Just the Tax, Ma’am

Election Analysis: Corporate tax structures and youth unemployment are rising election issues and are at the heart of the missions of many of Australia’s Not for Profit organisations, writes Sara Bice socio-political commentator from the Melbourne School of Government at the University of Melbourne in a series of articles leading up to 2 July.

Television’s Dragnet detective Joe Friday was a rationalist. His focus on the facts is a salient reminder to our candidates who would pursue politicised distractions in the remaining five weeks of the federal election campaign. A forgotten $2.3 million home, anyone? How about loading Australia with asylum seeker boats as payback for live cattle export bans?  

These distractions aside, Tuesday’s Newspoll placed health and medicare at the top of voters’ “very important” issues (75 per cent), followed closely by the economy and cost of living (both at 68 per cent). While taxation and employment fall lower in the list (coming in at just below 50 per cent), these two issues are inextricable to those deemed most important by voters. And they rest at the heart of the missions of many of Australia’s Not for Profit organisations.

The Melbourne School of Government hosted its first Public Interactive Learning Lab (PILL) on key election issues on Monday night, with a focus on tax. In an attempt to tackle the election question from unique angles, the discussion – in which members of the public voted on the most pertinent tax issues and suggested policy reforms – included views from a behavioural economist, a criminologist and historical philosopher. At least for this group, the need for more stringent tax enforcement, especially on corporate tax, arose as the most critical issue for policy-makers to address.

And what does concern about corporate tax have to do with NFPs, you may ask?

Australian tax law is notoriously complicated, with many NFP sector organisations struggling annually through a litany of legislation, including concerning how to classify their organisations within the tax structure. And it is this very complicated regulatory structure that allows large corporations – leveraging expensive legal services and assiduous accountancy skills – to exploit tax loopholes to become legal tax avoiders, not tax evaders.

NFPs and most of the general public lack the resources to achieve such “efficient” tax structures, leading to unequal treatment of entities and individuals under tax law. As one member of the public attending the MSoG event reported: “How is it that I worked for one of the world’s largest companies who paid basically no tax last year, but I was personally taxed 40 per cent?!”

For policy makers, tax equality is particularly challenging because, as Criminologist Professor Fiona Haines explained, it is the very complexity of tax law that facilitates big corporations to get around it.

“Creating more tax regulation is like trying to drown a fish in water,” she explained.

A more effective option, as economist Dr Leslie Martin explained, is to encourage the government to focus on reducing inefficiencies by determining the optimal level at which items can be taxed, without compromising consumption. But even this approach appears most effective in theory. In reality, at least in the case of inelastic items like petrol – those items which we will likely continue to buy at similar rates, regardless of price – we rapidly enter the realm of inequality.

Studies from the United States, for example, show that regardless of income level, consumers spend approximately the same proportion of their incomes on petrol, even when prices are up via tax increases. For those on larger salaries, this proportion is easier to maintain. But for those on lower incomes, maintaining the same consumption levels requires trade-offs, including reduced spending on other essential and non-essential items.

And so tax, and what we do about it, quickly becomes an issue of social equality and inclusion.

The second major issue for this week, youth unemployment, is also one of social equality and inclusion.

Youth unemployment is central to the concerns of several of Australia’s leading NFPs, including the Brotherhood of St Laurence (BSL), The Smith Family and YWCA. A February report by BSL shows that critical “hot spots” of youth unemployment remain throughout the country, with places like Newcastle – which is struggling under macroeconomic pressures pushing coal prices to record lows – showing figures as high as 21.8 per cent.

While the most recent figures on youth unemployment were down slightly (to 12 per cent in March from 12.2 per cent in February), the overall figures remain disturbingly high, especially when compared to Australia’s latest total unemployment rate of 5.7 per cent.

Australia’s NFP sector has a key role to play not only in ensuring that youth unemployment remains high on the political agenda in the lead up to the election campaign, but also in offering solutions.

Program’s like the Foundation for Young Australians’ Young Social Pioneers program, announced this week, present vital opportunities for young people to secure support for burgeoning business ideas that will foster innovation for social issues and establish new social ventures.

As Smith Family CEO Dr Lisa O’Brien explains in a piece on how we can reduce youth unemployment more generally, investments like this – which develop skills and expose young people to established mentors – are two key ways to ensure strong workforce participation by the next generation. And research supports her assertions.

Now, if the politicians could just get focused on the facts.

The Melbourne School of Government will host its second Public Interactive Learning Lab (PILL) on the subject of Youth Unemployment on Monday, 20 June. Join us for the discussion and help influence the agenda in this year’s election. For more information, visit: http://events.unimelb.edu.au/2016/6 or contact Sara Bice on sara.bice@unimelb.edu.au.

About the author: Sara Bice (PhD) is director of research translation, Melbourne School of Government at the University of Melbourne. With a decade of experience assisting private firms, Not for Profits and government agencies to plan and advance their sustainable development agendas, Bice’s career is committed to creating shared value for communities and companies through evidence-based decision-making, risk management and strong stakeholder engagement.

(Note the photo of Sara Bice is courtesy of  Adam Hollingworth)