The notorious Colombian drug lord Pablo Escobar (currently star of Narcos on Netflix) once observed: “Everyone has a price – the important thing is to find out what it is”.
After a week of haggling about the rate of the backpacker tax, treasurer Scott Morrison yesterday found out Greens leader Richard di Natale’s price: $100 million.
That’s how much Morrison put on the table in a “one-off payment” to Landcare Australia in order to get the Greens to swap sides and back the treasurer’s 15% rate before parliament rises for summer break.
The backpacker tax has been an unedifying spectacle for all sides of politics in recent weeks, but finally Morrison gets to drive a stake through the heart of an issue that’s dogged him since Joe Hockey’s 2015 Budget.
It also puts a price on principle for the government. After the shock loss of the vote on Wednesday, just minutes after the triumph of reinstating the ABCC, the embarrassment for Morrison when Derryn Hinch and One Nation’s Rod Culleton broke their commitments at the last minute to vote with Labor and the Greens started to look like incompetence amid arrogance, especially when he’d declared Labor “can go and take a flying leap” after reaching the agreement.
To recap briefly: Hockey announced 32.5% tax rate on every dollar earned by working holidaymakers in May 2014. The tax was supposed to add $500 million to the struggling Budget bottom line, but the high rate sent terror through the agriculture and tourism industries at a time when the number of overseas vistors on working holiday visas – those backpackers under 30 – were already in decline.
The July 2016 implementation date was delayed as his successor held a review on the issue before announcing in September that the rate would fall to 19%. To make the change revenue neutral, Morrison announced he’d keep 95% of their super payments in tax, adding $105 million to the coffers, and bump up the departure tax for anyone heading overseas by $5 – a move that further infuriated the tourism sector. The treasurer offered Tourism Australia $10 million for an international advertising campaign to bring backpackers down under.
Other changes to 417 and 462 visas would make it easier and more attractive for working holiday makers to head to Australia.
Meanwhile, on ABC radio, prime minister Turnbull was doing his bit for tourism, complaining about tax rates for “rich, white kids from Europe”.
The additional taxes would raise $365 million so the new package “washes its face”, Morrison said.
But the compromise rate failed to attract enough support in the Senate. The issue was a ticking bomb for the government because if changes to the rate were not passed before Parliament rose for Christmas, the rate would default to 32.5% on January 1.
So on the weekend, Morrison sat down with the crossbench and make another compromise in return for enough support to get the changes through. The rate fell to 15%. It was the figure the National Farmers Federation wanted and aligns with the tax rate for Pacific Islands workers who come to Australia for seasonal agricultural work.
But Tasmanian senator Jacqui Lambie had another idea and was pushing for 10.5%. Labor decided to run with the idea, proposed that figure as an amendement and two crossbench senators, Victorian Derryn Hinch, and WA’s Rod Culleton, welched on their deal with Morrison and backed Labor. As Philip Coorey observed in the AFR today: “Derryn Hinch became everything he spent years on the radio railing against: A politician who says one thing and does another”.
Within minutes the government announced it would not back the change and the stalemate began.
And a new, fifth, compromise rate, 13%, emerged. It seemed as plucked from the air as some of the others, with no rhyme nor reason. Opposition leader Bill Shorten said he could run with that.
But the government was not going to lose this one and end the year with a victory to Labor. To borrow from a former ALP minister, it became a matter of “whatever it takes” for Morrison.
And so he sat down with the Greens he so often berates as irrelevant. And to save government pride, Morrison spent more than the 13% rate would have cost. In addition, he also agreed to drop the superannuation tax rate by 30% to 65%.
But the cost is not the point. It’s likely to be far better policy in the long run that the rate is set at 15%, but the ad hoc approach of the parliament in recent months will do little to engender public confidence in the nation’s policymakers.
Yes, Labor’s manoeuvring this week was little more than cynical exploitation of a political opportunity to cause maximum discomfort to the government. They’ll be furious and now feeling a little betrayed by the Greens, but there’s no loyalty and less love on both sides of that marriage of convenience.
The Greens will be delighted with themselves for their moment in the limelight and the ability to extract cash from the government for a key environmental cause. It will be wrapped up as a Christmas present to their constituency. And they’ve also sent a signal to the government that they’ll come to the party if the price is right.
Morrison will bluster his way through, as always, declaring the result a triumph of sound policy.
But imagine working in a sector where the taxation rate changes on a daily basis on the whim of a particular senator and everyone then has to try and figure out whether they cope with that suggestion with no sound rationale or investigation or consultation with stakeholders.
Right now, the nation will be looking at a bunch of people paid $200,000 a year, and more, to shape the nation and wonder whether taxpayers are getting value for the job they’d paid to do.
Just name a price.
* This is an editorial. The opinions and conclusions expressed above are those of the author.
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