 an hour. The ACTU is seeking to increase it by $27 a week to $17.08 an hour or $649.20 a week.
In recent years, the ACTU has been warning that the gap between the minimum wage and average earnings is already too wide.
The Commission of Audit report says that having a single national minimum wage disadvantages workers attempting to gain a job in states like Tasmania and South Australia, where the costs of living are generally lower.
It says the national minimum wage is about 45% of average earnings in the ACT, but 65% of those in Tasmania.
But opponents of the move will argue that adopting this recommendation would entrench pockets of working poor in some states, and encourage a race to the bottom over wages.
Adopting the audit commission’s approach would cut the national minimum wage by as much as $209 a week in Tasmania, and $136 a week across the national average.
ACTU President Ged Kearney said the recommended cut to the minimum wage was an attack on the very foundations of Australia’s wages system.
“This is a recipe straight out of the United States – pushing down the minimum wage, getting rid of decent health services and privatising core Government services,” she said.
“Will Mr Abbott continue to be the puppet of Tony Shepherd and the Business Council of Australia and drive down wages and conditions for big business?”
A key plank of the Abbott government’s employment strategy is on the cusp of failure, with just over 500 job seekers so far joining a scheme meant to benefit 32,000.
The $10,000 Restart incentive was unveiled in Treasurer Joe Hockey’s May 2014 budget, the latest bid to tackle a policy area that has long vexed both sides of politics: how to encourage employers to hire mature-age Australians.
Moments after the budget was handed down, Employment Minister Eric Abetz said Restart “more than delivers on the government’s 2013 election policy commitment to lift workforce participation and improve quality of lifeE
It was projected to help up to 32,000 people annually.
However, Senate documents show employers have hired only 510 job seekers through the scheme in the five months since its July introduction.
There are nearly 175,000 Australians over 50 looking for work through Job Services Australia.
The documents warn it is difficult to predict the take-up rate for the $10,000 incentive but it was “likely” demand would grow. If it does not, it’s possible the program could fall 95 per cent short of the government’s target.
Job seekers aged 50 or over who have been receiving income support for at least six months are eligible. Employers who hire them receive up to $10,000 depending on whether milestones are met.
The government has budgeted $524.8 million to fund the project over four years.
Prime Minister Tony Abbott and Senator Abetz point to the scheme as an important component of the government’s so-called Economic Action Strategy.
“As our population ages it’s more important than ever that we try to ensure older people are contributors economically as well as simply culturally and that’s what will happen under an incoming Coalition government,” Mr Abbott said during the 2013 election campaign.
Senator Abetz on Thursday said the government “expects that take-up will increase as employers become aware of the programme”.
“As it stands, there are more than 600 mature-aged workers in jobs today that weren’t as a result of this programme,” he said, suggesting the total number has grown slightly since the 510 figure was reported in the Senate documents.
“The government is focused on building a stronger and more prosperous economy which will see more employment opportunities as employers gain confidence.”
Luring more mature-age Australians into the workforce is a potential boon for the economy but finding the right policy settings to make it happen has vexed both sides of politics for many years.
Under questioning at Parliament House earlier this year, Department of Employment deputy secretary Martin Hehir said programs targeting mature-age workers had proven to be “quite intractable”.
Just 230 employers took advantage of a $1000 annual subsidy under the two-year life of the Gillard/Rudd government’s Jobs Bonus scheme. That program was also meant to benefit up to 10,000 employers.
“So in one sense we know what has not worked in the past, and it has been quite an intractable area,” Mr Hehir said.
“So while the days are very early and the numbers are probably still low to begin with, you would probably have to say that it [Restart] is making faster progress than the previous work in this area.”
The Abbott government’s Commission of Audit noted that the effectiveness of wage subsidies “is open to question” because they may displace other job seekers and jobs may be lost once incentives expire.
Meanwhile, another job-creation scheme has also struggled to gain traction. The Tasmanian Jobs Programme, which offers $3250 to employers in an effort to revive the state’s sluggish labour market, has created 114 jobs in its first year. The government said it would employ 2000 Tasmanians over two years.
Opposition employment services spokeswoman Julie Collins said wage subsidies were “not enough” to support older Australians.
“We have Tony Abbott telling Australians they need to work longer – but in what jobs? People aren’t taking up wage subsidies because the jobs aren’t there,” she said.
The government has pledged to re-evaluate Restart in mid-2016.
When we highlighted the fact that Rio Tinto avoided paying almost half a billion dollars in tax in Australia last year. Yet Joe Hockey is making it even harder for the Australian Tax Office to catch corporate tax cheats.
Tony Abbott achieves the impossible: unity among economists
Economists are refuting the three big picture claims made by the government: 1) We have a budget emergency 2) We have a debt crisis and 3) The carbon tax was ruining the economy #notfittogovern #LNPSociopaths #greenlabor #auspol #votebairdlast
There’s a joke about economists: if you ask five economists the same question you’ll get six different answers. Granted, it’s not a very good joke, but it’s a fair call. Ours is a complex field, and a growing number of economists are acknowledging that the theory sitting behind mainstream economics is mostly rubbish. As a result, it’s very difficult to find consensus on real world events.
But that’s where Abbott and Hockey have achieved what many thought impossible: a true consensus. Unfortunately for the coalition government, the consensus is entirely against them. The Abbott government’s agenda has been driven by three major claims, all of them economic in nature. Let’s see how economists view these three themes:
1) There is a budget emergency
Number of economists who agree: zero
2) The federal government has a debt crisis
Number of economists who agree: zero
3) Carbon pricing is an economic wrecking ball
Number of economists who agree: zero
The above represents a very slight exaggeration. You can find people with some economics qualifications who agree with the government but, without exception, they either work for the Coalition or for some entity with ideological motives (like the IPA or News Corp).
While most would agree that there are serious structural problems with the budget, none would call it an emergency. Chris Richardson, economist and partner at Deloitte Access Economics, said:
We don’t need a surplus tomorrow, we don’t even necessarily need it in five years’ time. I’m more than happy with us getting back to sustainable fiscal finances over the long term. The politics would tend to suggest moving earlier rather than later but on the economics there’s no rush.
Saul Eslake, chief economist at Bank of America Merrill Lynch, said that to call the Australian debt situation a crisis was “to abuse the English language.”
Similarly, Nobel prize winning US economist Joseph Stiglitz used terms such as “absurd”, “crazy” and “a crime” to describe some of Hockey’s budget measures, and dismissed the perceived debt and deficit problems, noting that any Australian who worries about debt “must be out of their mind.” Richard Holden, professor of economics at the Australian School of Business, put it this way: “First, Australia does not have a debt crisis. Or, to put it another way, Australia does not have a debt crisis.”
It doesn’t stop here. The Age recently conducted its annual economics survey of 25 prominent economists. They select economists from a broad range of backgrounds across the spectrum of economics and their views vary widely on almost all issues. None of them agreed with the government on any of the above three topics.
