ALP imputation rules fairest

Claiming Labor’s policy breaches the principles of Chifley and Keating has reached new levels of ridiculousness.

Chris Bowen speaks to the media at Parliament House in Canberra yesterday. Picture: Kym Smith.

Robert Gottliebsen writes most weeks about Labor’s policy to reform dividend imputation back to its original design by Paul Keating. He is of course perfectly entitled to do so. I disagree with pretty much every word he has written and dispute the precepts of his argument, but I have not picked up my pen to respond before now. Claiming our policy breaches the principles of Chifley and Keating, however, has reached a level of ridiculousness which must be answered.

Ben Chifley believed in many things.

But when he talked of “The light on the hill” he wasn’t talking about the inalienable right to receive negative income tax. And given Labor is proposing to return dividend imputation to the original Keating design, claiming PJK would oppose our reforms (when he has publicly endorsed them) is particularly odd.

Let’s go through some of Mr Gottliebsen’s other claims:

Claim: Mr Gottliebsen claims our reforms are discriminatory because they mainly impact on self-managed super funds.

Fact: Actually it is the current anomaly in the system which allows for negative income tax for people who own shares which is discriminatory. By making dividend imputation refundable, John Howard laid the foundations for the current situation in which the only people in the whole country who can receive a tax refund who haven’t paid income tax to start with are those who own shares.

If Mr Gottliebsen believes Labor’s reforms are discriminatory, he must think the system which existed between 1987 and 2000, the system we are returning to, was also highly discriminatory. I doubt Mr Gottliebsen was railing weekly against the original system for those thirteen years. Remember, Australia is the only country in the world with a fully refundable dividend imputation system.

Claim: Labor’s reforms are a “retirement and pensioner’s tax”.

Fact: Wrong. Even mention of a “pensioner’s tax” is fundamentally wrong and Mr Gottliebsen knows it. He knows that we’re protecting Australia’s 2.5 million full and part pensioners who will continue to benefit from the current arrangements and will suffer no adverse impact. Furthermore, Labor’s reforms do not introduce any new taxes, they just remove the ability to claim cash refunds for excess imputation credits if no tax is paid in the first place. Dividends will continue to be received and no additional income tax will be paid on those dividends. We will not continue with the current situation which allows for growing share of company profits to be taxed at a zero rate whenever refunds are paid out to people who have paid no income tax. Those who argue for retention of the current arrangements are arguing against single taxation.

Claim: Labor’s reforms means that “few rich people will be affected”.

Fact: If Mr Gottliebsen had spent the time reading the very good analysis put out publicly by the independent Parliamentary Budget Office last week as part of the highly politicised and unprecedented government inquiry into an opposition policy, he would have read that even after the introduction of the transfer balance cap which only kicks in when couples have more than $3.2 million in their superannuation funds, many of these funds are still expected to be in a net-refund position and hence would be affected by this policy proposal. That is, contrary to the claim by Mr Gottliebsen, people with millions of dollars in their superannuation funds can still benefit from the current arrangements.

When it comes to self-managed superannuation funds, the PBO also happens to point out that based on the latest tax data more than 70 per cent of all imputation refunds accrued to funds with balances of more than $1.5 million.

Mr Gottliebsen will no doubt continue waging a war against Labor’s dividend imputation reforms. He is entitled to his opinion. But when he invokes former great Labor leaders as somehow suggesting our policy is not consistent with the fundamental principles of fairness, we will call him out every time. Labor’s reforms to dividend imputation will take the system back to its original form, introduced by Paul Keating, and will protect pensions along the way. This is a fairer arrangement that I have no doubt would be backed by previous great Labor leaders like Ben Chifley.

Chris Bowen is the opposition spokesman for Treasury and small business