“Analysis of the ACT Budget uncovers some quite startling detail. Most remarkable perhaps is the revelation that the claimed surplus is an illusion,” writes JON STANHOPE
IT is more than five years since the ACT government issued its response to the “ACT Taxation Review”.
The review was instituted in 2010 by then-Treasurer Katy Gallagher and ranks as one of the more significant pieces of policy reform in the ACT. Katy is to be congratulated for commissioning the review and later, as chief minister of the ACT, oversighting its implementation.
However, I am fairly certain that Katy would share the misgivings which I and I’m sure a growing number of Canberrans have about the impact the new taxation arrangements are having on many in the Canberra community.
Any analysis of data on the cost of living and trends in household disposable income in Canberra will show just how much stress households in the bottom-income quintiles are suffering.
The major concern is that the centrepiece of the taxation reform package, namely the increase in rates, designed to compensate for the abolition of inefficient taxes such as stamp duty has, since Katy handed over the reins, been undertaken without due regard to the significant inequitable distributional risks inherent in such a dramatic change.
Compounding the impact of the changes on households in the lower-income quintiles has been the addition of new charges such as the Safer Families Levy and increases in others such as the Fire Levy and in water, power and gas prices.
That this has occurred is surprising because these risks were recognised and discussed in detail in the “Taxation Review” report and were the subject of a number of its recommendations, all of which were accepted by the government in its response to the report.
The “Taxation Review” report includes in Part 4, from page 195, an excellent analysis of the important part the concession system would need to play in the transition to a new taxation system if adverse distributional impacts of the reform were to be avoided. The report specifically noted that concessions would be “a key component of recommendations to abolish duty on conveyances” and that the “role of concessions, including appropriate adjustments, will be fundamental to the success of any reform of the ACT’s tax system.”
The report outlines in detail the necessary components of a new concessions framework that should be developed as an adjunct to the implementation of the taxation reform proposals and makes five specific recommendations about why and how concessions should be used to “cushion” the distributional impacts of reform through the transition period and on an ongoing basis.
The government in its response to the “Taxation Review” agreed, unsurprisingly, to all of the concessions-related recommendations in order to ensure that negative and unfair distributional impacts were avoided.
However, it is clear that this has not occurred and that the actual experience of many Canberra households, notably those with lower incomes, including young families and pensioners, is unfortunately that the distributional impact of the changed arrangements has in fact had a major detrimental effect on their household budget.
Therefore, it would be valuable to understand the extent to which the recommendations have been actioned and of any other parallel decisions of the government that may have exacerbated the negative aspects of the changes.
The most effective review would undoubtedly be a performance review by the auditor-general of the overall implementation of the report. As part of any such review the auditor could, as part of her scope of work, assess the Treasury analysis of the distributional impacts of all decisions, for example the introduction of any additional levy or increase in existing levies, fees and charges, taken by the government in the period since the commencement of the taxation reform.
It would be remarkable if such analysis has not been undertaken and there would be advantage in the auditor-general reviewing it.
How did pokies get into the casino?
WHILE on the subject of the “Taxation Review” report, I was intrigued to see that the government rejected only one recommendation from the report, namely a dissenting recommendation from one member of the panel who recommended that poker machines be allowed in Casino Canberra.
The government in its response rejected out of hand the recommendation that the casino be permitted to own and operate poker machines, presumably accepting that the long-accepted current community gaming model reflected the range of economic, social and ethical considerations that previous governments had taken into account in setting the policy.
The fact that this decision has been subsequently reversed raises the obvious question of the basis of the decision by the current government to overturn the unequivocal and presumably unanimous position on poker machines of the Gallagher Cabinet in late 2012.