This unique consensus among economists makes it clear that the entire government agenda is based on false premises. How has this exposure affected the Coalition’s agenda or their messaging? Not at all. Not one bit. Not one iota. Let’s be clear about this. We know they’re not being honest about their real motives for policy. They know we know, too. They don’t care.
As I’ve explained previously, the Abbott and Hockey budget, if fully implemented, would have taken us a long way towards the free market social and economic model of the US, and away from the social democracy model of much of Europe. But the question remains as to why they would do this. Who benefits from a US style free market system where government minimises its involvement?
The answer of course is the wealthy and those who already wield power. The greatest beneficiaries of Abbott and Hockey’s policies are their largest financial backers, including the financial industry, the mining and energy industries, gambling interests and real estate companies.
For all the talk about this being the most ideologically driven government in living memory, the reality is something much simpler and more familiar. This government is simply delivering to big money what big money wants.
One of the clearest examples of this is the winding back of the Labor government’s Future of Financial Advice (FoFA) reforms. We know that many financial advisors have been preying on their clients. They make use of clients’ lack of understanding of complex investing and other financial options to direct them to financial products that are not in their interest, but rather in the interests of the advisor. This has been costing consumers huge sums of money, which primarily flow into the hands of the banks.
Labor’s reforms were aimed at making such conflicts of interest for advisors illegal in order to address this complex problem. The Coalition have wound back Labor’s changes and have provided not one defensible reason for doing so. Compliance costs and red tape have actually increased, so that cannot be used as the excuse. Meanwhile, we allow the banks to continue to profit from ripping off their customers.
The same is at play when you examine climate policy. You can’t find an independent economist who thinks the government’s “direct action” plan for tackling climate change is more efficient or effective than a carbon tax or trading scheme. Who likes direct action? The polluters of course. Instead of paying to pollute, they get paid not to pollute. Here’s the real con: one argument we are given is that the carbon tax was too big a burden on consumers. Who’s going to pay the polluters to reduce pollution? The government. Where do they get the money? From all of us. Consumers pay anyway.
The clarity of these examples reveals the sad reality of this government. They are not ideologues, they are just puppets dancing to the tune of those pulling their strings.
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Australian politicians love the idea of mutual obligation. But the disparities underlying it are becoming more and more extreme. Welfare recipients are painted as getting “something for nothing”, and pushed into more and more restrictive versions of the social contract. Meanwhile, corporate citizens are happy to take subsidies and shirk tax, and can expect little or no punishment if they break the law. Some are trying to excise themselves from society altogether. The government has talked tough about tax and regulation at the G20, while gutting enforcement agencies at the same time. Don’t expect that to change.
“NO PORNOGRAPHY” is what the blue signs used to say, alongside “NO LIQUOR”. To make them more “respectful”, the pornography part was changed two years ago to read “PROHIBITED MATERIAL”. The most important part – the “PRESCRIBED AREA” at the top – stayed the same. There are hundreds of these warnings spread across the Northern Territory, most on the outskirts of indigenous communities, but some placed seemingly at random. Near the town of Emu Bore, there’s one on the lonely road leading to a single family’s property, reminding them again and again of the proscriptions. Outside Yuendumu, the locals have placarded their own counter-suggestion: “IF U WANT PORN GO TO CANBERRA”. These signs don’t just delineate the areas affected by the Northern Territory Emergency Response, better known as the Intervention. They also mark another border: the farthest reach of the idea of mutual obligation.
Like the term “economic rationalism”, “mutual obligation” is a piece of Third Way political nomenclature that Australia has made its own. Both concepts were pioneered by the Hawke–Keating governments, before being fully realised by their successors. By 2000, John Howard could tell a Today Show interviewer that “mutual obligation is an Australian concept” and expect no argument. Politicians and government literature now often refer to the idea as being intuitively comprehensible, a kind of common sense. The principle that welfare recipients are expected to provide something in return for their payments has been normalised, especially if the alternative is “passive” benefits.
A love of mutual obligation unites even bitter adversaries in the political class. Policy engineers from Tony Abbott (“Although most people don’t choose to be on welfare, once they’ve become accustomed to it, it’s easy enough to find reasons why going back to work is too hard”) to Mark Latham (“aid the unemployed by developing their skills and reconnecting them with the benefits of work and active citizenship”) have endorsed it. The Liberals use the language of incentives, and the ALP the language of empowerment, but their end points are not so different. Before the last election, Julia Gillard’s reduction of the single-parent payment was given a familiar rationale. While admitting that the Newstart Allowance was too low, the then prime minister made her priorities clear: “I want to see everybody have the benefits, choices and essential dignity that comes with access to paid work.”
Few other kinds of contracts operate like those implicit in mutual obligation: the terms are not negotiable, duties can increase even as payments decline, and one party must fulfil its duties on pain of poverty and homelessness. Its political appeal causes strange ideological inversions: even dry conservatives suddenly become fans of the statist nudge of behavioural economics. But its most eerie power is to make its adherents, of whatever political stripe, junk all the modern information we’ve accumulated about unemployment in favour of conceptions that are centuries old.
Whether or not paid work has an essential dignity rather than a conferred one is open to argument. As the British journalist Jeffrey Bernard put it, “If there was something romantic about [work], the Duke of Westminster would be digging his own fucking garden, wouldn’t he?” But that argument is over for almost everyone in the Australian political class.
Workers are virtuous, but those on welfare are depicted as dole bludgers, job snobs and disability-pension rorters. This is a picture that has little relationship with reality. Unemployment in Australia is almost always a transient and unwilled state, and workers have little control over it. Most of the jobless have worked in the past, and will work again. The official unemployment figure is around 800,000 (and an even greater number of people, almost a million, are classified as underemployed). Total job vacancies in August this year numbered less than 150,000. All the virtue in the world can’t overcome a disparity like that.
Compared to other countries with our level of development, Australia’s spending on unemployment benefits is already low and well targeted. So is our social-security spending. When the Australian Bureau of Statistics released a compendium of relevant data recently, it showed that regardless of age, household demography, income, wealth, or income source, Australian households in 2011–12 were less dependent on welfare than they were in 2003–04.
There was no revelation here, nothing new. The reality of welfare in Australia has been known for a long time. But in the media, and even at policy level, anecdotes and age-old taboos about shirkers rule.
The template for today’s policy thinking on welfare is so old, it can be pulled almost verbatim from a 200-year-old book. Here it is in Alexis de Tocqueville’s Memoir on Pauperism:
Man, like all socially organized beings, has a natural passion for idleness. There are, however, two incentives to work: the need to live and the desire to improve the conditions of life. Experience has proven that the majority of men can be sufficiently motivated to work only by the first of these incentives. The second is only effective with a small minority. Well, a charitable institution indiscriminately open to all those in need, or a law which gives all the poor a right to public aid, whatever the origin of their poverty, weakens or destroys the first stimulant and leaves only the second intact.
