Andrew Leigh

How hard is it to deliver a tax cut, SloMo?

  Chris Bowen & Andrew Leigh

No wonder Scott Morrison was nowhere to be seen after PEFO was released yesterday…

Scott Morrison talked a big game about the evils of bracket creep and the need for urgent action.

Alas, you have to do your homework before taking action.

In January, Scott Morrison said:

“There's no compensation for them if we leave the tax rates where they are…”(Sky News Australian Agenda, January 24 2016).

Later, the L-plate Treasurer, delivering his first budget, announced:

‘‘From 1 July this year, we will increase the upper limit for the middle income tax bracket from $80,000 to $87,000 per year’’ – Scott Morrison, Budget Speech, May 3 2016

Yet as Scott Morrison and Malcolm Turnbull stampeded towards an election, they trampled their own tax cut.

The Commissioner of Taxation has indicated that the Government’s income tax cuts cannot proceed without legislation.

The Pre-Election Economic and Fiscal Outlook, prepared by the Secretaries of the Departments of Treasury and Finance, says on page 40:

“There are a number of tax measures included in the 2016-17 Budget that take effect on or before 1 July 2016. Many of these measures can be legislated at a later time within 2016-17 without materially affecting the estimates. However, the Commissioner has indicated that the Ten Year Enterprise Tax Plan — targeted personal income tax relief measure requires the relevant legislation to be passed before the change will be incorporated into the income tax withholding schedules. As the timing of this is uncertain, there is a risk that some of the revenue cost of this measure will slip from 2016-17 into 2017-18 (improving the 2016-17 bottom line with a commensurate worsening in 2017-18).”

Now this begs serious questions of the Treasurer:

1. Did the Treasurer ask the Tax Commissioner for implementation advice prior to announcing this Budget measure?
   
   
2. If he did ask advice, why didn’t the Government make clear from the start that these tax cuts will not be available as of 1 July 2016, but instead, only after legislation has passed the Parliament?

Labor has clearly indicated its support for these particular tax cuts.

Finance Minister Mathias Cormann’s very messy press conference yesterday saw him sidestep all questions about the Prime Minister’s claims that tax cuts would be handled administratively without legislation.

The fact is that if the Liberals really cared about bracket creep, they would have legislated their tax cut before calling an election.

On July 2, Australians will have an election - but not a tax cut.

Today's events are further proof that when it comes to economic policy, Scott Morrison is all talk, but fails on delivery.

SATURDAY, 21 MAY 2016