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Alan Kohler: How Tony Abbott killed tax reform

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It wasn’t only climate change that Tony Abbott and the Coalition cynically weaponised a decade ago – they did it to tax reform as well.

The two things were merged in the ruthlessly dishonest, but effective description of Labor’s emissions trading scheme as a “carbon tax”, but the result was a full stop to any action on either climate change or tax reform for more than a decade.

In fact, 12 years after Abbott became leader of the Liberal Party by one vote, both the Coalition and the Labor party are still incapable of serious reform of the tax system, or serious action on climate change.

The ascension of Tony Abbott was truly one of Australia’s greatest economic disasters.

Now there is a new push from the Financial Review for another needless inquiry into the tax system to try to generate some momentum for reform that might lift productivity growth, which has been falling since Abbott knocked off Turnbull in 2009.

The goal, broadly, is to shift more taxation from income to consumption and assets, by increasing and broadening the GST and removing the capital gains tax discount and introducing an inheritance tax, among other things. But nothing will happen.

Tax knee-jerkery

No further evidence for that is needed than the response to Tuesday’s piece in the AFR by John Kehoe with the headline that said Liberal MP, and chair of the House standing committee on economics, Jason Falinski, is in favour of an inheritance tax.

Here is what Falinski told Kehoe: “People say the rich don’t pay their fair share. It’s true … Increasingly, the people who aren’t paying tax are the people inheriting their money, such as through trust structures.

“More and more money is being accumulated by lazy capital, and that’s problematic. But if you have a go and it works, we’re going to tax the sh-t out of you.”

Sensible stuff. The words “there should be an inheritance tax” didn’t actually exit his mouth, but the implication was clear and that’s what the headline writer went with.

First thing Tuesday morning, no doubt after one of those early morning phone calls, Falinski tweeted: “Never have, never will support an inheritance tax. And anyone who knows me knows that I am strongly in favour of lower taxes, not higher taxes.”

Then shadow treasurer Jim Chalmers tweeted: “The only major party calling for death taxes is the Liberals. That’s the end of Josh Frydenberg’s unhinged, dishonest and desperate scare campaign about Labor. #Butterfingers can’t even get a scare campaign right without it falling down around him.”

We’re in an election campaign now, so everyone’s on eggshells and pouncing on every hint of a gaffe, but this sort of knee-jerkery about tax has been going on for 12 years.

Former Treasury secretary Ken Henry conducted a comprehensive review of the tax system in 2008. Successive governments have ignored its recommendations. Photo: AAP

The Henry Tax Review

In 2008, then Prime Minister Kevin Rudd commissioned Treasury secretary Ken Henry plus four others to review the tax system and come up with ideas to fix it; a comprehensive package of 138 good recommendations was the result.

The Henry Tax Review came out of the “Australia 2020 Summit” held in April 2008 at which 1002 participants in working groups of 100 concluded, among other things, that “the need for tax reform is urgent”.

The summit’s final report said reform should simplify the tax system, remove distortions, review the taxation of housing, including negative gearing, and improve fairness and participation.

Ken Henry did all that, but by the time his final report was published two years later, Tony Abbott had made tax reform toxic with his frenzied campaign against the so-called carbon tax, and by implication all taxes, and made the Henry Tax Review an exercise in futility.

Kevin Rudd published his response to it on the same day as he released it – May 2, 2010 – and accepted just three of the 138 recommendations: What he called the resources super profits tax (RSPT).

Tony Abbott, after four months as leader of the Opposition, leapt on this as the most evil and destructive policy ever visited upon the nation, with the enthusiastic support of the mining industry.

Not only did they kill the RSPT, but Kevin Rudd lost his job less than two months later.

His successor, Julia Gillard, watered it down into the Mineral Resource Rent Tax (MRRT) but, of course, Abbott campaigned as bitterly against that as he did against the RSPT and the carbon tax, and promised to repeal both at the 2013 election.

Which he did: Gillard’s Clean Energy Act was repealed on July 17, 2014, and the MRRT followed on September 2.

Reform on the back burner

Seven years later, the only changes actually made to the tax system have been tax cuts, and the only attempt to do genuine reform – Bill Shorten’s crazy-brave set of election policies in 2019 – was a disaster and lesson for the ALP.

And the only discussion of taxation in the 2022 election campaign will be ridiculous, damaging, attempts to portray the other side as big taxers – by both sides.

Perhaps if he wins, Anthony Albanese will try to build a new consensus for tax reform with another summit, or maybe he’ll leave it to the next election like John Howard did with the GST in 1998.

Even though the words “tax reform” will not pass his lips during the campaign, Albanese will have it on his mind. It’s just as urgent now as it was in 2008 and the ALP appears to be the only party willing to do any serous reform of anything.

As for the Coalition, there’s no prize for guessing why they’ve given up tax reform and replaced it with tax cuts and attacking the ALP: It works.

Tony Abbott taught Scott Morrison that, along with the new conservative dictum that power itself is everything.

Alan Kohler writes twice a week for The New Daily. He is also editor in chief of Eureka Report and finance presenter on ABC news

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