The Liberal backbencher Ewen Jones produced a fresh formulation on this just last month. “Is it better to have someone earning and learning?” he asked. “Or is it better to say to them, ‘There’s your dole, go home, eat Cheezels, get on the Xbox?’”
For the current government, “job snobs” are a modern variation on the idea of “sturdy rogues”, the able-bodied vagrants who resisted work in medieval times. They were contrasted with the genuinely needy “impotent poor”. Despite its information-gathering powers, the government isn’t interested in how many of these largely mythological figures clog Centrelinks around the country.
“There are clearly some job snobs around,” Senator Eric Abetz told Lateline in July. “I’m not going to put a figure on it, but we do need to encourage them, for their own sake, for their own benefit.” The employment minister and others believe the best way to encourage them is through work for the dole, a program that has been shown to be spectacularly ineffective. A study by Melbourne University economists Jeff Borland and Yi-Ping Tseng found the Australian variation actively prevented people from seeking long-term employment, locking them into dead-end positions with limited prospects. Jobseekers in Adelaide have found themselves building dioramas of World War One battlefields for RSL clubs. How they were supposed to market this skill on “graduation” is unclear.
The reality is that the assumptions underpinning work for the dole are not economic, but moral. As former Liberal leader John Hewson told the Saturday Paper, the program “is more about prejudice than it is about policy”.
If you’re a welfare recipient, especially an indigenous one, your obligations are devised to be onerous to the point of humiliation. Recently the Coalition mooted plans to no longer accept “reasonable excuses” for missing an appointment with a job agency. Only “extreme” excuses would do, like a bushfire or the death of an immediate family member. Being mentally ill wasn’t an extreme excuse. Being assaulted was, but only if you were assaulted the day before the interview. “Someone subject to an assault a week before their failure would not have a reasonable excuse,” the Australian reported, as it would not “directly prevent them from meeting their requirement (unless they were still incapacitated as a consequence of the assault)”.
Earlier this year, authorities used armed police in riot gear to remove children deemed at risk from an Aboriginal family. The children were later returned to their parents. The Intervention, a multi-million-dollar, multi-agency effort operating from a framework of new legislation, partly implemented by the military, was put together in just six days. By contrast, simply repairing the water supply of the Aboriginal community of Utopia took more than three months.
The government routinely investigates welfare fraud using powers it originally sought to target terrorism. Centrelink now accesses more personal metadata than any other enforcement agency, more often even than the New South Wales Police Force. It’s a simple procedure: a Centrelink agent fills in a form, gets approval from elsewhere in their department, and is authorised to tap into personal phone records and email history. The subject is not informed.
So far there’s not much evidence welfare fraud is out of control. Between 2006 and 2010, Centrelink conducted an average of 4 million compliance reviews each year, which covered 60% of its “customers”. The yield of cases referred for prosecution was on average 0.04%, or 3192 people. In 2012, fewer than 1500 people were referred for welfare fraud.
The Newstart Allowance, always set well below the poverty line, has now become so low that even groups like the Business Council of Australia say it should be increased. Government has so abandoned the unemployed that even employer groups feel compelled to advocate on their behalf, a situation that may be unique in the developed world. According to the current minister for employment, the ideal environment for a young unemployed person is one in which they apply for 40 jobs per month regardless of how many real vacancies are available, work 25 hours per week on menial tasks, and receive nothing in return for six months in every twelve.
One of the ironies of mutual obligation as it’s now conceived is that the vulnerable receive tough treatment, while the powerful are regarded as delicate, unstable and easily upset.
Humiliating job-seekers is supposed to build their moral character, but even tepid criticism of business might lead to “uncertainty”. Tony Abbott gave his own formulation of this at the Rocklea Markets in Brisbane in 2012, arguing that “government … create[s] the sort of stability and certainty which is necessary for confidence and which, in turn, is necessary for prosperity to grow. Stability breeds confidence. Confidence breeds prosperity.” For individuals, on the other hand, the uncertainty that would come from a six-month period of unemployment with no income was a good thing. It’s this inversion that has allowed the concept of mutual obligation to encompass such glaring disparities.
If employment is a necessary pre-condition of moral citizenship, then employers are not just economic actors, but gateways to social legitimacy. Despite the best efforts of the treasurer, Joe Hockey, the term “job creators” has not made an easy transition from American political rhetoric to ours. But the concept has arrived all the same. Ironically, as global competition makes jobs more contingent and precarious, simply being a for-profit entity has taken on a kind of sanctity among the political class, and a corporation fulfils its social obligations simply by existing – while proper regulation, pursuit over unpaid tax, and even prosecution for criminal acts are painted as threats to the moral order. That is, if any of these things could “cost jobs”, which they seem always on the verge of doing.
So while the most disadvantaged are being surveilled and constrained like never before, the social contract’s claim on the privileged has rarely been looser.
Multinationals assert their right to government assistance, both direct and indirect, avail themselves of legal systems, infrastructure, political influence and the many other benefits of civil society, and at the same time often assert that they’re not really participants in society at all. In 2009, Apple Sales International’s accounts stated, for example, that “the company is not tax resident in any jurisdiction”. Its average tax rate across all jurisdictions in which it operates is 4%. In Australia, it claims among other things to be a part Bermuda-based, part Singapore-based company selling second-hand Irish electronics. Last year this arrangement let it pay $36.4 million in tax on more than $6 billion in revenues. The then financial services minister, Arthur Sinodinos, “declined to criticise their actions”, according to the Australian.
The American economist and Nobel laureate Joseph Stiglitz is less reserved. There’s an asymmetry, he says, between corporations taking benefits from legislation, subsidy and other government actions, and their willingness to contribute. “That kind of asymmetry is, I would say, understandable, because they’re trying to hide any income. They’re acting on behalf of their shareholders – but, we might say, rob the rest of the society to do it.
“You can see that across the board. Apple in the United States, its very existence almost depends on the internet. Things like the iPhone wouldn’t exist without the internet. And that was created by the government. The company uses American institutional infrastructure, the legal system, the courts – and it doesn’t pay taxes.”
The company now has greater cash reserves than the US government itself. Apple’s huge war chest is the result of an aggressive form of tax minimisation referred to as base erosion and profit shifting (BEPS). There are different kinds of tax architecture that multinationals use to pare down their bills, but perhaps most common is a complex system of profit shifting and reporting known as the “Double Irish Dutch Sandwich” technique. Take Google, for example. The billions the tech company earns from advertising in Australia are paid to a company called Google Ireland Limited, which then pays them to a Dutch subsidiary, which then pays the money back to another Irish company. Google is an Irish company, except when it is in Ireland, where it is a Bermudan company.
“I am very proud of the structure that we set up,” Eric Schmidt, the company’s executive chairman, told Bloomberg. “We did it based on the incentives that the governments offered us to operate … It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”
I asked Google’s operations in Australia about its tax arrangements. They expressed less pride in the “structure”, and went back to a familiar line about jobs.
