PART 4 of "The Tax Reform Bill and the Constitutional Problem"
Open Letter by David Keane, November 1998

AN  AGENDA  FOR  A  SOLUTION  TO  AUSTRALIA'S  NATIONAL  LONG-TERM  ECONOMIC  PROBLEMS

Problems Inherent in Two Party Adversarial Democracy

Two party democracy has its limitations and we can see these limitations emerging in the disillusionment being felt by the young and minority groups, in the modern political process.  What hope is there in a real solution coming from our politicians, they will often say.  We have witnessed a decade of the politics of secrecy.  Both major parties have shared in causing this situation.  We see major world treaties (our recent treaty with Indonesia) being signed in secret, because of perceived economic gain.  We see other treaties being negotiated in secret (the recently troubled MAI negotiations were always negotiated in closed sessions, and the Joint Standing Committee on Treaties blasted the Commonwealth government for not involving the States in the decision-making process).

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National election dates are called, not for the common good, but in anticipation of ratings.  The recent GST debate was notable for its brevity of public debate before the election, and refusal by the government to permit a full enquiry before the GST election.

Governments avoid public accountability, saying they have a mandate to decide most political and economic issues behind closed doors.  With the emphasis upon secrecy, politics in parliament is more concerned with denigration of the opposition than informing the public.  But most important of all, vital information concerning treasury and pre-election budgets, is hidden from the public, and essential information from the Tax Office, Treasury and Bureau of Statistics remains unpublished, except at the discretion of the ruling government if publication will be perceived to improve their ratings.

Adversarial politics fosters such secrecy and deception.  Those in power release information, only if it is seen to improve their ratings.

Consensus Politics

The need in Australia, is to develop consensus politics, in which several groups join together, each with a different contribution.  Change will come most often when consensus of the group has been found, and this means broader sharing and openness of information.  Change will usually be slower and steadier, in contrast to the zealous ideological extremes and blunders fostered in the two party adversarial system.  The keynotes of consensus politics are goodwill, openness, working openly from ethical considerations, and concern for the common good rather than the party ideology.

There are two novel ways to introduce a greater degree of Consensus Politics, inviting the States to share in national economic planning, and establishing a level of civil representation in Australian government.

It may be that the process of developing economic federalism will be a lengthy process, perhaps taking a decade to finalise, and may involve an elected convention, similar to that of the republic convention.

One approach may be for the Commonwealth to keep the collection of income tax, but for a set of State economic rights to be agreed upon. Once clarified and generally agreed to, these rights could be enshrined in the Constitution by a referendum.

A second idea would be to combine the revenue raising departments of both Commonwealth and State, so that all revenues go into a Consolidated Revenue Fund, owned jointly by the Commonwealth and States.  In this way, petty taxes can be dispensed with, and practices of States balancing the budget by providing excessive costs to the Commonwealth (and vice versa) can be eliminated.  Then a federally acceptable arrangement is made by which the national revenue is divided between Commonwealth and States.

Long Range Economic Planning

We are familiar with the three-year plans symptomatic of adversarial politics (or perhaps we should call them 2 1/2 year plans).  At the end of the period another election is called, and adversarial opposing three year plans are again presented to the public.  The beauty of consensus politics, is that it seeks to debate the real long-term issues, and the debate naturally moves onto a more meaningful level.

The most important issue to be resolved at this time is the Commonwealth/State economic relationship.  The States are hurting badly, and three year agenda programs which will not work because they were not adequately or openly researched before trying to implement them, is not the answer.  The Commonwealth and States must come together on an equitable basis, and together find a long term solution.  The Australian Constitution guarantees economic equity between the Commonwealth and the States, and so when the States are hurting enough they will demand such equity in long term economic decision making.  Patronising agendas issued from Canberra are doomed to failure, because the States have not been consulted in fundamental planning (though they have had briefing sessions, which is what the recent Commonwealth/State talks were all about).

