Labor may not have stomach for tax reform

THE government has promised to hold a tax summit by next June, a chance to thrash out the details of reforms suggested in the ill-fated Ken Henry review, which had only three of its 138 recommendations embraced by the government ahead of the election.

Early in a new government's term is exactly the right time to hold a tax summit: a chance to debate ideas freely without the looming spectre of a campaign where ideas that verge on controversial might be politically used against it.

But will the summit even happen and, if it does, how extensive will it be? The opposition and industry are starting to question whether Labor in fact really wants a wide-ranging summit at all, of the kind we had in the 1980s when Bob Hawke was prime minister.

Back then we had a treasurer, Paul Keating, pushing for a consumption tax, ultimately overruled by his prime minister. It is hard to imagine such open canvassing of ideas happening in the highly stage-managed world of politics today.

In the present Labor government's discussions with industry, as planning for the summit apparently continues, Treasurer Wayne Swan and his assistant Bill Shorten have been delivering contradictory messages. Both have told industry insiders that the other one is responsible for the timing and details of the summit. Passing the buck I believe is the appropriate terminology.

So far, despite the parliamentary calendar having been released and the new year already ushered in, we know nothing about a tax summit that is due in less than six months: not the venue, who will be invited, how long it will run for or what exactly will be on the agenda.

It raises the obvious question: will the promise to hold a summit by June be honoured? No doubt Labor will hold a summit of some kind at some point this year, but again Shorten, for one, doesn't like even calling it by the name of the 80s extravaganza. He prefers to use the term tax forum, correcting people he has been talking with when they refer to it as a summit. Industry insiders fear doing so reflects Shorten and Swan's wish to downgrade the importance of what they end up hosting.

Politically, that's understandable: from the National Broadband Network, to putting a price on carbon, to handling the mining tax fallout, Labor has more than a few fires to put out this year.

But it should remember the words of Rob Oakeshott who, during his 17 minutes of verbosity when announcing which side he would back to form government, said: "We have now got a tax summit that this country needs. By June 2011, we've got a commitment to have the Henry tax review thrown into the public domain with full recommendations from government and a fair dinkum open debate in this country."

That sounds good, except that we still don't know any of the details, or even if the fair dinkum debate Oakeshott spoke about will include a much needed discussion about the GST and how it is refunded to various states disproportionately, or indeed whether the rate itself needs increasing, as is happening in Britain this month.

A senior source inside the government told me he knows for a fact Swan would rather not even hold the summit but has to do so as a window-dressing exercise to pacify the independents.

The opposition has written to the rural independents asking them how they feel about the ambiguity surrounding the proposed summit, given the importance they placed on having one when deciding to back Labor to form government.

Shadow assistant treasurer Mathias Cormann has been making the running on this issue, as he did when exposing problems with the mining tax during Senate committee hearings last year. As a West Australian senator (in addition to his portfolio duties), Cormann has a particular interest in the tax arrangements of the federation: arrangements that in the past few years have seen his home state of WA lose a greater and greater share of its GST revenue because of the mining boom delivering larger royalty payments.

But as much as such revenue windfalls help state government budget bottom lines, large resource rich states also have vast infrastructure needs that at the moment aren't being adequately met by state or commonwealth governments.

Surely this is a debate that must be on the agenda of any tax summit this year?

Tax reform is hard and the window dressing surrounding the summit's planning ultimately will be inconsequential if the details that come out of it assist in boosting productivity and ensuring a more efficient method of taxation. But what is worrying about the fact that we know nothing about the summit, and the language being used by our leaders to try to dilute its significance, is that it may mean there is a lack of stomach for tough reforms within the government's ranks.

Burned by attempts to pick the eyes out of the Henry review ahead of the election, and fiscally stretched because of spending commitments already budgeted for, this government doesn't appear to have the will to start a delicate parliamentary term by embracing far-reaching reform.

If it wasn't prepared to embrace more recommendations from the Henry review when it was riding high in the polls what chance is there that it will do so now as it lurches from one crisis to the next as a minority government?

Swan was right earlier in the week when he condemned the Coalition for opposing simply for opposition's sake much of the time, and when he reminded us all how good we have it compared with overseas nations.

But he knows full well the burden of being in power is that your approach is questioned, especially by the other partisan side.

Swan was part of a Labor team that opposed lock-stock everything the Howard government did to reform tax and industrial relations, just for starters. And because Australia is lucky enough to have lots of goodies to dig out of the ground, making us richer than most other nations in the process, that doesn't mean we shouldn't constantly press for more reform to sharpen our productive edge.

The tax summit needs to be more valuable than the 2020 summit gabfest that wasted everyone's time.

So let's hope the lack of detail about how this year's summit will be managed is overshadowed by a well-planned release of what is in store, sooner rather than later. And let's hope Labor embraces the spirit of tax reform, something The Australian has been calling for for years.

Excuse me for not holding my breath while we wait to find out.