“For financial year 2013 we paid $7.1 million in corporate taxes and $15 million in payroll and other taxes in Australia as part of our investment in a local workforce of over 900 people,” their statement read. “We believe international forums like the OECD are the right place to decide tax rules for multinational businesses because everyone would benefit from a simpler and more transparent system.”
It must be pointed out that if employing people were a legitimate excuse to avoid paying company tax, there would be no such thing as company tax. In Australia, the community has agreed that companies should pay tax, and the rate is set at 30% of profits.
Google also noted, with some justification, that while technology corporations inspire most of the excitement around base erosion, profit shifting and transfer pricing, there are plenty of companies in Australia that pay even less tax than they do. Old-school companies in industry and finance are some of the worst offenders.
According to a Tax Justice Network report, a third of ASX200 companies pay less than 10% tax, while 57% operate subsidiaries in tax havens. Not only does Australia miss out on an estimated $8 billion in annual revenue because of these fudges, but many of those taking the most tight-fisted approach are only too happy to unclench a palm when a government handout is available.
Take James Hardie, still making a strong claim to being one of the worst companies in the world. It has deliberately underfunded a compensation fund for asbestos victims that it was forced by the government to set up (its directors were given minuscule fines as a result). Now the fund is unable to meet its liabilities and will have to draw on a government loan facility to make payments to the dying. James Hardie is now arguing that the payments should be made in instalments. In the past two years, it has paid out $600 million in dividends to its shareholders. In the past ten years, the company has paid an average of $0 in corporate tax. In 2012, it won a tax case against the government, which now owed it $300 million.
Andrew “Twiggy” Forrest is the chairman of Fortescue Metals, and the man whose welfare review for the federal government called for “an end to paternalism” while expanding welfare quarantining. In 2011, Fortescue Metals admitted it had never paid corporate tax. “We have not cut a corporate tax cheque to date, no,” was a spokesman’s elegant formulation.
I asked Forrest about his conception of mutual obligation. Even he seemed surprised by how much emphasis the media had placed on the punitive aspects of his report.
“I don’t look at mutual obligation [as] trying to get value for money out of welfare, that is not my purpose … When it comes to welfare, it’s an opportunity for someone to upskill and to become a more valuable member of their community, a more contributing member of their family. There’s an opportunity to grow from that experience.”
I asked him about how people on welfare might come to view their role in the social contract, when they saw highly publicised stories about companies taking research and development tax credits while paying almost no tax. Wasn’t that also a kind of “something for nothing”?
“That’s a hard one, which I’d probably ask Ministers Hockey and Turnbull to turn their minds to. I would suggest that if the Australian government is trying to encourage research, then those companies who do the research have every right to claim it. But if it then leads to artifices which are beyond the spirit of the law, then, yes, I think those companies should be looked at with serious rigour.”
That is happening, at the G20. Google’s dream that these issues be looked at an OECD level has come true. Joe Hockey has been triumphant. “We are determined to improve the integrity of the global tax system by addressing the erosion of our collective tax base through work undertaken by the OECD,” he said, while announcing a Common Reporting Standard for the automatic exchange of financial information. The Australian Tax Office (ATO) itself would be leading one of these new collaborative investigations. Australia would be at the forefront of a new co-operative age of tax collection and transparency, and the twilight of BEPS.
But inside the ATO itself there is a very different impression. The government might be talking tough on tax collection, but its enforcement is weak and getting weaker. When he was still shadow treasurer, Joe Hockey’s main criticism of the ATO was not that it was ineffectual in its collection duties, but that it was “overly aggressive”. It had an “insular and inward-looking culture that has put it at odds with taxpayers”.
“Taxpayers are not the enemy,” he told the National Press Club. “They should be respected.” He mooted a possible break-up of the ATO’s functions, and upon taking government, announced plans to hasten layoffs of 4700 staff over four years. Strangely, for a government that was to renew focus on transfer pricing, the specialist team within the ATO taking aim at multinational tax evasion was disbanded.
The staff cuts were said to be part of Hockey’s deficit-reduction treatment, though that explanation is baffling. Cutting funds to the tax collection arm of government may be the single most inefficient form of austerity there is – each dollar spent on enforcement brings in around six in additional revenue.
So if the rationale isn’t economic, what could it be? “They’re trying,” says Stiglitz, “to give a free ride to rich people.”
The government’s sabotage of its own efforts to go after multinationals caused the normally staid ATO to start leaking in earnest. Senior staff, or former senior staff, describe a transitory, junior bureaucratic culture, where the emphasis is on short, relatively simple investigations, preferably cases that can be cleared in 90 days or less. Often the crudest tactic in company tax avoidance is the most effective: time-wasting.
“There was also an absurd clear-out of senior transfer-pricing staff about two years ago, so there is very little likelihood of the ATO ‘manning-up’ on multinationals any time soon,” an anonymous former tax official told the Fairfax business reporter Michael West. “The best chance of that happening is if the revenue collapses and the government asks the commissioner to explain how that happened.”
To make matters worse, the nation’s big accountancy firms have skimmed off the best of the ATO’s former staff, turning them from gamekeepers into poachers. Armed with intimate knowledge of the inner workings of the ATO, their clients have become more adept at disguising their moves.
It’s not just compliance and enforcement that’s the issue. In practice, the government has offered no policy response to reduce corporate tax avoidance. Despite Hockey’s belligerent talk about tackling the problem, the government has no legislative agenda to rein in tax avoidance, other than to water down measures introduced by the previous government. Having opposed the Senate inquiry into corporate tax avoidance, Hockey seems to be pinning his hopes on brokering a unanimous, comprehensive and enforceable agreement at the G20.
The ATO is not totally toothless, though. In July it used a combination of big data techniques and coercive powers to commence a new hunt for tax evaders. “This data matching program will assist the ATO to identify taxpayers that may be operating outside the taxation and superannuation systems,” said ATO Assistant Commissioner Darryl Richardson.
He was talking about the Music Industry Royalty Payments Data Matching Program. The taxpayers “outside the system” were musicians.
Joe Hockey has earnt a reputation as being sympathetic to high finance. “Around the big banks and financial services industry – they love him,” the writer Joe Aston told the treasurer’s biographer. Hockey’s legacy of a tax-enforcement regime that’s both more enervated and collegial looks like it will cement that loving relationship.
The chasm between how the government treats the most powerful and the rest of us does not apply only to tax affairs. Consider the record of the Australian Securities and Investments Commission (ASIC), Australia’s chief corporate regulator. Like other Western enforcement agencies, its response to the global financial crisis was to do almost nothing. In the five-year period up to February 2014, it prosecuted just 32 insider-trading cases. It boasts failed or non-existent prosecutions in some of the biggest episodes of fraud and collapse in Australian corporate history, among them Securency, Banksia Securities, LM Investment Management, Storm Financial, RAMS and the AWB scandal.
