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The Henry Tax Review: pearls before swine?

By Bryan Kavanagh - posted Friday, 28 February 2014

Now Qantas. Who's next?

Australian business doesn't deserve to survive. It's beyond repair. Some sections want tariffs to protect them against cheap imports. Others want to drive down wages (apparently so they can match those of the Chinese) in order to keep turning a profit.

Yes, and while we're at it, why don't we also remove all those fences at the top of cliffs and put ambulances down at the bottom? That might keep people in jobs at the expense of all other Australians, too.


The collapse of Australian industry and business is rarely correctly sheeted home to the perversity of the 125 taxes that make up the Australian tax regime at local, state and federal levels. Australia's Future Tax System (AFTS) found that 115 of these were inefficient, raising only 10% of our revenue, and could easily be abolished, together with their collection costs and deadweight.


Australian business ignores a truism: when you continue to tax products and services, you will have less of them. Surely then, with Australian manufacturing and other businesses in their death throes, abolishing the 115 taxes suggested by the Henry Tax Review has something to recommend it as a good starting point?

The relative silence greeting this recommendation might be explained in terms of not meeting business expectations that favoured tariffs, or a labour relations program that would abolish penalty rates, or otherwise reduce wages.

In noting the mobility of international capital and the increasing mobility of labour, the Henry Tax Review also recommended greater use of Australia's land and natural resources as a tax base, as these are unable to flee to tax havens.

Secondary, but important, considerations were that capture of the economic rents of Australia's resources will not create any less of them, nor can they be passed on in prices like taxes on incomes, services and products.


This proposal was also greeted by a yawn from business, if not antagonism in certain quarters. Perhaps a perceived need to remove Kevin Rudd and the Labor government from office had come to override genuine discussion of tax reform?

For example, the exceptionally hostile response from the big mining companies when the Rudd government tried to implement the Henry Tax Review's proposed 40% resource super profits tax (RSPT) on mining was largely supported by business. The mining lobby spent $22 million in a successful advertising campaign to scrap the tax and this played an integral role in Kevin Rudd's removal from the prime ministership.

Rudd's replacement, Julia Gillard, cobbled together the minerals resource rent tax (MRRT) to replace the far sounder RSPT in a backroom deal with selected big miners. As the MRRT has delivered little revenue, it seems the miners have won another round at the expense of most Australians.

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About the Author

Bryan Kavanagh is a real estate valuer and associate of the Land Values Research Group.

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