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Not So Taxing Times

The Minerals Resource Rent Tax has commenced and it’s causing problems for the Gillard Government, including in particular, the Treasurer. What most people would not have expected is the way in which it is causing trouble for Wayne Swan. Instead of having to defend a huge tax grab, the Treasurer today was forced to respond to reports in newspaper The Australian that the MRRT failed to raise any revenue in it’s first quarter of operation. This is a circumstance few would have seen coming, though tumbling commodity prices should have provided somewhat of a warning to the pundits.

You see, the Minerals Resource Rent Tax, the renegotiated version of Kevin Rudd’s Resource Super Profits Tax was designed in an interesting way. Even though the name was changed, the new iteration was still a tax on profits. Therefore, when profits were high, the tax would be paid and when they were low, it would not.

Budget papers, released earlier this week in the Mid-Year Economic and Fiscal Outlook showed that the government believed the tax would still raise $2 billion this financial year.

A failure to clearly sell the way the tax works is the main reason that the response today was as it was. Too little time was spent saying that the tax would not raise revenue in bad times, but would in good times.

It is also a failure of design. If the ALP wanted to be sure of revenue then pegging the new tax to profits as they did was not the way to achieve a certain stream of revenue, especially one so easily impacted by poor commodity prices. To make matters worse, the new mining tax is not to prop up revenues with proceeds put away for future benefits. No, the tax revenue raised was to pay for promises made by Labor.

Clearly the turn of events this week, including the broader revenue shortfalls announced as part of MYEFO, make the prospects of returning to surplus extremely unlikely. Commodity prices for one would have to not just get back to where they were, but likely higher to make up for the time when the price was below expectations. Those prices could yet stay low for some time.

But the tough week, more accurately the tough day today did not end there for Mr Swan.

Speaking to reporters in Brisbane today, Treasurer Wayne Swan twice made a mistake when saying how much revenue the Minerals Resource Rent Tax would provide to the budget bottom line. Twice the Treasurer said that the tax would make $9 billion this financial year.

Actually, the resource rent tax is set to make $9 billion, not over the first year, but over the forward estimates, the next four financial years. It was a case of third time lucky for Mr Swan.

Ordinarily a simple gaffe like that does not mean much. It happens to politicians from time to time. However,for a Treasurer battling for a surplus and not having the numbers add up, it adds to a perception of confusion and uncertainty on the part of Wayne Swan and the Gillard Government.

The Opposition of course were crowing, enjoying a day where again, the Treasurer has been squirming over economic issues. But the celebration should also have been a tad on the difficult side for them too. The tax raised no revenue, so it was not doing the damage to the economy and businesses that the Coalition had warned about.

Federal Labor are seeing any remaining hope they had of returning the budget to surplus, which was delusional in the first place, evaporating before their very eyes.

But it is not the surplus the ALP should be most worried about the most. It is a worry, but the least of them. What they should be worried about the most is how much they might have to borrow to pay for the spending promises associated with this new tax of theirs.

Question Time Ahead of Time

Another day of federal parliament and Question Time has passed us by. Tuesday was a bit of a noisy one, louder than Monday anyway. Tuesday’s session of Questions Without Notice saw the Member for Mayo, Jamie Briggs booted from the lower house under standing order 94a for abusing a point of order he raised in relation to an answer from the Acting Prime Minister, Wayne Swan. Despite that, a wide array of issues were canvassed from across the parliament, though the variety of policy areas was more diverse on the government side through the use of the Dorothy Dixer.

The Opposition spent the bulk of Questi0ns Without Notice pursuing the government over their spending priorities, in particular the so-called “big new spending” announced by the government this financial year. The questions pointed out the spending and revenue problems that the Gillard Government faces as they prepare to, most likely in vain, return to surplus next year. Most of the questions asked whether or not taxes would be raised in order to aid the government in returning to surplus.

Though there were a majority of questions focused on the budget, the price on carbon did make a much larger return to the Question Time arena on Tuesday, with questions about hospitals and the carbon tax and closing coal-fired power stations which will at this stage no longer occur as the government seeks to cut carbon emissions.

Oh, and there was the obligatory asylum seeker question from the Coalition at the start of Question Time.

The government again was much less focused on one or two issues during Question Time and continued using the Dorothy Dixer to ask a number of different questions on different policy areas. There were questions on the economy, supporting those in need, the so-called ‘super trawler’, schools investment, health, jobs, skills, wages and housing.

Because of the predictable nature of this, the 43rd parliament, it is almost certain that the strategy for Questions Without Notice for both sides of the political divide will remain the same, or at least largely identical.

On Wednesday, again the Coalition will most likely focus questions to the government around the budget. They will again ask how the government will return to surplus with new and continued spending commitments and whether or not this will require tax increases or whether or not it just won’t happen.