Most recently, it refused to press charges against former Trio Capital executive Jack Flader, claiming it would be “irresponsible”. Flader is the mastermind of the largest superannuation fraud in Australian history; Trio collapsed in 2009, with executives stealing at least $180 million. Government paid the jilted investors $54 million in compensation. It took ASIC three years to interview Flader, leading the Sydney Morning Herald to describe him as a “poster boy for regulator indifference”.
Even in the mundane paperwork it oversees, ASIC itself concludes there is an “unacceptably high level of non-compliance with the financial reporting obligations by administrators of insolvent public companies”. Gina Rinehart’s Hancock Prospecting failed to lodge its annual financial reports on time for seven years. Not only were “reasonable excuses” acceptable, no excuses were necessary. With that kind of attitude to filing forms, Rinehart could find herself in trouble if she’s ever unemployed.
Budget cuts to ASIC are unlikely to improve this situation: 12% in 2014 alone, $120 million in the next five years. Almost 200 of its barely 1800 staff will be laid off. Again the excuse was budgetary, but the animus was openly ideological. In May, the parliamentary secretary to the treasurer, Steven Ciobo, told a post-budget breakfast that “the government thinks that there is scope for the financial services industry, and for all the other industries, to self-regulate more … There will always be (as a general statement of principle) our preference for self-regulation over the need to have a regulator [that is] taxpayer funded.” In response, ASIC admitted that it might be unable to perform its most basic consumer protection functions.
Chairman Greg Medcraft has made some disquieting comments. In 2013, he told a forum that experience has taught him “disclosure doesn’t work, in many cases”, that auditing often does more to hide corruption than expose it, and that “we can’t have cops on every street corner”. More recently, he said that Australia is a “paradise” for white-collar crime and that penalties are “not strong enough, not tough enough”. In June this year, a Senate inquiry concluded that, even accounting for ASIC’s limited powers and resources, “it appears to miss or ignore clear and persistent early warning signs of corporate wrongdoing or troubling”.
Hence, presumably, the new emphasis on self-regulation. It’s a philosophy that works in many ways, and has long been supported within ASIC. For instance, a secretive secondment program brings external corporate lawyers into the bosom of ASIC’s operations. James Wheeldon, a whistleblower who worked with the regulator on fee disclosure before he left in 2005, describes the process as “tainted by corruption”. Not only was his advice routinely ignored in favour of the interests of big banks and super funds, but he was also asked to take instruction from a lawyer on secondment from the fund manager MLC. The lawyer was helping to prepare ASIC’s response to a lobbying submission from MLC. He had helped to draft the original submission, and was now writing part of his own reply.
Nothing symbolises ASIC’s comical misallocation of resources better than the way it now conducts raids. Usually it doesn’t conduct them at all, and the most high-profile bust of 2013 wasn’t on a house or an office, or even a building. It was a tent, the abode of activist Jonathan Moylan, who sent out a hoax press release, ostensibly from ANZ, as part of an environmental campaign against Whitehaven coal. Investigators raided his campsite, seized his computer and phone, and quickly put together a criminal prosecution.
Compare that to what happened during the Commonwealth Bank’s financial planning scandal, where predatory advisers scammed an unknown number of customers out of millions of dollars. ASIC was handed evidence of widespread criminality by internal sources – it responded with a year of paralysis. Then, instead of prosecution or investigation, it reached a “settlement” with the bank, a compensation package that amounted to a fraction of the amount taken. The CBA apologised for its “defensiveness” on the issue, which included having consumer advocates tailed by private security firms, inducing the defrauded not to do media interviews, promoting advisers (including the infamous Don Nguyen) who had forged signatures, and giving huge bonuses to the executives who oversaw the toxic divisions. It claimed a “small number” of customers had been given “poor advice”. This number was later revised to a possible 400,000.
After all this, ASIC praised the CBA for its “co-operative and consultative approach”. The CBA explained that it had promoted Nguyen in 2008 so he would be “subject to higher levels of supervision”.
It’s this kind of behaviour that shows the illusory nature of the social contract that mutual obligation is supposed to be based on. The CBA isn’t exactly a rugged free-marketeer. Deemed too big to fail, it benefits from an effective subsidy estimated to be as much as $4.5 billion a year. The government rushed to guarantee the bank’s loans during the financial crisis, and funnels billions in compulsory superannuation its way every year. The minimum expectation in return is that it avoids rampant fraud. It can’t, and even the expectation that this criminality might be punished looks pathetically naive.
“I want a regulator that is feared, not a wimpy group of bureaucrats,” said Nationals Senator John Williams, a key figure in the Senate inquiry into ASIC’s failings, and almost alone in the Coalition in making such criticisms. More representative of his party-mates is Senator David Bushby, chair of the Coalition Economics Committee. Bushby absented himself from Senate hearings where the victims of CBA scams gave evidence. He then produced the sole dissenting report from the inquiry, which otherwise called for a royal commission. Part of his reasoning was emotional. A commission “could protract the emotional strains on victims of malpractice over a longer time period, without the advantage of offering additional remedies beyond those that are already being worked through”. Unwilling to listen to the victims, he was happy to speak on their behalf.
Bushby also stressed the importance of waiting for the outcome of the banking inquiry headed by David Murray, while also suggesting that the banks had learnt their lesson. This dissent, six pages in a 547-page report, was taken up by both Tony Abbott and the finance minister, Mathias Cormann.
The truth is that the banks have learnt their lesson: they know that the people supposed to hold them to account will believe almost anything they say. No matter how many times regulators, judges, politicians or even sections of the media encounter fraud and wrongdoing, it seems a fresh shock every time.
After evidence of endemic fraud, ASIC still trusted the CBA to run the compensation program itself with no oversight, and was so credulous about the CBA’s claims that it cribbed material from the bank for its own submission to the Senate inquiry. Full of lies, it had to be pulled and amended.
“I think it is fair to say that the level of trust and confidence was misplaced by us,” said the ASIC chairman.
The response from the financial industry itself was robustly frank.
“No shit,” wrote John Addis, the director of Intelligent Investor Share Advisor.
Limiting the ban on one of Australia’s most disgraced businessmen to seven years, Administrative Appeals Tribunal member Geri Ettinger said: “I am mindful that there is no allegation that Mr Nguyen engaged in dishonest conduct.” His document-forging was never mentioned.
“The CFP [Commonwealth Financial Planning] outcome reverberated around the financial advice industry,” said Greg Medcraft, as he gravely delivered a slap on the wrist, “and sent a very clear message that ASIC is deadly serious about lifting standards.” The only reverberation was from laughter.
Another Senate inquiry, pushed by the Greens and lacking the support of the government, will examine large-scale tax evasion. There will be well-meaning declarations made at G20. But within the ATO, few expect significant changes. Now the emphasis isn’t on enforcement but “settlement”, avoiding litigation in secret. Not threatening any jobs. More like an agreement among friends.
