By Phillip Coorey
The Albanese government is considering a partial backdown on next week’s two-day Senate inquiry into the capital gains tax and negative gearing after it was accused of a whitewash for denying key critics of the budget measures the right to appear as witnesses.
The government was considering backtracking by inviting one or two of those snubbed, sources said, after a row erupted over the witness list that was finalised on Thursday by the Labor-led committee and weighted towards supporters of the controversial tax changes,
Regardless of the hearings, Treasurer Jim Chalmers hardened his resolve to ram the tax changes through parliament without amendment, using a speech to the party faithful to deride budget critics as the entitled classes “with political or commercial skin in the game”.
“Not everybody is born already at the top of the ladder like Angus Taylor was, not everybody fails upwards like he has. And unlike One Nation, we vote the way workers need us to, not the way Gina Rinehart tells us to,” Chalmers told an ALP National Policy Forum on Thursday.
With the government already under fire for allowing just two days of hearings to scrutinise what Chalmers says is the most significant tax overhaul in more than 25 years, criticism intensified on Thursday when the Labor-controlled committee finalised the line-up for the hearings to be held on Monday and Tuesday.
Missing were key critics of the measures including the Financial Services Council, the Housing Industry Association, leading investor Geoff Wilson, former Treasury official and CGT expert Geoff Francis, economics professor David Stern, and Stockspot CEO and founder Chris Brycki.
The three major business groups – the Business Council of Australia, the Chamber of Commerce and Industry and the Small Business Council, all of which are critical of extending the CGT changes beyond housing – are scheduled to appear jointly late on Monday.
They were moved to the first day only after complaining about being relegated to day two.
Process appears rigged, says Wilson
On Thursday night, Labor was considering adding Wilson and the HIA to the list to soften the criticism.
Wilson said the whole process appeared rigged.
“We have not been contacted by the secretariat, despite appearing before the previous [Greens-led] CGT inquiry earlier this year,” he said.
“If a Senate inquiry into one of the biggest tax changes in decades won’t hear from those directly affected, Australians are entitled to question whether the outcome was predetermined.”
Most of the other witnesses are either agnostic or support the budget decisions to target so-called wealth taxes, which include limiting future negative gearing to new homes and dumping the 50 per cent CGT discount for a less-generous version of the pre-1999 inflation-based model, redistributing some of the proceeds as a $250-a-year tax cut.
Advocates scheduled to appear include the Grattan Institute, the Australia Institute, the ACTU, the welfare lobby and various like-minded organisations, former Treasury secretary Ken Henry and several economists who have spoken in favour of wealth redistribution.
Former Treasury official Professor Miranda Stewart, a strong advocate for cracking down on trusts, is also on the list, although the decision to impose a minimum 30 per cent tax on discretionary trusts will be dealt with later in the year and is not part of this inquiry.
Financial Services Council chief executive Blake Briggs said it was inconceivable that his organisation was not invited, given the CGT changes were extended beyond housing to business, shares and all other assets.
“In the government’s rush to avoid scrutiny of its capital gains tax increases, the Senate inquiry has abandoned the principle of good governance by refusing the FSC and other industry experts the right to appear and provide evidence of the negative impact on the financial services sector and its customers,” he told The Australian Financial Review.
“The government’s refusal to hear from industry experts who can inform the Senate of the impacts these tax increases will have on Australians, particularly younger Australians who have invested in shares and ETFs in an effort to save for their first home, shows a blatant disregard for the consumers who will be adversely impacted by the tax changes.”
Briggs said if Chalmers was serious about the significance of his tax changes, he should defend them, rather than shut down scrutiny.
Excluding witnesses ‘unbelievable’
Liberal senator and committee member Andrew Bragg said the process was “a whitewash”.
In an email to Labor committee chair Lisa Darmanin, he said it was “unbelievable” that several key witnesses able to provide authoritative evidence about financial markets, housing and investment were excluded.
“I have sat on this committee for seven years, and we have never closed down debate to key witnesses,” he said.
“The Senate needs to maintain its reputation here as a scrutiny chamber and without these witnesses, we will all be without their significant expertise and insight.”
Apart from considering carve-outs for early-stage and start-up businesses, which begin life with a zero or low capital base, the government shows no other signs of budging.
In a second speech delivered on Thursday, this time to the Morgan Stanley Australia Summit, Chalmers indicated that the process was in train.
“We do recognise there are some specific issues for small and start-up businesses with low or zero cost base, and we have been engaged in targeted consultation with these sectors,” he said.
“Shortly, I will publish a policy position paper seeking feedback on our proposed approach, consistent with the commitment we made privately before the budget and publicly in the budget documents.”
He defended the decision to extend the CGT increase beyond housing when the budget was aimed principally at fixing the imbalance in the market towards investors.
“Leaving things exactly as they are would lock more and more young Australians out of the housing market forever,” he said.
“Having made that decision to act, the imperative is to not then replace one distortion with another.
“That’s why we haven’t limited our CGT changes to housing because it’s better to apply the discount in a more neutral way.”
Licensed by Copyright Agency. You must not copy this work without permission.