Imagine a year or two down the track if the Coalition agenda for intensified economic patronage from Canberra is enforced, a majority of States will concurrently be in crisis, and together they will demand reform.  The Commonwealth Coalition formula is that they should all 6 States (without a single dissent) agree to the increase of a very unpopular GST tax.  Yet to demand equity by a majority of States initiating their constitutional right to raise their own taxes (be it State Income Tax, 2% Easy Tax, or any other tax apart from customs or excise), would only require a majority of States to agree (or possibly only a half), to the States a much more attractive solution than the Coalition formula which demands absolute consensus of States about increasing a very unpopular tax.

Multinational Tax Evasion.

The present GST agenda to provide a quick fix to our economy, is coupled with a parallel attempt to balance the budget by selling off Telstra.  But it will be a further three years before the dire consequences of GST will become evident, and by that time, the Coalition has hopes of having GST entrenched firmly into Australian taxation.

But the real problem behind Australia's failing economy is the enormous degree of foreign ownership, the highest among OECD nations.  And the Coalition is determined to extend that trend.  Consider the Australian Bureau of Statistics (ABS) all-over figure of 42.6% foreign ownership.  In 1995-96, ABS figures indicated foreigners paid only $10 billion in tax, that is just 9% of our overall taxation revenue.  Yet this is just the tip of the iceberg.  If we take into account nominee shareholders (not included in ABS figures) the degree of foreign ownership is likely to be closer to 90%.  A conservative $200 billion goes out of Australia each year, thus escaping the tax net.

Multinationals are given an open welcome to come into Australia to compete on our markets and take their profits overseas, while paying little or no tax.  This in turn creates unfair competition which forces Australian-owned (tax-paying) companies out of business and a loss of income for the Australian Government.  The lack of money staying in the country results in lack of money for development, and therefore leads to unemployment.  If we did not give so many favours to internationals, if we were to do our own development, then the money would stay in the country and so would the profit, which would create more employment.

Here then is the hidden reason for Australia's failing economy.  But most of the figures are kept secret in Treasury, ABS, and the Tax Office.  The States must link together and insist upon recognition of economic equity and demand also access to these vital economic figures.  Then they will see themselves why there is no money for infrastructure and hospitals and bandaid solutions such as GST are not given in depth investigation and public airing before holding elections on them.

Initiatives to Start Civil Representation.

It may be argued that the States rarely agree among themselves.  Diversity of State views would actually be a very positive contribution in developing a national long-term economic plan.  What has been missing in the past has been the opportunity for States to come together and discuss the ethical and fundamental basis for planning the Australian long-term economy.  Once such fundamental questions, are explored openly through a consensus debate involving all the States and Commonwealth, then the true causes of our economic problems will be for the first time openly shared with the public.

This experiment in enhanced democracy and recognition of State/Commonwealth equity will involve in time three levels of government --- Commonwealth, State and Civil Society.  The idea of civil representation in State and National government, is only just emerging, yet it is an idea that is as powerful and irresistible as the rising tide.  The experiment of civil representation in the UN General Assembly in the year 2,000 will project this idea sharply into humanity's consciousness, and like a similarly powerful idea (the electoral vote for women) it will become adopted around the world in just a few years.  Those governments that pioneer with this experiment will become wayshowers for humanity.

This whole process of political consensus and openness will take a giant leap forward when at least one government (State or Commonwealth) initiates public debate, about inviting civil representation into Australian government. This whole idea is explored more in Part 5.

Changes to the Australian Constitution

It is particularly important that when the Commonwealth introduces a referendum to change the Constitution for Australia to become a republic, there is not slipped in a clause to hand exclusive income tax and general tax collection over to the Commonwealth.  The right to collect income tax by the States is the major element of restraint upon the Commonwealth from destroying the States economically.  It guarantees at least an element of economic federalism.  NEXT


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Electoral Authorisation: David Keane, PO Box 582, Gosnells, W.A., 6110, Australia.