That suits the government. You might call it a “general statement of principle”. Besides, their attention is elsewhere. News.com.au is running stories on scam welfare recipients again. Under the headline, ‘It’s so easy to fudge a bludge: Online guides used to con doctors into giving out disability support pensions’, the yarn outlines how web forum users share information about how to maintain benefits.
On the web forums themselves, most people are trying to figure out how to get by. “If you do a bit of volunteer work, a bit of study, do some part-time work, you cut your own throat,” wrote one “con artist”. That’s apparently one of the more common kinds of scam among the disabled – trying to work.
When Joe Hockey announced that he was abandoning the 2018 date for returning the Budget to surplus, I suspected that yet again he’d blame the Labor party for his inability to deliver on his promise, but I never thought he’d try to suggest that it was – in fact – the Labor Party that tried to hold him to a target of ever getting it back into surplus.
“I never set a target. That was implied by the Labor party,” he said.
Although this does have the qualifier “based on the numbers presented today”, one would have to suggest that it’s rather disingenuos to base them on numbers that you don’t believe.
JOE HOCKEY (National Press Club, 2012): Based on the numbers presented last Tuesday night we will achieve a surplus in our first year in office and we will achieve a surplus for every year of the first term.
Ok, it’s fair to point out that they did abandon such an ambitious timeline prior to the election, but even after the election we’ve been told many, many times that getting the Budget back on track that’s what’s important.
As Mr Hockey told us in his update on prior to the official update on the Budget:
“Twelve months ago, iron ore was at $120 a tonne,” he said. “There were market expectations it would fall to $95 a tonne. We budgeted $92 a tonne. It’s currently $63 and we are forecasting that it will remain around $60 a tonne for the foreseeable future. That more than 30 per cent fall in iron ore prices has had a big impact on the budget, as has a 15 per cent fall in thermal coal and a 20 per cent fall in wheat prices since the budget. As a result, the forecast decline in the terms of trade this year is the largest since records were first kept in 1959.
“The government has decided to use the budget, which is stronger than it was 12 months ago, as a shock absorber for the biggest fall in our export prices in many years. If we don’t use the budget as a shock absorber for this extraordinary fall in the terms of trade, then Australians will lose jobs and we will lose our prosperity.”
Mm, I don’t quite understand how the Budget is stronger than it was twelve months ago given the expectation is that it’s expected to blow out by billions of dollars in current year. In fact, it may even blow out by more this year than the measures being “held up” in the Senate (which are over the forward estimates and not as enormous as they seem when you say them quickly!) But hey, Joe must know what he’s doing. After all, he sounded so confident when he was in Opposition.
Yep, they’d be a “no excuses, no surprises” government. But they weren’t expecting the commodity prices to fall and so that’s not their surprise, which means that it’s not an excuse either. It’s just one of those things that nobody has any control over.
So Joe’s going to get the Budget back on track. But he won’t be setting a timeline. It seems the blog I wrote yesterday about the Liberals changing their name to the “Sleeping Dogs Party” is closer to the truth than I thought. I should probably sue Joe for copyright.
So Joe tells us that the Budget is going to be used as a “shock absorber” otherwise people would “lose their jobs”. Part of the way he’s using it as a shock absorber is by shutting down government departments and sacking public servants, because they don’t count as real jobs, and they certainly don’t spend the money they earn in the “real” economy. No, this’ll help consumer confidence grow and stop the unemployment rate rising.
So Joe’s going to get the Budget back on track. When he can. Just don’t rush him, ok. He’s had a lot of unexpected events. You can’t plan for the future, you know. And anyway, he didn’t promise a timeline. We just have to know that he’s in there, doing his best.
And it’s all the Labor Party’s fault anyhow.
With all the fuss surrounding the storm in a teacup that was the G20, I’d just like to give a shout out to another notable recent non-event. While our very own treasurer Joe Hockey posed for photo ops with the leaders of the free market, talking up the need to ‘lift people out of poverty’ as the basis for boosting economic growth by 2% above normal growth expectations, the leaders of the world’s 20 poorest countries didn’t meet for multilateral discussions last week, mostly because they weren’t considered important enough get an invite, since they clearly had nothing to bring to the table, and probably could not afford the airfare anyway.
Nonetheless, in the spirit of fairness and equality, let’s take this opportunity to give an enthusiastic hoorah for the undefeated title holder of poorest country in the world, the Democratic Republic of the Congo, whose people Belgium’s King Leopold II is said never to have committed genocide against, killing 10 million.
In a close second place, let’s also raise a glass and a box of used condoms to Zimbabwe, ground zero for the HIV/AIDS epidemic which now affects 20% of its population. Of course this has nothing to do with WHO clinical trials involving human test subjects and a polio vaccine which had been cultured in the kidneys of rhesus monkeys, allowing the Simian Immunodeficiency Virus (SIV) to jump species – so let’s not talk about that.
Followed by a length and a half is Burundi whose economy consists solely of exporting coffee beans but has no sea ports and no direct access to markets so 80% of its population still live in poverty.
In fourth place is Liberia. A nation founded and colonized by freed slaves from America. Is this a dystopian nightmare on steroids? Or a social experiment gone badly, badly wrong? Liberia is still recovering from the civil war which raged through most of the 1980’s killing hundreds of thousands, and is now threatened by the Ebola pandemic.
At the time of writing the world’s fifth poorest country is Eritrea. Gatekeeper of the Suez Canal, in colonial times it was seen as a region of great geopolitical importance by the Italians who ransacked it first, and later the British. Since independence it’s been more or less constantly at war with neighbouring Ethiopia.
Coming up on the inside is the Central African Republic. This is more than likely where those diamonds in your pretty engagement ring come from. 62% of its population live on less than $1 a day.
Next is Niger and then Malawi. 80% of Niger is SAND. Malawi is another landlocked rural economy without access to trade.
In ninth place is Madagascar. If it’s not the exploitation of mineral wealth then it’s tourism which is the cornerstone of most third world economies. Home to some of the most diverse flora you’ll ever see. I should like someday to visit.
Afghanistan is the tenth poorest country in the world. It’s hard to believe that just 30 years ago was a burgeoning socialist economy.
In eleventh place is Mali and in twelfth place Togo, where things are looking slightly up – It’s reported that the average wage in Togo has risen from $1 a day to $1.25 in just under 10 years.
Bringing up the rear are Guinea, Ethiopia, Mozambique, Guinea-Bissau, Comoros, and South Sudan.
Second to last we have Nepal, the world’s 93rd largest country by land mass, with a population of approximately 27 million. Bordered by China and India it is home to the world’s tallest mountain peaks including Mount Everest. It’s also reportedly home to some of the happiest people on earth. Up until 1951 Nepal was an agrarian society, arguably oblivious to its lack of schools, hospitals, roads, telecommunications, electric power, industry or civil service for hundreds of years. Nowadays Nepal is “committed to a program of economic liberalization.” Thank God for progress.
