Rudd's reforms aren't looking so super
By Alison Stieven-Taylor
The fallout continues from the Rudd Government’s proposed tax reforms released in May. The ‘stronger, fairer, simpler tax plan for our future’, has stirred up a hornet’s nest.
The Resource Super Profits Tax has garnered apoplectic responses not only from the mining industry, but the superannuants and others who have invested in mining for their retirement. Not to mention all the ancillary industries and businesses that are now shaking in their boots at the thought that this tax, the highest in the world at 58%, may bring about an end to their livelihoods. How fair is that Mr. Rudd?
|Alison Stieven-Taylor is an author, journalist, and magazine editor based in Melbourne. She is also the creative director of Reality & Illusion Productions, a leading media communications company specialising in B2B communication.|
And the benefits to small businesses in the tax reform package are … small. 2% off the company tax rate and that won’t kick in until 2012/13. And being able to write off $5000 worth of gear now, well it isn’t $50,000 is it? And what about the mandatory increase in superannuation to 12%? Is that going to see some businesses in the future reluctant to put on employees because on costs are too high?
The Rudd Government’s tax plan raises more questions than it answers, including the most worrying of all – do Rudd and his Merry Men have any idea what they are doing? Even those of us who have little interest in the machinations of government can see that the Resources Super Profits Tax is a desperate bid to come up with something that is going to refill the coffers after the Rudd and Swan great cash giveaway.
Now I’m the first to shy away from discussing political alliances, the statement ‘they’re all as bad as each other’ doesn’t tend to hold court when others are passionate about their political champions. But enough is enough. This Government has sadly proved its inadequacies over and over again. The only scarier thing than another term with Rudd is one with Abbott. Thankfully I don’t have room in this story to air my views on the leader of the opposition. Suffice to say, they are colourful.
The Henry Tax Reform document is 1000 pages long. I’ve asked the industry’s associations to give their views on two issues – the increase in superannuation contributions and the Resource Super Profits tax. Hagop Tchamkertenian National Manager for Policy & Government Affairs Printing Industries and Garry Knespal, Executive Director GASAA, have both agreed to share their thoughts.
With the vast majority of printing companies privately owned and falling in the SME category, what does the proposed increase to superannuation contributions mean for the industry?
Tchamkertenian: “The staged increase in the Superannuation Guarantee will impose a cost on the printing industry. While the increase of the Superannuation Guarantee from 9 per cent to 12 per cent will take place over many years to help minimise the cost impact on industry, it still represents a cost to business and therefore Printing Industries advocates that the increase should comprise part of future wage trade-offs.
“Unemployment is forecast to fall, which implies there will be labour related issues for the printing industry in terms of accessing skilled labour and potential labour cost increases. Wage costs are forecast to rise at a significantly faster rate than inflation over the next two financial years. This is likely to place pressures on printing industry margins.”
|Hagop Tchamkertenian National Manager for Policy & Government Affairs Printing Industries|
|Garry Knespal, Executive Director GASAA|
Knespal: “There is no doubt margins and profit levels within the printing industry are very tight. Even when overall business continues to improve increased demand for print may not necessarily flow as strong competition between online and print continues. Any added costs, without real productivity offsets, will have some negative employment impact. At this stage it is hard to quantify, particularly as the rise in compulsory employer contribution will be gradual, but rest assured some employers will hold back on employing new staff, or will reduce take home pay, to cover the increased impost.
What are your thoughts on the Resources Super Profit tax?
Tchamkertenian: “While there may be economic arguments to support the tax, the Government perhaps should have just promoted the concept of introducing a Resource Tax and then consulted the affected industries on actual rates and associated arrangements. It should, for instance, have defined what it believes constitute a "super tax" rather than use the term, but be vague on the associated details.
“Given the proceeds of the proposed Resource Tax will be used to fund other measures such as the reduction in the corporate tax rate; increased infrastructure investment in resource states; and the Government’s co-contribution to superannuation for low income earners, it is crucial that a compromise solution is found.
“Definitely there are elements of the proposal such as providing refunds for state based royalties paid by mining companies and providing rebates for exploration related costs that would be beneficial to less profitable resourced based companies.
“When it comes to the great debate that has commenced, the Government tends to have history on its side. A similar tax - the Petroleum Resource Rent Tax - was introduced in the 1980s by the Hawke Government. The 40 per cent Petroleum Resource Rent Tax is in operation today yet it seems not to have deterred new investments in the industry.
“Printing Industries remains hopeful that a workable solution can be found which will allow the resources industry to continue contributing to Australia's economic wellbeing”.
Knespal: “The timing of the employer superannuation increase, mining industry super profit tax and other revenue raising measures could not have come at a worse time. The fragility of global and local markets and general business conditions is such that any added employer costs will have serious repercussions on employment and savings. The proposed Resources Super Profits Tax on the mining industry has already affected the printing industry as it has knocked business, share market and consumer confidence for six!
“If the idea takes off of taxing businesses that make higher profits than the Government deems reasonable then it could easily be extended to other ‘lucrative’ industries e.g.; financial, health etc. Indeed why not tax any business that earns a super profit as defined by the whim of Government. While it is easy to target the mining industry it is a dangerous precedent that could be very easily extended. While the printing industry is unlikely to ever be in super profit territory it does rely on the big end of town to be able to afford to spend on print communication.”
Let’s hope the Government has a Plan B because if the Resources Super Profit Tax is defeated by industry and public outrage, or watered down, Australia is going to need to find another way to repay its debt.