By Thomas Henry
Treasury officials have been left flat-footed and unable to answer basic questions at a two-day inquiry into Labor’s controversial tax overhaul, including the revenue windfalls for each of the CGT and negative gearing policies over any time frame.
Having had weeks to prepare for the Senate inquiry into Jim Chalmers’ changes to negative gearing and capital gains taxation, as well as trusts, officials from the Treasurer’s department could not detail the separate policy revenue totals, nor could they confirm that errors picked up in submissions would be corrected by the time the legislation passes through parliament.
Liberal senator Claire Chandler repeatedly pushed Treasury deputy secretary Diane Brown for a breakdown of the department’s modelling on the policy’s revenue, but was told that officials did not have the figures at hand.
Ms Brown also admitted Treasury had made errors in examples included in the explanatory memorandum to the legislation, but said whether corrections were made was a “matter for government”. “We will look to review that, and there will be an opportunity to correct those errors … We do see there is an opportunity to make revisions. Whether they are is ultimately a matter for government,” Ms Brown said.
Treasury did, however, stand behind its modelling of compliance costs associated with the tax reforms estimated to sit around $88m annually, despite estimates from Australia’s professional accounting body claiming the figure could be more than $540m a year.
Both the Institute of Public Accountants’ senior tax adviser Tony Greco and CPA Australia told the inquiry that Treasury estimates for compliance costs were “grossly underestimated” and that the reforms would act as a significant drag on the productivity.
Modelling by CPA Australia forecast the ongoing cost of the changes to sit somewhere between $295m and $542m a year, as well as a one-off transitional cost of up to $825m that Treasury had not included in its estimates.
“The phones have been ringing off the hook since the budget and I can tell you one thing, it’s not the negative gearing changes, it’s the CGT changes and the discretionary trust changes,” Mr Greco told the inquiry. “We’re imposing a huge compliance cost and much more complexity … These are complex provisions that everyone will get caught up in when they sell a CGT asset.
“I can’t overstress the complexity and the compliance cost associated with this measure. You’ve got to ask yourself why are we doing this?”
Wilson Asset Management chairman and chief critic of Labor’s tax changes Geoff Wilson – whose rival protest event next door to the Senate inquiry drew a crowd of about 100 – claimed the reforms spelled “the end of small companies” and worked against Australia’s national interest. “Australian prosperity has always depended on a simple idea,” Mr Wilson told the inquiry.
“That people work hard and take carefully considered risks with their capital so that they could build a better future for themselves and their family. We believe this legislation weakens that social contract. That’s the end of small companies quite effectively. All the money will go to Rio, BHP, the big banks, the top 10 companies. That’s where all the money will go, and anyone below that, the cost of capital will go through the roof. It’s a disaster.”
Despite concerted calls from witnesses across the two-day inquiry for an extended consultation process, Anthony Albanese on Tuesday refused to budge on his timeline for passing the legislation.
“We are very determined to give people the reform that is needed. We know that for a long period of time, housing was ignored by the federal government,” the Prime Minister said in Melbourne.
After keeping rates on hold on Tuesday, RBA governor Michele Bullock said the bank had discussions with Treasury about budget measures, but would wait until the tax changes became law before assessing the impact on the economy.
“We take those as given when they’re legislated and then we’ll work through what we think that means for aggregate demand in the economy in total,” Ms Bullock said.
Licensed by Copyright Agency. You must not copy this work without permission.