Paul's Blog: The Henry Review – and Brave Sir Kevin

After the bold promise of ‘root and branch’ tax reform, the Rudd Government’s response to the Henry Tax Review is barely even a ‘twig and leaf’ effort.

It’s another depressing example of this government’s approach.

We’ve had the bold claims and hyperbolic language.  Wayne Swan promised “the most comprehensive examination of the tax system in over 50 years”, which would “play a vital role in modernising Australia’s economy to meet the great challenges of the 21st century.”

Just like Kevin Rudd said that climate change was “the greatest moral challenge of our time.”

There has been the deliberate use of symbols – such as a lengthy review, a distinguished panel, even a budget-style lockup –to create a sense that something important was happening. 

It’s the same technique the Rudd Government used with the Apology to Indigenous Australians, ratifying the Kyoto Protocol, and its 2020 Summit.  Their objective: concentrate attention on the symbols and divert attention from the lack of substance.

Naturally, there has been the intense focus on media management.  So Rudd sat on the final report from the Henry Review for several months, delaying its release until just before the budget.  That way, it will helpfully disappear from view once the budget media cycle begins.

Don’t forget the most typical feature of how the Rudd Government does things: the yawning chasm between the big promise and the modest reality. 

So the promised ‘root and branch tax reform’ has shrunk to something of altogether smaller scale – a typical Labor tax grab.  Of Henry’s 138 recommendations, the Rudd Government has accepted precisely two and a half –one being the massive new tax on the mining sector.

But as is also all too common, Rudd and Swan can’t bring themselves to admit they have squibbed it.  Even as they unveiled their depressingly timid response, they were furiously claiming to have delivered on the original bold vision.

Swan on Sunday made the ludicrous claim that “if you think about reforms of our economy and the economic system in our lifetime, this is more significant than any I can think of.”

Has he not heard of the introduction of capital gains tax in 1985? Of the superannuation guarantee charge in 1992? Of the GST in 2000?

In substance, the Rudd government’s response to Henry is little more than a $29 billion tax increase.  It is $9 billion a year on the resources and energy sector, and a $20 billion increase in the superannuation levy on all businesses.

Once again, that is typical of this government’s approach – when all the empty talk about reform is stripped away, what they are really on about is increasing the tax take.

The Rudd government has consistently increased government spending and tax collection – in the misguided belief that government should make up an ever larger share of the national economy.

The Howard government took a very different approach to tax reform.  When it introduced the GST, there was a determined focus on offsetting tax reductions – with multiple inefficient state taxes swept away.

But the feature of its response to Henry which is most depressingly typical of the Rudd Government is its craven lack of political courage. 

This is a gutless government. 

It assigned a respected group of senior officials, academics and industry figures to conduct a thorough review of taxation policy.

Whatever you may think of the merits of individual recommendations, Ken Henry and his colleagues have produced a comprehensive report within an intellectually coherent framework.

If the Rudd Government were serious about reform, it would offer a serious and well considered response.

Instead, it has seized on one recommendation which suits it – for a massive new tax; it has used the Review as a smokescreen to introduce something which was not even recommended – an increase in the compulsory superannuation levy; and it has ignored or specifically rejected the vast bulk of the recommendations.

Mr Rudd likes to talk tough and hairy chested – but just as he has cut and run on the ETS, as he squibbed it reforms to parallel importation of books, he is a wimp on tax reform.

It is the same contrast between the bold promise of courageous advance – and the pathetic reality of fearful retreat – that Monty Python captured in their biting parody of timid ‘Sir Robin.’

Brave Sir Robin ran away, bravely ran away away.
When danger reared its ugly head, he bravely turned his tail and fled.

Let’s just call him ‘Brave Sir Kevin.’

Paul Fletcher is the Liberal Member for Bradfield.