A second major focus may be the price on carbon again which was the focus of the second part of Question Time on Tuesday afternoon. This will likely focus around coal-fired power and businesses and organisations that are impacted by the carbon price but will not receive compensation from the government.

Of course, it being the Coalition, there is always the distinct possibility that there will be at least a question or two on asylum seekers and refugees as the government prepares to send the first boat arrivals to Nauru.

The ALP for their part will again try to prosecute their case for having acted in a wide selection of policy areas. This will likely include again, the comparative strength of the economy, schools investment, health, vulnerable people, jobs, wages, skills, housing and infrastructure.

The only unknown is how bad the behaviour will be, but we can all live in hope that it might just be a little more constrained and dignified than we have become accustomed to when it comes to politics.

Government Still Emitting Mixed Messages and Potentially Leaking Revenue

Carbon pricing is happening, it’s been legislated and that legislation has commenced. The fixed price period began almost two months ago now, on July the 1st. But today things have moved forward as far as the floating price, the emissions trading scheme which will commence in just under 3 years time after the fixed price period ends. The Australian Government has today announced that they’ve reached an agreement with the European Union to link their respective schemes which means Australia joins with 30 other nations in a common market for carbon credits.

But there’s also been a step backwards from existing Labor Party carbon pricing policy, there will no longer be a floor price, that’s gone as part of the pact with the EU linking Australia and European Union countries. This new market, though heavily regulated, will be the largest carbon market in the world, but by no means does it cover anywhere near the majority of the globe and its population. The European ETS covers  just over 500 million people and Australia will add a further 22 million people living under the carbon market.

For the first 3 years of the emissions trading scheme, Australians will have access to European carbon credits but not vice versa. European businesses being able to purchase carbon credits in Australia will be allowed to occur from 2018.

Aside from the broken promise over the carbon price, the biggest point of contention since the decision was made in minority government to pursue the carbon price was over the floor price.

The floor price was instituted by the government supposedly to provide certainty to business and to avoid the price of emissions becoming too low. This price was to be set at $15 per tonne from 2015 when the market-based trading scheme will start. We were told, just as recently as last week that the floor price would happen, though reports had surfaced that the ALP were considering backing away from this element of their climate change policy.

Essentially now, the common market with the European Union will determine the price, any price it likes, and if the EU example is an indication, that price has the potential to go quite low, well and truly under the $29 per tonne that the Treasury modelling banks on for the year 2015-16. This means the revenue projections are surely under serious threat.

But Greg Combet doesn’t think so. The Climate Change Minister today said that the long-term average over the past 4 years of the European ETS has been $23 per tonne of carbon emissions. But whether that’s enough to achieve an effective price of $29 in 2015-16 alone is fanciful. This is especially so with a European economic community in chaos financially, a common market that has seen their permits go as low as single digits per tonne of carbon emissions.

Worse still, this backdown on the floor price is in effect an admission that the Gillard Government was wrong with its legislated policy direction. Rightly or wrongly, it will be construed as the government admitting that a floor price would have hurt Australia and our competitiveness and the people dealing with the flow-on costs of the scheme and that could easily have further negative implications at least temporarily for the struggling ALP.

For an administration struggling with expectations, the mixed messaging and second backflip this month doesn’t bode well in trying to run consistent messaging in areas of public policy and that just makes the government look confused and scared.

By far the biggest damage will be to revenue and that will in turn make promises much harder to deliver, though maybe they’re not too worried about that given the chances that they’ll hold the purse-strings at the start of the floating price are slim. Oh, and the fact that the trading scheme might well not be there under a Liberal Government. But who knows, it’s certainly much, much harder to repeal now.

One Principle of Liberalism Seemingly Forgotten in the Plain Packaging Debate This Week

The federal government’s plain-packaging laws have passed their latest hurdle, a legal challenge in the High Court of Australia which was struck down earlier this week, paving the way for the commencement of the policy from the 1st of December this year. The judgement was eagerly awaited with some predicting the costs of a potential loss at billions of dollars for loss of trademark and intellectual property.

But alas, this never transpired and we are just months away from olive green becoming the most hated colour in the country- or maybe it is already given that it was chosen as the colour for the so-called “drab packaging” that tobacco products will now be clothed in.

On the free choice side of the debate it was all about the right of companies to their intellectual property and trademarks despite the judgement by the highest court in the land.

But there was one element of liberalism that has seemed to be conspicuous in its absence from the debate over the plain packaging laws at least around and since the judgement and that is the ‘Harm Principle’ as defined by the philosopher, John Stuart Mill. This principle states that the actions of individuals should only be limited in order to prevent harm to other individuals. Writing in his book On Liberty, Mill stated “the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others.”

Since the judgement, people have screamed, “well what about putting alcohol in the same ordinary and uniform packaging boat?”. I’m not exactly sure, but last time I checked, the decision to inhale dangerous amounts of alcohol was completely up to the user and the fumes, while awful and an assault on the senses for those within cooee of a heavy drinker, do not have the ability to kill.

