Land and Labor League

The Land and Labor League supports the Henry Review into Australia's public finance future.

We agree with the objectives and concerns. The objective was to minimise economic inefficiency, provide equity and minimise complexity. The review did not make any recommendations on the GST as that was not part of its terms of reference. It was particularly concerned with the future environment, especially estimations that by 2050 almost a quarter of Australia's population will be over 65 and the immediate export market in south-east Asia in the same period of time.

Whilst the issue was only addressed very indirectly by the Review it should be noted that the Australia has a very low proportion of public income and expenditure to GDP compared to other OECD countries. This may seem surprising for a country that is highly dependent on efficient and effective social and physical infrastructure.

The Review was highly consultative. It was established in in May 2008. The first discussion paper was released in August 2008, had a round of public submissions in August to October 2008, released consultation papers in December 2008, had more public submissions from December 2008 to May 2008, held public meetings in all capital cities and two regional cities in March 2009, held focus groups in five capital cities and three regional centres in April 2009, released a further report in May 2009, held a two-day conference in Melbourne in June 2009, and delivered its report to the government in December 2009. The Government's response was released in May 2010. Approximately 1500 written submissions were received and considered by the panel.

Some of the key recommendations of the review included reducing the quantity of taxes, especially those which had very marginal revenue generation. The panel argued for a progressive marginal tax rate with a high tax-free threshold and a constant marginal rate established on the individual level. The tax on superannuation contributions in the fund should be abolished. The rate of tax on superannuation fund earnings should be halved to 7.5 per cent. The company income tax rate should be reduced to 25 per cent. The capital allowance arrangements for small business should be streamlined and simplified, by: allowing depreciating assets costing less than $10,000 to be immediately written-off. State-based payroll tax, a tax on employment, should be abolished. All alcoholic beverages should be taxed on a volumetric basis, which, over time, should converge to a single rate, with a low-alcohol threshold introduced for all products. The rate of alcohol tax should be based on evidence of the net marginal spillover cost of alcohol.

The most significant components of the review however are firmly entrenched in classic liberal political economy; the use of land as a major source of revenue for the public. Specifically, the review argued that the the government should abolish stamp duties (which increases the cost of housing and reduces sales) and move towards a Federal land tax, eventually for all properties. The argument for this - and indeed all resource-based taxes that are derived from value rather than volume (as Royalties) are is based on their efficiency and responsiveness.

The burden of inelastic supply (land, natural resources) must be borne by the 'supplier'. It cannot be passed on to anyone else.