Rent-seeking rampant

The Rudd government’s proposal to tighten up documentation requirements for the very generous tax concessions provided for people who receive motor cars as a fringe benefit has produced some striking examples of rent-seeking from the Australian right, notably including Catallaxy and the Australian Financial Review. Catallaxy has a string of posts defending this rort.

The Fin gives lots of space to bleating rent-seekers, while imputing to “academics” the opinion that this is a subsidy. I guess that’s fair enough, given that the Fin regards basic science as a matter of academic opinion, while treating the failed dogmas of the 1980s as proven facts. And, of course, the Opposition has promised to oppose the measure, while weaselling out on the question of whether it would reverse the changes if elected.

This really is a test for Rudd. If he wants to refute the oft-repeated claim that he is all spin and no substance, this is his first chance, and one of the best he is going to get.

86 thoughts on “Rent-seeking rampant

  1. @TerjeP

    “But I take it you have never run a business and have some *** crazy ideas about what it entails anyway.”

    Perhaps you have some *** crazy ideas about how ‘special’ people who run a business are? You seem quite sure that you deserve special treatment because you do run a business. I have seen this attitude from my own business owning relatives and from those small – and I mean small in mind and character – business people who have been my ‘bosses’.

    Sancho, Terje only argues for his own self-interest. That is his religion.

  2. I’m with TerjeP on the subsidies and red tape. You could clean the whole system up a lot by not using the tax system for micro-redistribution. Keep it progressive, but that’s it, no “family tax benefit part B” nonsense. Personal tax: “how much do you earn? Give us 10% of everything over $20k, 20% up to $80k, 30% after that. The end”. Company tax: “net earnings? Give us 30%. The end”. Want an R&D subsidy? Apply for it as a grant. Want the government to donate money to Ford? Campaign accordingly. Want a tax-deductable phone? Great. Use it for personal calls? Split the bill. Show your working, the tax department will want to see it.

    One side benefit would be the nudge effect that people are less inclined to take the second step of applying for a grant, and again that explicitly applying for a subsidy would be hard for some “self-sufficient” people. So fewer people would apply.

    I was thinking that with international “earnings redistribution” or whatever the approved circumlocution for tax evasion by multinationals is, would a Tobin tax help with that? Maybe not the whole answer, but could it be part of the solution?

  3. That’s not what Terje meant, Moz, and you know it. I agree with you, btw – we should also remove all the direct and indirect subsidies to fossil fuel industries, miners generally, etc.

  4. Log books seem so quaint in this day and age, anyway. I have an ancient car but I understand the up to date ones are chock full of smart electronics, so can’t a car help with tracking its use with the aid of some kind of downloadable smartphone app? Surely that would not be too taxing for the executive class, most of whom are welded to their devices anyway?

  5. @David Irving (no relation)

    I know nothing. And deny everything. Or is it that I can’t recall? I’m not sure any more, it was so long ago. But I know I’m opposed to hiding subsidies in the tax system or anywhere else, I want them out there in public where we can all discuss them rather than spending our lives ferreting out the rorts.

    Helen, the objections are not based on the practical issues, they’re based on the principle of the thing – no tax rort shall ever be repealed without a fight.

  6. Helen, i heard on the first day there’s an app for it. i don’t know what all the complaining is about. if you can’t be bothered honestly accounting for your supposedly justifiable perk you shouldn’t have it. -a.v.

  7. One of the interesting things about salary packaging for cars, from my observation of people I’ve known and worked closely with, is that it encourages people to drive rather than use public transport. Rorting (using for private use) of course makes this more so. Also salary packaging is particularly attractive to people who live a long way from their work (it saves you more the further you have to drive). So all in all I think there could be major environmental benefits from ending salary packaging for cars. However offering it for public transport (which one of my former employers was starting to look at) could be beneficial for the environment.

  8. Perhaps you have some *** crazy ideas about how ‘special’ people who run a business are? You seem quite sure that you deserve special treatment because you do run a business.

    Julie – ahhh no. You seem to have misunderstood what I said but at the risk of being misunderstood let me reiterate.

    Sometimes at work as an employee I will use a pen to write on a post-it-note some reminder that is of personal benefit. Perhaps my wife rang to say I should pick up milk. Now the use of the ink and paper was a personal benefit not a business activity. If you want a corporate tax system with absolutely zero leakage then all personal benefits must be separated and excluded from business expenses. So some leak proof system would require that a record is made of all the post-it-note and ink that is used for personal benefit. The accounts department would then tally up all the post-it-notes and drops of ink used each month for personal benefit and having done so they would calculate FBT and remit the associated revenue to the ATO.

    If you did this the tax man would collect a few extra cents of FBT each month. The company would however incur $100’s of dollars in extra labour costs doing the accounting. And of course they would claim this labour as a business expense. Which would reduce their regular company tax by a lot more than a few cents.

    This is an extreme example. But it shows that at some point extra compliance creates a lose / lose situation. The ATO loses. The shareholder loses. And the staff do mindless bean counting.

    So any pragmatic policy maker will create exemptions. The ATO does not expect companies to pay FBT on personal benefits given to employees such as the use of post-it-notes and pens. And the ATO has decided that personal calls made on company mobile phones are also not worth accounting for.

    Now you can argue that the ATO and FBT tax policy should be more aggressively demanding compliance. Maybe it should go after personal calls on company phones. But if you think compliance comes at zero cost, or that there is absolutely no limit to how aggressive they should be, then you’re batshit crazy.

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