The Guardian’s Greg Jericho (aka “Grog’s Gamut”) has posted a detailed article today putting into perspective the level of taxpayer assistance provided to the automotive industry and showing that there are plenty of other sectors with their fingers in the Budget pie:
From the talk by some commentators and government ministers you would think the car industry and manufacturing in general is the only industry that receives any government handouts.
The reality is rather different and also rather complicated…
The Productivity Commission found that in 2011-12 the industry that received the most total budgetary assistance was manufacturing with $1.65bn, followed by the primary agriculture industry with $1.44bn and then the electricity, water and gas industry with $1.08bn…
It’s worth, however, getting some context to the assistance to the manufacturing industry. While in the 1970s and 1980s it was massively supported – at the time worth over a quarter of its output, since 1990 its effective support has been on a par with that other great Australian industry, agriculture:
Also, while the Productivity Commission does consider tax concessions as assistance it only includes those which are industry or sector specific. This means it does not, for example, include as an assistance the fuel tax credit scheme, which allows companies to claim a tax credit for the use of diesel fuel in heavy road vehicles.
And yet assist the mining industry it does – to the tune of $2.3bn in 2011-12, compared to only $182m for the manufacturing industry…
One other tax concession not counted by the Productivity Commission is negative gearing. This certainly provides assistance given in 2010-11 negative gearing investors claimed $13bn in losses in their tax. Such investors were claiming an average loss on their property of $10,947…
You could also argue that the $30bn in taxation foregone due to concessional treatment of superannuation contributions and earnings is a massive boon for the financial services industry. But that also is not included as official “assistance”.
So yes, the car industry receives assistance and it is understandable why some are glad to see it will end. But there are plenty of industry fingers in the government pie. And it is worth acknowledging that the reason much of the assistance like the fuel tax concessions or negative gearing remains in place – or remains at its current level – has little to do with economics and more to do with political lobbying.
Hear, hear. Assistance provided to property investors via negative gearing is particularly pernicious and serves no useful purpose. It does absolutely nothing to boost supply, yet the additional demand from tax subsidised investors places upward pressure on home prices, locking-out first time buyers. The billions in lost tax revenue could also be used to fund schools, hospitals, housing-related infrastructure, or any number of other worthwhile endeavours. It is pure and simple rent-seeking.
Advertisement
Superannuation concessions, the bulk of which flow overwhelmingly to higher income earners, are equally unjustifiable on equity or efficiency grounds.
So why aren’t politicians, policy makers and the bulk of commentators attacking these lurks as well?
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
