Ken Henry (2)




Happily, I was wrong.  The recommendation for a more comprehensive land tax to replace the ragged array of state land taxes does remain intact.  It’s well and truly visible in the picture “Australia’s Future Tax System” painted by Ken Henry today.  But the Rudd government rejected it.

The AFTS report is very good. The panel deserves congratulations for a more rigorous effort than usually passes for tax reform in Australia.

[However, someone connected with producing the land tax aspect of AFTS didn’t see that high land prices simply reflect the private capitalization of land rent which remains uncollected by government.  He or she has taken on board the real estate industry’s furphy that it has something to do with the supply and demand of land.  Issues of supply and demand count for nothing in a tax-induced real estate bubble.]

And, hey, the government has accepted the recommendation for a resource rent tax of 40%!  Excellent stuff!  But there the good news ends. The rest was all an election year cop-out by an increasingly timorous Rudd government.  Realpolitik rules!  Efficacy?  Leadership?  What’s that?

I couldn’t express it any better than Alan Kohler does in his excellent Business Spectator article here.

In summary, the numbers are as follows:-

Henry Review recommendations:                              138

Recommendations accepted:                                        1.75

Recommendations rejected or deferred:          136.25

Let’s hope whoever wins government later this year has the intestinal fortitude to do what’s right, to complement the resource rental tax with the proposed comprehensive tax on land values.  As Ken Henry’s report shows, it provides scope to abolish a number of atrocious state taxes.

And, as my submission to AFTS showed, such a comprehensive tax on land values is an essential ingredient in staving off some of the devastation that’s going to occur when our real estate bubble bursts shortly.

Ken Henry

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