The Pascometer, Fairfax’s Michael Pascoe, was in fine form yesterday evening, slamming the Abbott Government’s refusal to tackle the rort that is fringe benefit tax (FBT) concessions on cars purchased through a novated lease:
Largely buried by the leadership circus of this month were two releases that serendipitously exemplify the lack of that integrity and provide a quick test of whether a “reformed” cabinet wants to do the best thing for the country…
First up was the 2013-14 political donations list. Second was the Treasury’s 2014 tax expenditures statement…
Among the political donations, a $250,000 gift to the Liberal Party from the Australian Salary Packaging Industry Association stood out… nothing from any other industry group came near it…
Moving right along, there is item D20 of the tax expenditures statement: $750 million this financial year for “application of statutory formula to value car benefits”.
And $760 million next financial year.
And $830 million the following year.
And $940 million the year after.
It adds up to a rather large amount of money.
And it means the vast majority of Australians are subsidising a rather small minority’s ability to buy and run a new car more cheaply than the rest of us, for no better reason than they can through an accident of bad tax policy…
Pascoe is spot on. Readers might recall that the former Labor Government attempted to reform FBT so that those using cars for non-business related purposes could no longer claim a deduction – a move that would have cost those with a packaged car some $3,000 a year (but saved the rest of us).
However, while in opposition, Tony Abbott pledged to dump Labor’s proposal if it won the election, claiming that the policy would adversely hit car industry jobs and that “the only way to stop this is to change the government”. The rest is history. The Coalition won office, Labor’s reforms were dumped, the rort was reinstated, and now the Budget is poorer to the tune of $1.8 billion over four years [note: the above figures, which are larger, include legitimate business use].
The FBT rules have also skewed resource allocation, spawning an entire industry set about rorting the rules (i.e. salary packaging and fuel card companies) – resources that could be put to better use elsewhere in the economy.
That the Coalition denounced changes that would have saved the Budget significant expense and restored greater equity to the tax system, shows just how badly it has erred in its “war on entitlements”.
