Page 2186 - Week 06 - Tuesday, 21 June 2011
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be a tax where, in relation to what you might make in the tax, what you make on the swings you will more than certainly lose on the merry-go-round of providing infrastructure. And given the way that this government provides infrastructure and, for instance, the inability of Mr Corbell when he was in ACTPLA to deliver infrastructure on time, on budget and on scope—and we have now put him back in charge—one can only expect that the amount of money that you will make from this change of use charge tax will be more than offset by the need and the urgency to bring on infrastructure further afield, with new greenfield sites and the size of the city as it sprawls across the Monaro.
We also have a claim that the government is about to provide a substantial subsidy to the development community. In a speech on 16 May, Ms Gallagher said that the ACT government is providing a substantial subsidy to the property sector through the remissions to the imposition of the lease variation tax. Ms Gallagher’s statement is complete nonsense and again demonstrates her complete lack of understanding of economic and financial concepts. A subsidy is a payment, typically by government, to enable an industry or a company to continue operating through using the subsidy to make its prices more competitive.
Therein is the expose of this tax. The minister is saying that for the next five years, if she sticks to her subsidy line, she is subsidising the development industry because this tax will make that industry uncompetitive: it will skew the industry in such a way as to damage the industry. It is not a subsidy. A remission is never a subsidy. I know that is good language, and you want to salve those who are afraid of the effects of this tax. But a remission as some sort of generosity from the government is not a subsidy; it is simply a remission of the tax. It should be called what it is: a remission of the tax.
Ms Gallagher told the estimates committee on 16 May 2011 that it was important to place the quantum of the lease variation tax in perspective. She said that, in an overall revenue take of $1.2 billion, the lease variation tax of $20 million is relatively minor. Again, Ms Gallagher displays a sad ignorance of taxation theory. Mr Barr gets this, because Mr Barr has spoken to committees in the past about the effects of taxes. All taxes have an effect, don’t they, Mr Barr?
Mr Barr: Indeed.
MR SMYTH: Yes. Mr Barr knows that; Mr Seselja knows that; I know that. Apparently the Treasurer does not know that all taxes have some sort of effect. And there again we have Ms Gallagher displaying a sad ignorance of taxation theory. A new or expanded tax will inevitably cause people to change their behaviour. That is what taxes do. This is one of the givens of taxation theory. Some taxes are intended to change behaviour explicitly, such as an excise tax on cigarettes and tobacco. Other taxes do not have an explicit intention to change behaviour, but in their application they cause people to consider how transactions can be changed to avoid or minimise the tax.
I will give you a great example. Federal Treasurer Keating said in 1985 that the capital gains tax would only raise $25 million in its fifth year. It now raises about $8 billion a year. It has created a new advisory industry and caused people to change the way they deal in assets. Even a minor amount—if $20 million is minor; I do not
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