Joe Hockey’s back to the future speech

TWO years ago, Joe Hockey went to the election promising to cut taxes. He didn’t. Now he says he’ll go to the next election — with the same promise.

Hockey’s back to the future speech

TWO years ago, Joe Hockey went to the election promising to cut taxes. Then he raised the top marginal tax rate to 49 per cent. Now he’s promising to go to the next election — with the same promise.

This morning, about 200 professionals representing the Tax Institute and Chartered Accountants Australia were called to the five-star Westin Hotel in Sydney’s CBD so Joe Hockey could deliver a familiar message.

“I confess I find it unappealing to dress up increased tax and spending as tax reform, especially if it’s the commonwealth raising taxes to help states increase their spending,” Mr Hockey said.

The Treasurer vowed to take the issue of personal income tax cuts and bracket creep to the next election — but couldn’t answer how it would be funded.

When asked whether a budget surplus or tax cuts was now the higher priority, Mr Hockey said: “It’s both. We have got to try and do both.”

Alex Malley, chief executive of accountancy peak body CPA Australia, was scathing of the tax announcement, arguing that Mr Hockey was merely repeating what was in his tax discussion paper in March.

“Today was an extraordinary day in politics in Australia,” he said.

“We had a federal treasurer call 200 people to a hotel to tell them what we already knew. It does very much feel like there’s a sense of desperation to own the topic of taxation.

“This is not the leadership we need to take our country forward. We all know personal income tax is high. What we want to know is, what’s the solution and where are we going with tax reform?”

Sinclair Davidson, economics professor at the Royal Melbourne Institute of Technology (RMIT) and senior fellow with free-market think tank the Institute of Public Affairs, said Mr Hockey was “treating the people who voted for him with contempt”.

“They promised balanced budgets and tax cuts before the last election. They’ve done the opposite,” he said. “People are now paying higher tax under a Liberal government than they did under Labor.

“Hockey is the man who increased these taxes, and now he’s promising tax cuts. Is he going to cut them back to where they were? Further?”

Professor Davidson rejected Mr Hockey’s defence of Friday’s decision to apply the GST to all overseas online purchases as “plugging a hole”.

“People are going to be paying more money to the government. That’s a tax increase,” he said.

However, the Australian Chamber of Commerce and Industry welcomed the speech. In a statement, chief executive officer Kate Carnell said the Treasurer was “spot on”.

“Australia’s income tax rates are too high and need to be reduced,” she said.

“As it stands many Australians are hard at work only to see a significant share of their income go to the tax collector. This stifles the incentive to work and hurts the ability of households to improve their standards of living.”

Michael Potter, research fellow with free-market think tank the Centre for Independent Studies, said the government was sending “mixed messages”.

“What we’re seeing today is an announcement that he’s going to make an announcement about presenting options that they’ll then take to an election,” he said.

“We’re happy that he’s made these comments about bracket creep, but it’s important to recognise that he has talked about this before. We’re disappointed that we’re not actually seeing action.”

CPA Australia’s Mr Malley said while there was no doubt income tax cuts were needed to encourage participation and productivity, Mr Hockey “appears to be caught in a cycle of restating the problems rather than rethinking the solutions”.

“Tax reform is about the ongoing sustainability and resilience of the entire economy,” he said.

“Reform needs to consider company as well as personal income tax. Just restating the facts will do nothing to change Australia’s uncompetitive 30 per cent company tax rate compared to 20 per cent in the UK and 17 per cent in Singapore.”

Professor Davidson said the government had clearly hoped it could “grow itself out of trouble”, and appeared to have lost the will to prosecute the case for cuts.

“Yes, they blame the crossbench [in the Senate] but they haven’t even tried,” he said.

“If they had 100 double dissolution triggers on spending cuts, you could at least say they’d given it a red hot go and take that to an election. Then they might have some credibility.”

Mr Malley said CPA Australia was also approached to host this morning’s conference. The invitation was declined.

“The bodies were approached, and the conclusion was that a five-star hotel would be the venue, and there would be a cost associated,” he said. “It was my view that it was not in my members’ interest.”

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