In last place is Haiti, the world’s twentieth poorest country whose citizens are lucky enough to live on $2 a day. All but swept out to sea by a 7.0 Mw earthquake in 2010, despite the billions gifted to NGOs the rebuild infrastructure, there is no indication of economic recovery any time soon.
The global bumblebee fart which was the G20 summit will soon fade away into a cloud of coal dust, remembered most fondly by anyone who happened to catch a glimpse of president Obama, and for the $400m it cost to close down Brisbane for a week, plus whatever Putin’s mini bar bill comes to. Once again our beloved Prime Minister has taken the opportunity to make a complete dick of himself and the rest of us in front of the entire world, playing apologist for big mining in the face of falling iron ore prices and impending climate catastrophe, and whining to his newfound piers how sad it is that the democratic process will not allow him to pass his $7 GP tax or push through his plan to make university degrees less affordable.
Of course none of this should come as any surprise. Maybe we should cut the man some slack? Looking at the P20 it’s pretty clear that mining, agriculture and tourism have been the primary cash cows of some of the most-likely-to-succeed third world economies. I guess you need to see it from the point of view of a sociopathic bottom feeder to understand that old Tones is really doing the best he knows how. It may be another 40 years before Australia gets to play host to such an important event again. Given our current economic trajectory we may be lucky to attend future summits at all. It’s hard to imagine that we will number among the world’s 20 strongest economies for long if we continue on our current path. Still, given the choice between the indignity of poverty and the embarrassment of Abbott’s pointless posturing, this may be for the better.
Joe Hockey has been making noise about tax avoidance.
“They’re stealing from us and our community,” he told the Nine Network on Friday, labelling tax cheats as “thieves.”
Tony Abbott told us we should judge the Coalition on their actions rather than their words – sound advice considering their words bear no resemblance to what they actually do – so it would be timely to consider what they have done to address this growing problem.
While other countries are their closing their tax minimisation loopholes, the Abbott government has spent the past year opening them up.
One of Treasurer Joe Hockey’s first acts in office was to roll back Labor’s measures to tackle profit shifting and improving tax transparency – effectively handing back $1.1 billion to big global firms.
As it pushes for a G20 summit agreement this weekend to crack down on corporate tax evasion, the Abbott government has set a timetable for action that is about one year behind the biggest European economies including Britain, France and Germany.
The “early adopters” in the global program will begin exchanging information in September 2017, however, the exchange of information with Australian authorities will not take place until September 2018.
In March this year, the ATO announced an amnesty for offshore tax cheats. For those who come forward before the end of the calendar year, there is a guarantee of no prosecution and only four years of offshore income is assessed with a maximum shortfall penalty of 10 per cent.
“For lots of people, their forebearers came from war-torn Europe”, tax lawyer Mark Leibler told the ABC’s AM program. “They wanted to keep nest eggs overseas, not primarily in order to avoid or evade tax, but just as a measure of security.”
So these people and their families have been avoiding tax since they arrived here after the war but let’s not worry about that.
Around $150 million worth of assets is the most declared by one person so far. The money has come from 40 countries including Switzerland, the UK, Hong Kong, Israel and Singapore.
Australian Tax Office deputy commissioner, Greg Williams, said new migrants with limited knowledge of Australia’s tax system and people that have deliberately sent money offshore are also among those coming forward.
“You’ve got that whole gamut from old money, new money, recent migrants and people sending the money offshore,” he said.
These ‘people’ include our own government.
Australia’s Future Fund has revealed it has invested more than $20 billion through offshore tax shelters, including the Cayman Islands, warning of lower returns if it does not minimise its tax bill.
The $77bn fund for federal public-servant pensions has revealed that 14.4 per cent of its assets, worth about $11bn, are invested in subsidiaries based in the Cayman Islands (a tax haven in the Caribbean) and a further 1.3 per cent is in its subsidiaries in the British Virgin Islands and Jersey.
On top of this, the fund has tipped 12.6 per cent of assets, about $9.6bn, into private market vehicles based in these tax shelters and a small fraction is invested in a vehicle based in Luxembourg.
Answers to a Senate inquiry revealed that, at June 30, the fund held stakes in 15 tobacco manufacturers including a $55.4 million stake in British American Tobacco in Britain, $44.5m in Lorillard and a $44.9m investment in Philip Morris in the US.
Individuals within the government also embrace the benefits of tax “minimisation”.
In July, it was disclosed that Malcolm Turnbull, Australia’s second-richest parliamentarian, has invested in a ”vulture fund” based in the tax haven Cayman Islands.
Mr Turnbull, who has divested himself of shares and switched his investments to managed funds and hedge funds since being elected, updated the register of members’ interests on June 18.
The IPA, not surprisingly, is against any moves to tighten up the laws.
“Inspired by the sensationalist headlines, the emerging policy agenda for a clamp down on tax avoidance should be seen for what it truly is: a ploy by indebted countries, with overgrown public sectors, to hoover up more cash from productive people and enterprises, stifling tax competition in the process.”
You have to give them credit for never letting morality or ethics interfere. They were no doubt impressed when their much-loved patron, Rupert Murdoch, single-handedly blew an almost billion dollar hole in our budget when the ATO chose not to appeal a court ruling condoning Murdoch’s tax avoidance practices.
In a 1989 meeting, four News Corp Australia executives exchanged cheques and share transfers between local and overseas subsidiaries that moved through several currencies.
They were paper transactions; no funds actually moved. In 2000 and 2001 the loans were unwound. With the Australian dollar riding high, News Corp’s Australian subsidiaries recorded a $2 billion loss, while other subsidiaries in tax havens recorded a $2 billion gain.
By last July that paper “loss”, booked against News Corp’s Australian newspaper operations, had become an $882 million cash payout.
Under a legal arrangement when the company was spun off last June, News was forced to pass all of the tax payout to Mr Murdoch’s 21st Century Fox.
News Corp said it had retained $A81 million because it faced income tax charges on the interest payments by the Tax Office. However it seems unlikely to actually pay these funds: News Corp Australia carried another $1.5 billion in tax deductions from a separate paper shuffle that it made when News reincorporated in the US.
The Australian Taxation Office says its $882 million loss to Rupert Murdoch’s News Corporation may just be the tip of the iceberg.
Tax Commissioner Chris Jordan and deputy Neil Olesen told a parliamentary inquiry the Tax Office has recently lost even more valuable cases against individual taxpayers.
“There are others bigger than this one,” Mr Olesen told a parliamentary hearing in March. “There were significant amounts at stake that we were also unsuccessful with through the courts.”
In a current case, Australian tax authorities allege multinational oil giant Chevron used a series of loans and related party payments worth billions of dollars to slash its tax bill by up to $258 million. The claim is now being heard before the Federal Court of NSW.
