It appears that Kevin Rudd’s industry of the future might very well be shelf-company manufacture in the Northern Territory.
Adopting a suggestion from Gina Reinhardt, Rudd has promised to make the NT a special economic zone where companies will pay a third less company tax.
Following in the failed decentralisation foot-steps of the Whitlam Government and others (Albury Wodonga anyone?) Rudd is trying to coerce Australian business into going north where there is no business.
Until northern Australia decides to produce something for which there is an international market, no “push” solutions are going to work. People, and companies, go where there is economic advantage. And when there is economic advantage, they don’t need to be coerced.
Having differential tax rates within the one country will only advantage one industry – the tax avoidance industry – with advisors and consultants springing-up to show companies how they can get this advantage.
And even then it will mostly be a benefit for private companies as franked dividends mean public companies will be largely unaffected.
So the NT will be most attractive to private and overseas companies who are looking for tax minimisation, making it a bit like Switzerland, but without the chocolate and yodelling.
The only saving grace about this proposal is that Tony Abbott was stumbling towards a similar one, and Kevin has probably pre-empted and terminated it.
An Idea whose time has come; and indeed, liked by both sides of politics.
Alan B. Goulding.
Comment by Alan goulding — August 16, 2013 @ 10:41 am
In matters of taxation, s.51(ii) and s.99 of the Constitution forbid discrimination between States, but not between the States and a Territory. Rudd is cynically exploiting this loophole. A more responsible way to exploit it is to use the NT and the ACT as proving grounds for desirable but politically risky tax reforms that are meant to applied across the country. A pilot program in the Territories limits the number of votes that will be lost in the inevitable fact-free scare campaign.
Comment by Gavin R. Putland — August 16, 2013 @ 11:16 am
We created the constitution Gavin! Therefore, it follows we can change it, particularly if that intended change has very widespread, bipartisan support!
For mine, and since you raised it in this thread; the entire tax act could be jettisoned, with a single stand alone unavoidable expenditure tax replacing all of that convoluted complexity. Arguably, the only measure open to us to effectively deal with the looming destiny of demography!?
And yes, you will no doubt tell me that all the states need to agree, before we can change or even scuttle the ubiquitous GST.
However, you’d be wrong again.
The GST is the sole product of federal legislation, and what the fed gives, the fed can also take away; but particularly, if it needs to twist a few recalcitrant state pollie’s arms, to compel essential change/govt service rationalization!
Alan B Goulding.
Comment by Alan Goulding — August 16, 2013 @ 12:09 pm