The unwinding of an era of supercharged growth in tax revenues is proving to be very boring indeed. Here is what the last ten years of total Federal revenues looks like:
It was all so happy when the pie just kept on growing. But since 2007, the pie is unchanged (though better this past year) and in an economy already run by highly concentrated sectoral interests, the bodice-ripping over the who is going to get what slice has become the hottest game in town.
The trigger this morning is Deloitte’s regular Budget review update starring Chris Richardson, which has fired up the mining lobby. From The Oz:
THE mining industry says the government should have expected the proceeds from the mining tax to be highly volatile, with an estimate by Deloitte Access Economics today suggesting it will add no more than a net $500 million to the budget bottom line this year.
This represents a $1.5 billion hole in the budget from the mining tax alone – enough to wipe out the Gillard government’s promised 2012-13 surplus of $1.1bn. The Australian revealed last month that none of the major resources companies had paid mining tax in its first three months this financial year.
But the Minerals Council of Australia has rejected claims the industry was “not paying its way”, saying payments of royalties and company tax had risen fourfold over the past decade.
Meanwhile, over at the AFR, it’s looking increasingly like a big win for the retail lobby:
The federal government’s GST review is expected to recommend expanding the GST net to catch $4.2 billion in online sales, in a bid to shore up collapsing federal tax revenues.
A move to tax overseas internet sales, by either lowering the $1000 tax-free threshold or imposing the tax on offshore suppliers, would be backed by local retailers, which have long complained that they are put at a competitive disadvantage at a time when online shopping is growing.
…Mr Greiner, who along with former Victorian premier John Brumby and Ferrier Hodgson partner Bruce Carter led the GST review…The GST review’s earlier report warns the government is losing $1.7 billion in tax each year under existing rules. The Productivity Commission found in late 2011 that lowering the tax-free threshold to $100 could collect around $500 million but would cost twice as much to implement. A federal taskforce is reviewing ways to make parcel processing more efficient; it reported in September that imposing GST on imports over $500, would lower handling costs.
Deloitte goes on to forecast deficits of four and five billion in the next two years, which sadly, can only mean the battle for tax will continue.
When I wrote the Great Crash of 2008 with Ross Garnaut in 2009, the good professor surprised me with his line that, if the aftermath of the GFC was handled poorly, the greatest cost to Australia in the long run would be a return to the vested interests business cultures that dominated the Australian economy for most of the twentieth century. As we shift back and forth in a daily pantomime of bogus surpluses, opaque taxes, partial analyses and public/private quid pro quos, where is the simple dictum of competition driving excellence and intervention only upon market failure?
The professor looks increasingly to be right.