Despite growing pressure to crack down on multinationals reaping massive profits in Australia each year and paying little tax, the ATO has been scaling back its technical ability to force the “transnationals” to pay up.
After cuts of $189 million in the May budget, the ATO announced that they had to cut staff by 2,100 people by the end of October.
Community and Public Sector Union (CPSU) deputy national president Alistair Waters said “The tax office has provided evidence to the Senate that for every $1 spent on resources by the tax office, that collects $6 in tax revenue. Obviously if you are pulling resources out of the tax office that makes it easier for people who might want to avoid paying their tax.”
Public servants with hundreds of years of combined technical know-how have left the ATO’s “Internationals’ Group” in recent years, with the process accelerated by the present massive cuts to the agency.
Private advisors hired by “transnationals” to minimise their tax payments know too much about internal workings of the ATO and are using their insider knowledge to profit their clients.
Case deadlines of 90 days imposed on audit teams by ATO bosses eager to increase the number of cases covered have allowed transnationals to simply “wait out” the Taxation Office or to have low-ball settlements accepted.
Swedish furniture giant IKEA paid just $7.7 million in tax in Australia in 2013-2014, despite banking an operating profit of $92 million for its Australian activities that year.
Even the government’s domestic decisions belie their stated willingness to crack down on tax rorting.
Repealing the legislation regarding novated car leases and FBT cost us $1.8 billion in revenue and the only people to benefit are those who fraudulently claim business usage of their car, and the salary-packaging industry that has sprung up to service this perk.
But what can you expect from a Prime Minister who keeps caucus waiting for an hour – his excuse being “he had to schedule an early morning visit to a cancer research centre in Melbourne on Tuesday so that he could justify billing taxpayers to be in the city for a “private function” the night before”.
Or a Treasurer who defended “his practice of claiming a $270-a-night taxpayer-funded travelling allowance to stay in a Canberra house majority-owned by his wife” as did the Communications Minister who “rented a house from his wife Lucy when in Canberra.”
In Canberra, MPs are not required to show a receipt to prove they stayed in a hotel because the blanket $270 rate applies whether you stay in a hotel or a house owned by yourself or another person.
Because of the rules, many MPs purchase property in Canberra to provide a base during parliamentary sittings and use their travel allowance to pay off their mortgage.
We also have our Prime Minister, Attorney-General, Foreign Minister and Agriculture Minister defending their practice to claim travel and accommodation costs to attend weddings whilst grudgingly refunding the money only after it was exposed in the press. Attendance at sporting events apparently still constitutes official business.
Tony Abbott had promised to lead an honest government that would respect taxpayers’ money and end the age of entitlement.
Joe Hockey has “vowed to give the Tax Office whatever laws it needs” and is “determined to use all available resources to close tax loopholes.”
Sorry boys – your actions make me doubt your sincerity.
For someone whose popularity was the envy of everyone in the new Coalition government earlier this year, Joe Hockey must be wondering what the hell happened. His pre-budget popularity among all voters was 21 points on the positive side (51% for and 30% against). Then came his first and possibly last budget. That budget is best described as a fart bomb, the aroma of which just won’t go away.
From that point on Joe has suffered from a lingering case of foot-in-mouth disease. Some of his revealing comments following on from his earlier, ‘end of the age of entitlement’ rant, and his dancing to the ‘best day of my life’ music, on budget night, include ‘old people don’t drive cars,’ and just the other day a mind boggling, ‘we will find any way we can to take money out of universities,’ as said to Phil Coorey at the Australian Financial Review.
So, it’s pretty clear his star has hit a brick wall not just with the electorate generally, but with LNP voters as well. The odd thing is that Joe himself is genuinely surprised at how badly his budget has been received. So one has to ask, did he not think that being unfair to the disadvantaged would rebound on him? What was he thinking? Were the unpopular budget measures his idea, or was he encouraged to go down that path by others? Was he set up?
One thing is for sure. The Treasurer owns the budget no matter who else contributed and Joe will own this one for years to come just like John Howard owned the 1982 budget that preceded Malcolm Fraser’s defeat in 1983. The full impact of Joe Hockey’s budget is yet to be realised because the economy is in much better shape than it was in 1982. That’s the good news.
The government, however, campaigned furiously on fixing the ‘debt and deficit disaster’ and that is the bad news. They did so not realising the nature of the problem which was, and is, falling revenues and excessive tax expenditures. They still don’t seem to realise it, or do they? They still want to curb spending but in fact are doing the opposite. Debt is steadily increasing. Perhaps that is why Tony Abbott wants a more mature discussion about the GST. They know they have to find some new money from somewhere.
Sooner or later the numbers will show them up as utter failures. They have already left it too late. And someone will have to accept responsibility for it. It almost feels like poetic justice that while Peter Costello benefitted hugely from a barrel load of money coming in from China and making him look so good, Joe Hockey’s barrel has shrunk to a tea pot and he is looking so bad.
Costello was never put to the test. Hockey is being tested severely right now and is not looking good at all. The analogy being, that when things are good the music is playing. When things go pear-shaped, the music begins to fade.
If the budget is ever to return to surplus, revenues must rise. That is fundamental. The only way that can happen, short of a revival in China, is to raise taxes and cut tax expenditures; the exact opposite of Abbott’s mantra about lower taxes. They won’t do it. What a delicious opportunity for Labor to exploit. If Bill Shorten and Chris Bowen can climb out of their lethargic slumber and show the Coalition up for the failures they are, Abbott will have to respond.
The likely response is to blame the Treasurer. That’s the way of politics. How long has he got left? Probably one more budget and if it does include tax increases of some description, Joe is screwed. If it doesn’t, by 2016 the Coalition’s economic credentials will be screwed and they will have to go.
The Coalition could have avoided all this last year by campaigning on Labor’s leadership failures and little else, but they had to engage in chest beating about the economy, pointing to their so called success while Costello was Treasurer. They chose to highlight, what seemed to be Labor’s economic failures. In reality, they shot themselves in the foot.
They didn’t hear the music fading. In 12 to 18 months’ time the music will stop.
Hockey in his eagerness to do something right for a change tripped and found himself licking Palmer arse. He’s delayed the increase in compulsory super from 9.5% to 12% for another 7 years. Of course Joe magnanimously said the workers will see that extra money in their pay packets. A straight out lie because employers are not obligated to pass it on.
Tell me an employer that will pass on a 2.5% wage increase when they are not obliged to. His man will go down in history as little more than a waste of space. Please explain Mr Treasurer
‘If it stays with employers the best way to grow superannuation in Australia is to have a stronger economy because ultimately because superannuation is invested back into the economy’
If the employer keeps the money Joe it’s not my super Joe it’s his new Merc or his overseas trip. It’s the Christmas present my wife or kid just might miss out on. Maybe the school excursion. What utter horse shit is the man saying the improvement in my employer’s life style is good for the economy. That’s as Liberal as you can get and Abbott is running the same line on this.