10 May 2015

Bowen confused, thinks two announcements constitutes a plan for Australia

On ABC’s Insiders this morning, Chris Bowen claimed that the ALP had fully-costed plans for Australia: 

“What we're doing is outlying alternative plans and we've done that from Opposition early in the term in a fully-costed and credible way.” (Source: Chris Bowen, ABC Insiders, 10 May 2015)

This is fundamentally untrue. Labor’s plans are not credible, and – despite repeated attempts – Labor refuses to release the documentations to support the claim they are “fully-costed”.

Further to this, Chris Bowen’s claim does not take into account the billions of dollars of responsible savings Labor is attempting to block in the Senate – these savings include $5 billion of savings proposed by Labor and Budget repair measures they announced before the last election but are now voting against.

Labor has so far made two announcements that they claim will assist in Budget repair – both being plans for tax increases.

Multinational Tax

The first ‘policy’ that Labor claims to have released is a multinational tax which they say will raise $1.9 billion over the forward estimates.

The only detail we have on this ‘policy’ is a two page press release from Bill Shorten, Chris Bowen and Andrew Leigh, along with a transcript of a 20 minute press conference from the trio. Treasury has advised, based on the limited details available, Labor’s ‘policy’ would cost Australian jobs.  

We have asked Labor four times for their key assumptions behind their international tax plan – in Parliament on 2 March, on Q&A on 16 March, in a formal letter on 17 March and in yet another letter on 19 April. No information has been forthcoming. The announcement has been criticised by the OECD and peak business groups and experts in the area.

When Pascal Saint-Amans, Director of the OECD Centre For Tax Policy And Administration, was asked about Labor’s policy concept in a Senate committee hearing on 9 April 2015 he made the following two important remarks:

“I would definitely say yes [to it being premature to adopt this policy]”.He then went on to say “If you introduce such a legislation and your other partners don’t do so, then you face the risk of shifting the capital to other countries.” (Source:  Pascal Saint-Amans, Director, OECD Centre For Tax Policy And Administration, Senate Economics References Committee – 9 April 2015)

In addition to this, Jennifer Westacott, Chief Executive of the Business Council of Australia, remarked in a press release that:

“Some of the company tax measures announced today by the federal Opposition have the potential to slow economic growth and further diminish Australia’s competitiveness…. The Business Council has serious concerns that proposed changes to thin capitalisation laws risk undermining major capital and infrastructure projects and deterring investment. This would come at a time when, more than ever, Australia needs investment to drive jobs growth and economic resilience.” (Source: Statement on Suggested Changes to Tax Arrangements, BCA press release, 2 March 2015) 

Superannuation Tax

The second ‘policy’ that Labor announced concerns a superannuation tax that they say, again, will raise $1.9 billion over the forward estimates.

A key component of this announcement is similar to the superannuation cash grab policy they announced in 2013 when in Government but never legislated. Labor’s 2013 policy said Labor would apply a 15 per cent tax on earnings to $100,000 and above – Labor’s new super tax plan lowers this threshold to $75,000. Treasury’s deputy secretary told Senate estimates about Labor’s 2013 policy that “a number of super funds said it would be extraordinarily problematic to do”.

Labor’s claim that its 15 per cent tax on superannuation earnings above $75,000 will likely affect 60,000 retirees with balances over $1.5 million is misleading in the extreme. As observed by notable economist and commentator, Henry Ergas, 70 per cent of those hit will have balances lower than the $1.5 million claimed by Labor, making Labor’s proposal a desperate revenue grab.

It also is a policy that Chris Bowen can hardly support. In his 2013 book Chris Bowen argued (on page 42):

“The tax concessions for superannuation are substantial. They are justified because they avoid future payments of the age pension and they help boost our pool of savings, with all the benefits for the economy that this brings. But because the tax concessions are costly for the budget bottom line it is natural that the Treasury and Department of Finance are attracted to recommending that they be pared back when belts are being tightened. The problem with this is that it creates uncertainty for, and concern by people who are making voluntary contributions to superannuation.” (Source: Chris Bowen, Hearts and Minds, July 2013, page 42).

Given Chris Bowen’s past statements, his policy suggestion today is simply rank opportunism from a Labor Party without a clue or a policy platform….