14 June 2015

Abbott's tax review process is 'infected' Federal Court judge says

A Federal Court judge has slammed the Abbott government for ruling out changes to negative gearing, superannuation concessions and GST as part of its tax review, saying the entire debate is politically infected and "handcuffed" from being able to achieve any useful reform.

Justice Richard Edmonds, who was appointed to the Federal Court under the Howard government in May 2005 and has previously been critical of the lack of political will by leaders to carry out tax reform, said the Abbott government's review will turn out to be just as useless as the former Labor government's attempts back in 2009.

Former treasury secretary Ken Henry carried out a review back then, which was released in 2010 by the then treasurer Wayne Swan, but Mr Henry and his panel were restricted from including GST in the debate.

'Political infection'
Justice Edmonds said it was a complete waste of his time to get involved in the Coalition's review, as the white paper process clearly suffered from "political infection".

It had "turned septic following statements by senior members of the government since the issue of the paper, making it quite clear that a number of these matters will not be considered at any price save, perhaps, if it is 'our' political advantage to do so", he said. "The handcuffs that are being placed on the process are as bad as the handcuffs placed on the Henry Review."

"If that is what is to happen, then I do not wish to participate. My time is too valuable to undertake a reasoned analysis in support of various aspects of reform when I know that no matter how sound and persuasive the arguments are, they have no hope of finding traction."

Prime Minister Tony Abbott and Treasurer Joe Hockey have both ruled out changes to sacred cow tax breaks of negative gearing and superannuation, or a GST rise, despite numerous submissions to the white paper saying these areas should be up for debate.

Justice Edmonds said as someone genuinely interested in structural reform of the Australian tax system, he was disappointed he would not be able to make a contribution. The bar for changing the GST was set too high, he said.

"As a lawyer, first as a solicitor, then as a member of the New South Wales Bar and now as a Federal Court judge having 50 years' cumulative experience in advising and adjudicating on issues arising under that system, I was looking forward to making a substantive and hopefully constructive contribution to the tax discussion paper," he said.

"On reading the paper, it became apparent that despite what the paper said on pages five and six under the heading 'joining the national conversation on tax reform', including statements such as, 'the Government will …rule nothing in or out' and 'you should not be limited by the issues or questions contained in this discussion paper", certain matters that need to be brought to the table for consideration and discussion were off-limits.

"The infection of politics has once again intervened to quarantine them from the reform process, he said. "For example, there will not be any changes to the treatment of the family home. On negative gearing and superannuation, while the government says it is open to new ideas, the paper has all but nailed its policy colours to the mast already. ...The message is clear: you will have to persuade us to abandon these positions."

A former Henry Review panel member, Professor John Freebairn, called – among other things – for the tax system to be more equitable so that those on lower incomes get more support.

He said tax brackets needed to be indexed so that "those who now draw remuneration as a larger share than the group average from the concessional fringe benefits and superannuation will lose, while those who draw a smaller share than the average will gain".