That doesn’t mean the effects of alcohol, which have had increased public exposure recently won’t lead to harm to others, sadly they will and that is an horrific reality of a mind-altering substance. Moves have and will continue to be made in an attempt to reduce that harm that is caused to others around heavy drinkers. The difference here is that there is generally a safe level of alcohol consumption before your behaviour becomes thuggish whereas with smoking there is not. Violent offenders too can be that way with or without buckets of booze in their systems.

Putting harmful tobacco products in uniform packaging has only a little, in itself to do with affecting in a positive way the idea put forward by the 19th century political philosopher. But it may go some way to achieving that end.

To put cigarettes in olive green packs will likely not lead to an immediate cut in the rate of smoking as those already puffing away will likely continue as they know their brands well and the new packaging will have little or no impact on their decision-making processes. It’s even debatable whether or not the changes will have any real impact at all with no practical evidence The graphic pictures which couple with the health warnings may continue to contribute to a decline in the rate of smoking as evidence has shown.

But old-style army colour packaging, while possibly contributing to cutting down in the long-term the amount of people sucking back on a cancer stick, coffin nail, call it what you will, while diminishing the harm caused to others by this dreadful habit, will not completely remove that threat of harm to others. Only other measures can do that.

But surely any measure that does have at least some impact in diminishing the number of people smoking in the country surely removes the harm caused to some people and should be celebrated as a positive for public health. Second-hand smoke is bad after all and the less people blowing smoke in your face the better.

But given the danger that smoking is to not just the user, but those around them, the application of the Harm Principle could go much further. Think asbestos. That product causes awful sickness and death too, though smoking at a much higher rate, bu asbestos was phased out late in the 20th century and then banned by the government in 2003.

It is true also that a lot of the harm to others has been removed with many states banning smoking in a variety of public spaces which differs state by state, territory by territory. This can only be seen as a positive step forward.

Moves might continue toward an eventual ban of these slender killing machines, but only when the federal government finds within itself the ability to wean itself off the revenues generated in an attempt to change the behaviour of individuals. Then and only then will the true and full extent of the Harm Principle of John Stuart Mill be realised. That and it might well save substantial healthcare dollars which could be funneled elsewhere.

Question Time Ahead of Time

Today marks the last sitting day of the parliamentary week and the last day of parliament before the budget is announced in Canberra on Tuesday May 8 by Treasurer Wayne Swan. Consequently economics will continue to be the focus of the day in Question Time and the energy of our politicians will be at an almost anxious high as they try to get attention on their programs for Australia and the Opposition throw everything at the Gillard Government in trying to hold them to account.

The focus of the Opposition will continue to be on the two or three key areas that the Coalition have pursued for some time now  in their Question Time and broader political strategy. The two main focal points of the Abbott-led Opposition questions today will continue to be both the carbon tax and the mining tax which have had varying degrees of focus since both have been announced. They have both now been passed by the government and the Coalition will continue to pursue them as they come into force and for any negative impacts they have.

The Coalition also may ask some questions of the ALP Government about Fair Work Australia and its investigation into Craig Thomson, a long-running affair which has provided much political and parliamentary material for the Liberal and National Party Coalition.

The Opposition is likely to also ask questions of the government about the deal announced today to keep Holden producing cars in Australia for the next 10 years at least.

The government, as has been its strategy all parliamentary year will be to focus on their big programs, at the moment the Minerals Resource Rent Tax (MRRT) and how the revenue from it is projected to benefit the community, including low income individuals and small and big business. Some Dorothy Dixer’s, as has been the case this week may be devoted to other topical or even less discussed policies, like the Murray-Darling Basin Plan which received questions in the House of Representatives yesterday.

The Gillard Government will certainly use some Dorothy Dixer’s to ask ministers associated with the car industry about the deal with Holden to keep car production in Australia for at least 10 years and to highlight the benefits of this for the local and national economy.

The usage of the motion to suspend Standing Orders is another eventuality that cannot be discounted, particularly as we head toward a grand total of 50 of them for this the 43rd parliament of Australia. The motion however is less likely to occur as the topics discussed have been the focus of the motion in the past.What may work in favour of a suspension of Standing Orders is another topical issue presenting itself before Question Time today, likely not the Holden issue, or the fact that it is the last session of Question Time until the parliamentary week beginning the 8th of May.

Look for fireworks and restless pollies slanging remarks across the chamber today in the Lower and Upper House. Expect to see a high number of ejections from both sides and even Ministers sat down by the Speaker for not being “directly relevant” to questions asked by the Coalition and even their own side as they attempt to use Dixer’s for having a go at Coalition policy rather than explaining their own. Get your last fix for over a month from 2pm AEDT today

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