MYEFO – giving the rich a break

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Nick G.

The Federal government’s Mid-Year Economic and Financial Outlook (MYEFO) gives the green light to big corporations to keep stuffing their pockets while the government cries poor and attacks the people.

Delivered on the same day as the Sydney Lindt hostage crisis, it essentially says “We will not make the rich pay”.

It says “We are prepared to go further into deficit rather than stand up to the multinationals”.
It says “We will wipe out billions of dollars in revenue from the rich and impose further austerity on the people”.
It represents a massive broken promise by the Abbott government to return the budget to surplus.

Secondary Factors

Hockey blames the downturn in iron ore and coal prices and also blames reduced wage growth. Both are factors.   Iron ore prices have plummeted by close to 50% this year and not only are wage-earners not keeping up with profits, but unemployment is rising, so revenue from personal income tax is down.  It has been estimated that dropped iron ore prices and lower wages, however, would account for only $2.3 billion of the $11 billion black hole forecast in the MYEFO. These are factors which a government might fairly blame on market conditions over which it chooses to exercise no control. What is within its control is whom it targets for revenue raising.

Toeing The Line

There are a number of measures where the cost of toeing the big end of town’s line is resulting in revenue losses.

For example, the Japan-Australia Economic Partnership Agreement will reduce revenue from tariffs by $110 million next year to a total of $1.59 billion over the four-year forward estimates.  It appears to be too soon for Treasury to estimate the revenue losses from the Korean and Chinese free trade agreements and, of course, the Trans Pacific Partnership FTA is yet to be signed.

The third stage of an Investment Manager Regime, which will “provide a tax exemption on the gains of widely held foreign funds that have invested in certain financial arrangements in Australia” apparently cannot be estimated either, perhaps because there is an option for investors to backdate application of legislation to apply from 2015-16 from the 2011-12 income year.  Wow – they will even make legislation retrospective to give our revenue base to imperialist finance capitalists!  What we are told by Treasury is that this will have “an unquantifiable cost to revenue over the forward estimates period.”  That’s reassuring….NOT!

No Restrictions On Off-shore Avoidance

Maybe the biggest cop-out is walking away from efforts to close down transfer pricing and other arrangements that allow big corporations to shift their profits globally and avoid paying tax in the source country.  The MYEFO baldly states: “The Government will not proceed with a targeted anti-avoidance provision to address certain ‘conduit’ arrangements involving multinational enterprises, first announced in the 2013-14 MYEFO)”.

There was some empty rhetoric in this direction at the Brisbane G20 Summit, but as we pointed out back in May, there was never any serious intention to go after the corporate tax avoiders (see http://vanguard-cpaml.blogspot.com.au/2014/05/rich-tax-avoiders-are-sitting-back-and.html).  We quoted the Deputy Tax Commissioner Mark Konza as assuring the Business Council of Australia that the tax commissioner would not “go crazy with this power” to pursue them.  In fact, he said, the powers would be “rarely implemented” because of associated legal difficulties.

Big business was further assured that Abbott’s decision to slash 3000 jobs at the Tax Office would probably hamper what little effort the ATO may have been planning to put into the task.

So how much is lost by allowing profits to be placed in overseas havens out of reach of the ATO?

Hockey’s MYEFO refuses to put a figure on it, but the previous government, in its 2013-14 Budget had put it at $4.2 billion over the forward estimates, or an average of around $1 billion per year.  Hockey’s MYEFO, giving the nod to further corporate tax avoidance, dismisses this cheating on our revenue base as “unrealisable”.  Where there’s a will there’s a way, but if the servants of the rich are unwilling, let’s just call it “unrealisable”.

Finally, there’s the Minerals Resource Rent Tax.  Remember that this was originally a 20% super-profits tax on all minerals.  It then became a 10% tax on a handful of resources when Gillard deposed Rudd and announced the next day that she had “opened to door to the mining companies”.   Hockey’s MYEFO contradictorily estimates a revenue loss of around $2 billion a year from scrapping this tax (table 3.2 in the MYEFO) to claiming that it would save over $10 billion over the forward estimates!  How it can be simultaneously a loss and a savings is perhaps known to Treasury officials, but they have declined to explain it to the people.

There are other little gems, like the tax exemption for US contractors “working on United States military force posture initiatives in Australia”.  It just wouldn’t do for the Australian tax-payer to have to build bases for a foreign power on our soil, and then expect nationals of that power to pay taxes on income earned in Australia and paid by those same taxpayers.  We are very generous towards our “friends” and overlords.

Don’t expect the Murdoch media to expose any of this.  According to a report by the Tax Justice Network Australia, Murdoch’s companies paid the Australian Tax Office a miserly 1.1% on pre-tax profits of A$5.54 billion over the period 2004-2013, which was helped by complex financial transactions among its 146 subsidiaries, including 25 in the Virgin Islands and 19 in Mauritius.

Perhaps MYEFO should stand for Manipulating Your Economy For Ourselves.

 

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