The tax forum's unmentionable tax: Julie Bishop Op Ed

05/10/11

Opinion piece by the Deputy Leader of the Opposition Julie Bishop published today on the National Times website:

Major economic reforms are by their nature challenging and difficult to implement.

On this second day of the government's tax forum it is worth reflecting on the history of the last major tax reform undertaken in this country.

The path to the introduction of the Goods and Services Tax began in earnest in the 1980s when it was supported by both sides of politics who recognised the need for a broad-based consumption tax to replace the archaic maze of multiple rates of wholesale sales tax.

It was formally adopted by then opposition leader John Hewson as a key element of the Fightback policy platform taken by the Coalition to the 1993 election.

Then Labor prime minister Paul Keating mounted a fierce campaign against the introduction of a GST and narrowly won against the odds in what most saw as the Coalition's ''unloseable election''.

In the lead up to the 1996 election then opposition leader John Howard said he would ''never, ever'' introduce a Goods and Services Tax, and went on to win that election in a landslide.

During his first term, Howard became convinced of the need to replace the complex layers of wholesale sales tax with a flat rate GST, and saw an opportunity to abolish a range of inefficient and distorting state taxes.

State governments had been suffering from a shrinking tax base for decades and the decision to provide all the proceeds of the GST to the states put them on a more sustainable footing and enabled major reform of federal-state relations.

The Labor opposition vowed to campaign against the GST and threw Howard's pre-election comments back at him.

However, this attack was blunted by Howard's decision to take the proposed GST to an election and seek a mandate from the Australian people.

The 1998 election was a hard fought contest - I remember it well as it was my first election.

There was great uncertainty over the Coalition's decision to campaign on the introduction of a new tax and whether it could win a second term.

That decision and the election win gave Howard great authority to negotiate with minor parties and independent senators, as they recognised the Coalition's mandate, even if Labor refused to do so.

The contrast with Julia Gillard's behaviour over the proposed carbon tax could hardly be more stark.

Tony Abbott repeatedly challenged the Prime Minister during the 2010 election campaign by declaring that ''as night follows day, Labor will introduce a carbon tax''.

The tight contest and the prospect of being Australia's shortest serving Prime Minister led Julia Gillard to give her infamous pledge on national television that ''there will be no carbon tax under the government I lead''.

This was not an unscripted or unguarded moment but a carefully considered deliberate statement to protect Labor's vote.

After the election Julia Gillard signed an alliance agreement with the Greens and promised to impose a carbon tax in return for their support.

That decision has caused immense anger and concern in many parts of the community but particularly among small business manufacturers, many of whom are already struggling to compete against overseas imports.

This week I visited one such business in the NSW regional centre of Cowra.

SaraJane Furniture has been operating for more than 30 years and employs 130 local people.

It has taken steps in recent years to reduce its carbon footprint by more than 35 per cent, not because of the threat of a carbon tax, but because it made the company more efficient.

The owners have based the success of their furniture manufacturing business on using only Australian-grown plantation timber and investing millions of dollars in high-tech machinery and equipment.

The business is producing 3000 pieces of furniture per week, or 40 containers per month, for one Australian retail outlet.

Its major competitor in China is supplying the same retailer with 70 containers of furniture per week.

It is a low margin business but SarahJane Furniture has survived through efficient business practices, a skilled workforce and innovative design.

With the high Australian dollar placing enormous pressure on the business, the last thing it needs is a carbon tax.

The owners estimate that the imposition of a carbon tax will increase the current electricity bill of $13,000 per week to $21,000 per week.

The business will receive no compensation from the government nor any recognition of the capital investment it has already made to reduce its carbon footprint.

What irks the owners most is that their competitor in China will not face any similar increase in costs.

Given the small margins in the business, the owners have put on hold all plans for expansion and are now genuinely fearful of the prospects for survival and the impact that would have on individual employees and their families.

The owners are particularly angry at what they see as the Prime Minister's lack of a mandate to introduce a crippling tax and her refusal to take it to an election to obtain one.

The proposed carbon tax is off limits at today's tax forum, making a mockery of the whole event.

Julia Gillard should skip the tax talkfest and instead take a trip to Cowra.

She should visit these hardworking people, who have invested three decades of their life in a business providing valuable work in a country town, and explain to them why her survival in the office of Prime Minister takes precedence over their future.