The ‘Insiders’ program on the ABC yesterday morning featured considerable debate about the coming wave of inflation, the increasing wages gap, the structural deficit now built into the national budget, and an interview with the new treasurer Jim Chalmers. I was struck again by the narrow focus of the conversation on the expenditure side of the equation, irrespective of the specific topic of the moment.
It seems to me that while we have an expenditure problem, about to become worse with the combination of inflation and the promises made to get elected, the real problem is with revenue.
While it is both sensible and well overdue to chop out the waste and costly lifestyle cushioning of liberal ‘mates,’ that will not solve the problem.
Long term we need a more productive economy, which does not mean less jobs, but it does mean that we need to edge up the international productivity ladder. This requires further investment in education, technical training, and investment in science and the means to commercialise the outcomes of that science.
Unfortunately, this takes investment at a time when investment is challenged by the scarcity of money. Anyone running a business understands this to their core. They also understand that to dig out of the hole, they need to generate added revenue to enable the investment, as cutting costs can only be useful at the fringes, and longer term is well documented as a failed strategy.
The government simply must examine revenue and put in place measures to increase it. Politically, and practically, increasing personal income tax is off the table. In addition, the temporary cut in fuel excise will end on 28 September, adding to costs throughout the economy and no doubt creating howls of protest.
The obvious way to generate revenue is to really bite the bullet politically and chase multinational companies that currently pay little or no income tax in this country. That would invite a huge PR response from these companies, comfortably headquartered in many of the tax havens around the world, exercising transfer pricing, related party loans, and the many other rorts that go on. They will claim that the competitiveness of investing in Australia has been destroyed, and deliver a litany of tales about the damage to the economy the withdrawal of that capital will deliver. Remember the effort the Minerals council made to force the Rudd government to abandon the mining ‘tax’? That would pale into insignificance compared to the shouting a real across the board tax collection effort would bring.
Bring it on I say. I am sick of seeing multinationals use the infrastructure, resources, and capability of Australians to benefit a group of obscure owners and shareholders hiding behind the curtains of tax minimisation and avoidance possible as a result of the simple reality that tax rules are national, while money is international, aided by political hubris.
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Gary, None of your comments disagree with my basic thesis that MNC’s should be paying tax on profits generated here, rather than shovelling them offsore through various management, loan arrangements, and low tax domicile.
They benefit from being here, there is a price to pay for the priviledge.
I pay more income tax than multinationals generating billions in revenue.
Absurd.
Hi Allen
Actually it quite easy to understand the correct solution.
Australia’s problem is firstly an industry competency (or lack thereof) problem – which becomes an economic problem – and which our low competency industry and political leadership have been unable to fix to the past 25 years.
Look at it this way.
Australia, if it takes its right place in the world should today be a $5-7 Trillion economy – yet in 2021 was only a $1.6 trillion economy.
The right question is: What are the obstacles and impediments that are stopping us delivering the $5-7
Trillion economy?
So, its not about revenue or costs – its about what has gone wrong inside industry – that has decimated the ability to create massive economic growth and the creation of well-paying MULTIPLIER Jobs.
Turning our nation around is not hard.
What is hard is getting any recognition of the REAL problem.
Because if you don’t understand the real problem – then you will ask yourself the wrong question – and come up with the wrong answer – and then implement the wrong solution – just as we have been doing for the past 25 years.