Australia doesn’t have a revenue problem, it has a spending problem.
That’s the slightly unconventional view of Australia’s new treasurer Scott Morrison and it’s a view that sets out what looks like the agenda Morrision is likely to pursue in his plans for an overhaul of the tax system.
What’s important about the way Morrison is framing his argument is that he recognises the point Ken Henry made on the ABC’s “7.30” program on Tuesday night, that Australia’s long-term fiscal balance is in trouble.
But, Morrision told Leigh Sales on “7.30” last night that if he just focuses on revenue then he’d be giving himself:
“a leave pass as Treasurer on constantly trying to ensure that we spend taxpayers’ money the best way we can and we raise as little as we need of it and we spend as little as we have to of it to ensure we get the right balance.”
Rather, Morrison said: “I just don’t think we can give ourselves as a government and I don’t think states can give themselves the leave pass of not focusing on what’s within their control. And what’s within our control is how much money of the taxpayers we spend.”
Morrison went on:
“My point about revenue measures and spending measures is there is a tendency to think, ‘Well, we can deal with the budget issue just by jacking up taxes on everyone,’ and that’s not an approach that I intend to follow.
His message is a little complicated but this is a subtle and distinct change in, and reframing of, current settings and expectations within the tax system.
Morrison is saying entitlements, for all Australians, are back on the table for the Tax White paper process.
That’s how the government can rein in spending.
It’s particularly important for older Australians who are able to earn income in retirement tax-free while their kids and grandkids in the workforce, on the same income, pay tax. It’s particularly important for all the other entitlements, including high value properties many live in while claiming the pension.
Back in May, when he was social security minister, Morrison told baby boomers it was time to unlock their assets which have been built up for retirement.
At the time he said, “the purpose of providing tax incentives to encourage people to build up their super is so they can draw down on it in their retirement, not maintain it as a capital pool to be passed on as an inheritance.”
It’s a point he’s made again in an interview with Phil Coorey in the AFR this morning.
“With an ageing population, under the right settings, we are unlocking the capital of older Australians, then you are creating new markets for those services in Australia,” Morrison said.
Think about that. Morrison told Sales on “7.30” that he is not in the camp that says “the way that we drive this economy in the future is to jack up taxes”.
Which implies he’s not in the camp that says all the current entitlements in the system are sacrosanct and grandfathered.
He doubled down on tax increases, saying:
That’s not something that I’m prepared to embrace…and it’s not something that I’m going to allow to guide our decision making because as Treasurer, I have to focus on the things that I can control and what I can have an influence over is how much the Government spends of taxpayers’ money.
As Ken Henry pointed out to Sales the previous night, the spending grows to around 5% of GDP in the future, around $80 billion in today’s terms. So there is plenty of spending that can be reined in.
No wonder he’s decided to eschew the world stage, G20 meetings, the IMF and World Bank so beloved of his predeccesor.
Setting the reform agenda via the Tax White paper process is going to be work enough. Selling it to the Australian people is a whole other story.
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