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Labor and the Greens on the Carbon Tax debate

By Tristan Ewins - posted Friday, 8 April 2011


It is in this context that Labor has downgraded its original promises to cut Company Tax. Instead of cutting the rate from 30% to 28%, now the government is proposing a cut of only one per cent. (ie: to a rate of 29%)

However Greens leader Bob Brown has argued that even a cut of one per cent would return half of new revenue taken back to the miners. Instead Brown is proposing a ‘two-tiered’ approach to Company Tax which would see only companies enjoying profits of less than $250 million enjoying the tax discount. This would hit ‘the big end of town’: including the major banks and mining giants – while sparing small business. For Brown the money thus saved would be better spent improving wages and conditions for aged care workers, funding national dental health care, or increasing Newstart, the youth allowance, Austudy and Abstudy,"

As against claims lower Company Tax is needed to allow for greater competitiveness, research commissioned by the Greens shows that the current rate of 30 per cent is still very significantly below the OECD “weighted average” of 36 per cent. The same research estimates a 1 per cent cut would cost $18 billion by 2021.

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Such a pool of money could also be critical for infrastructure, education, and mental health and aged care services.

But there are potential issues for Labor in drifting away further from the platform it took on these issues to the 2010 Federal election.

To begin: it is important for Labor to honour any agreements in order to retain credibility as a partner for negotiation into the future. This means that if Labor has any kind of ‘agreement’ it is a practical necessity at least that the government ought enter into fresh negotiations if seeking to change its position on resource taxation during the current term. Either that or take such action as to make the consequences ‘neutral’ for those concerned. This could boil down to a choice between either increases in corporate superannuation contributions for low income workers, or abandoning the Company Tax cut, diverting the proceeds to other crucial priorities as Brown suggests.

Further: if the government goes down the path of increasing superannuation contributions for low income earners it would be best to also ease Aged Pension means tests for such groups to enhance any real effective gain.

It is equally compelling as a matter of public interest, however, that the electorate be made aware of the scope of any agreement Gillard made with the big miners, including BHP and Rio Tinto, and corporate Australia more broadly, in the run up to the 2010 poll. Negotiations with the most powerful corporate interests ‘behind closed doors’ is anathema to democracy.

Unfortunately, the political power of the miners, and the corporate sector more broadly, is not going to disappear any time soon, no matter how it skews democratic processes, overshadowing the voices of ordinary citizens. So maintaining credibility in negotiations with those interests is crucial no matter how problematic their power may be.

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However it is also most definitely legitimate for Labor to seek a fresh mandate at the next Federal election to effectively increase and widen the scope of the Minerals Resource Rent Tax; and to start canvassing support for any such move now. Given the past defeat, though, Labor would need to adopt a cautious approach.

Yet there could be a difficulty with such a move as well if not handled properly. Labor might not want to ‘muddy the waters’ by pursuing too many distinct major debates on tax reform at once for fear of leaving some voters overwhelmed.

Climate Minister Greg Combet is anticipating a “long debate” suggesting any Carbon Tax will not be implemented until July 2012.

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About the Author

Tristan Ewins has a PhD and is a freelance writer, qualified teacher and social commentator based in Melbourne, Australia. He is also a long-time member of the Socialist Left of the Australian Labor Party (ALP). He blogs at Left Focus, ALP Socialist Left Forum and the Movement for a Democratic Mixed Economy.
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