Henry, Rudd taking flak

TREASURY secretary Ken Henry’s claims that the resources super-profits tax would not affect investment have been challenged while Prime Minister Kevin Rudd has been accused of panic in response to the global financial crisis.

Canadian tax authority Professor Jack Mintz – who modelled the effect of a similar tax in Alberta – told an Australian School of Taxation conference that the Henry Tax Review “failed to recognise how its recommendation could discourage investment in mining much more than for other industries”.
The Australian quoted him as saying the report had considered resource taxation and company taxation in different chapters and, as a result, overlooked the effect of the increased combined tax burden on investment.
He did concede the RSPT was well designed and would have no influence on investment in the absence of company tax.
Meanwhile, Australian National University Research School of Economics director Professor Warwick McKibbin said the Rudd government “panicked” and “rammed through” decisions fraught with risk.
He accused the government of overspending on its stimulus package by putting money into areas it could not reverse and then deciding that “because of politics they had to get their spending back so they could claim they had fiscal surplus – for which there is no economic basis, by the way”.
“So they come up with a really badly designed resource tax to try and get the position to look good three years from now and, in the middle of a sovereign risk crisis, exposed the economy to a reassessment of sovereign risk.”
McKibbin, who is a member of the Reserve Bank board, also accused Henry of not only failing to consult experts on economic issues, but of trying to silence them.
He told the Age he was stunned by Henry’s call this week for academics to “put down their weapons” and stop nitpicking over government proposals such as the emissions trading scheme.
“The ETS was a flawed scheme. Had the government got it through it would be dead by now because of the financial crisis.
“I have enormous respect for Ken Henry, but he can’t believe that you should have consensus because it is better to have bad policy that everyone agrees with than eventually get good policy that will work.”

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