AUSTRALIAN FINANCIAL REVIEW 21 January 2015
Tax system ‘infected’ by politics: Justice Richard Edmonds
A Federal Court judge says the tax system has become “infected” by politics and politicians so lacking in “intellectual honesty, integrity and courage” that Australia may never return to the prosperity of its past.
In a scathing critique of past and present federal politicians, eminent tax expert Justice Richard Edmonds said the Abbott government had no “realistic prospect” of taking a structural tax reform policy – that had debated in the community with even a chance of consensus – to the next election.
Despite the Abbott government’s commitment to release a tax white paper before the 2016 election, Justice Edmonds said: “I fear time is now too short”.
Justice Edmonds, who has adjudicated on some of the country’s most high profile court battles, cited warnings by former Treasury secretary Martin Parkinson last year that the tax system had a revenue mix stuck in the 1950s, even after the introduction of the GST and big corporate and income tax cuts.
And the nation had to consider politically unpalatable changes to superannuation, the taxation of the family home, fringe benefits, negative gearing and even broadening not just GST but also income taxes.
But politicians were not interested in tax reform and only embrace tax changes “in their own political interest”, Justice Edmonds told the Australasian Tax Teachers’ Association in Adelaide on Wednesday.
“Changes to the taxation system are so riddled and infected by politics, changes amounting to real tax reform cannot even make it to the table for consideration and discussion, let alone be adopted as policy for implementation,” he said.
“Recent events in relation to the present Government’s budget proposals and the abolition of the carbon and mining taxes illustrate the state of infection.”
He said federal politicians over the past 15 years – which includes the Howard government, the Rudd and Gillard government and the Abbott government – all pursued objectives driven by “political expediency to the exclusion and detriment of the nation’s best interests”.
“In doing so they have all displayed a lack of intellectual honesty, integrity and the courage necessary for strong political leadership,” Justice Edmonds said.
“The most worrying aspect is not that this has happened in the past, but every indication that it is going to continue into the future; and if it does, then the people of this country will never again enjoy the prosperity and consequential well-being that they, and their forebears, have enjoyed in the past, and deserve to enjoy into the future: Europe here we come!”
Over the past eight years, the superannuation system has become “totally skewed” in favour of the wealthy because of the opportunities for tax avoidance, said Justice Edmonds who said he was always amazed at the apparent political consensus on the introduction of the tax-free status of super benefits.
“I dare say that if the ordinary man in the street had any knowledgeable notion of what certain sections of the community were getting away with in this regard, any semblance of consensus would quickly disappear,” he said.
“The whole system of the taxation of superannuation in this country needs to be brought back to the table.”