Despite Tony Abbott's pre-election promise that there would be "No cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS.", the ABC and SBS are staring down the barrel of $43.5 million in cuts over four years. This is a low-ball figure, with ABC Managing Director Mark Scott arguing that the cuts will probably amount to more than $120 million over that period.
Unsurprisingly, this policy about-face (which is a kind way of saying lie) was tremendously unpopular with voters. However, the government has stuck to it's guns, citing a "debt and deficit disaster", which seems to conveniently evaporate the moment Joe Hockey crosses the Tasman.
But let's assume, for the sake of argument, that the PM isn't lying through his teeth. Let's also assume that he's being genuine when he invites input from cross-bench senators, asking "if you don't like what the Government is putting up, give us your alternative in terms of how we save money."
Sure, a more cynical commentator might suggest that this is a lazy attempt to shift attention away from his own budget train-wreck; but let the record show I am anything but cynical.
The savings I will focus on come from the Tax Expenditure side of the ledger. In simple terms, tax expenditure is tax that the government could collect, but chooses to forego. Think here about the zero-rating of GST on certain kinds of food - that alone amounts to 6.2 billion in foregone revenue. While I have very strong ideas about the desirability of zero-rating food, we'll save them for another blog post. Instead, I want to focus on alternative tax expenditures that we might choose to collect in order to find the $43.5 million in cuts which are being directed to the ABC and SBS.
Option 1: $21 million annually in "Discounted valuation for car parking fringe benefits".
A fringe benefit, in simple terms, is a benefit that flows to an employee, from an employer, which isn't the employee's salary. So, if I work for a public transport authority and get cheap or discounted travel as a perk of the job, that's a fringe benefit. Fringe benefits are subject to tax to stop a situation where an employer could provide a large portion of an employee's benefits in a form other than salary, thereby avoiding tax which would otherwise be payable on those benefits.
Now, you or I mere mortals have to pay for parking near our work. Probably, if you're anything like me, this should cause you to take public transport, or car-pool more often that you actually do. However, employees of organisations far more salubrious than mine can have their car parking provided for them. This constitutes a fringe benefit, which is taxable; the tax is levied on the employer and is calculated by applying the ATO's formula.
Rather than assess the real cost of the benefit, however, there are a number of ways a business can get a deduction on the amount due. Some small businesses are exempt from paying the FBT, others can elect to use a formula for calculation of the tax due which is significantly less than the real value. The result is $21 million in foregone revenue annually. To re-iterate, that is twice the value of the combined cuts to the SBS and the ABC year on year.
Now, sure, this might cause some employers to stop offering car parking Some employees might not like having to pay car parking fees, but in an age of massive urban congestion we have to ask whether the convenience of a small subset of employees being able park at their place of work for free, or a considerably discounted rate, is worth, again, $21 million a year.
Option 2: $5 million annually in "Concessional rate of excise levied on brandy"
Let's be up front; this alone wouldn't cover the cost of budget cuts to the SBS and ABC. It would, however, cover half that amount. And, unlike other tax expenditures, there seems to be no conceivable reason for continuing the concessional tax treatment. Why do brandy drinkers get a free pass? It's time for those Hennessey swilling toffs to be lifters, not leaners.
Option 3: $20 million annually in "Deduction for environmental protection activities and environmental impact studies"
This is another tax expenditure that dwarfs the cuts to ABC/SBS. We forego $20 million annually in allowing full immediate deductions for capital expenditure to " to control pollution or manage waste". This deduction is meant to incentivise business to outlay capital to reduce their environmental impact.
Now, call me old fashioned, I would have thought that if your business created pollution it was your job to control or manage that waste. That is, it's just an ordinary part of doing business. It strikes me as rather strange that we would pay polluters to clean up after themselves, rather than expecting them to clean up after themselves as part of the cost of doing business. Instead, we're spending $20 million a year in corporate welfare that's only available to those businesses that create significant waste of pollution. Seems rather backwards to me.
Option 4: $74 million in 2014/15 for "Refundable Film Tax Offsets"
As the Tax Expenditure statement puts it, "Film production companies incurring expenditure on certain productions in Australia may be eligible for refundable tax offsets." Up to 15% of various costs incurred shooting, producing or post-producing a film in Australia are deductible. This is not restricted to our indigenous film industry, but also includes "qualifying large scale films" including Hollywood blockbusters.
Of course, there are sensible reasons for wanting to encourage foreign investment in Australia's film industry. Against that, this is money effectively being paid out to highly profitable companies, many of which are overseas entities. And many, many other industries get no such support in the form of similar tax breaks. Further, if you were genuinely concerned to build an indigenous film and television industry, why on earth would you be cutting $43.5 million dollars in funding to the ABC and SBS, in favour of tax breaks to multi-national film companies? Surely the direct investment in local film and television would be the much better use of the limited resources...
So there we have it - I've identified 4 low-hanging tax expenditures which could be axed instead of cuts to the ABC and SBS. And these are only the low-hanging fruit. Just wait till I get started on Shipping Investment Incentives, Offshore Banking Units and the myriad superannuation concessions...
Budgets are about priorities, and time and time again the Abbott government has shown that they believe in prioritising corporate welfare over the things that matter to voters.
