CURRENT POLITICS - Eureka Dinner Speech 2014
EUREKA DINNER ADELAIDE
15 November 2014
The Adelaide Club is but one more stockade for the corporates. After Eureka, the propertied classes in Victoria built themselves a stockade called the Legislative Council. It had the same power over legislation as the Legislative Assembly. Only electors with £10,000 in property could be members. Only electors with £1,000 could vote for them. In today’s values, only the likes of Rinehart, Palmer, Forest and Turnbull were eligible. No wonder the Bulletin referred to the Victorian Legislative Council as the ‘House of Landlords’. South Australia got something similar. Here, the property qualification for the franchise lasted until 1975, twenty-five years after it was abolished in Victoria.
The global corporates maintain all kinds of stockages. The G20 has erected a fortress around their Brisbane meeting. The presence of 6,000 thousand police and military forces is more than justified when you bring together so many of the world’s crime bosses. They should spend the rest of their lives in maximum-security prisons. Of course, the overtly violent wing of the state is there to do what the troopers did at Eureka, that is, to repress the protestors calling for justice. As Parisian students said of the barricades they erected in 1968, they are not designed to keep the police out, but to see who is on the other side.
The people have kept building stockades. In 1998, the offices of the Maritime Union at the Port was the Eureka Stockade. For the past few years, the stockade has been at Mukedy station. The spirit of the stockade ranges across land wherever people have ‘locked the gate’ – to fly this green Eureka flag. Those sites are places of struggle, strongholds around which unionists, Aborigines, farmers and environmentalists continue to fight. They are not hiding places, not bolt holes, not retreats, not bomb shelters and not comfort zones.
The rebels at Eureka put up a makeshift stockade which did little to slow down the dawn attack by the military. Nonetheless, the rebellion galvanised the rest of the population so that the authorities could not convict the rebels who were, after all, as guilty as hell. The jury boxes were stockades for democracy.
In 1852, the leader of the squatters in the Legislative Council, W.A. Splatt, gave the game away when he opposed a stock tax with a cry which has reverberated ever since: ‘Shall we tax ourselves?’ That rhetorical question is the key to understanding why the miners were driven to open defiance of the Crown. The flashpoint was the enforcement of the licence fee. The miners did not object to paying a fee. What they objected to was to being taxed while the squatters and the merchants refused to pay anything. Sound familiar?
Hence, it is appropriate to take taxation as the connecting thread for an address at a Eureka Dinner.
The official historian for the mining and other corporates, and sometime President of the Melbourne Club, Geoffrey Blainey has run the line that the rebels were the forebears of resistance to higher taxes on mining corporations. The fact is that the rebels are the forerunners of those of us who want a super profits tax to make the profit-takers pay more.
Indeed, the problem has been to get the mining giants to pay any tax. In 1973, the new Minister for Minerals and Energy, Rex Connor, asked a simple question. What has been the contribution to Australian welfare from the mining boom that began in 1957 with bauxite? The assumption had been that the government would get more back in taxes than it had paid out in subsidies and granted as investment allowances. When the Fitzgerald Report came in April 1974, the numbers showed otherwise. The governments had got nothing. In fact, the rest of us had been forking out to pay BHP and CRA to profit from exporting finite resources. Calculations varied from $5m. up to $55m. but there was no doubt that we taxpayers had been subsiding the mining giants. Proof positive came when the Queensland government reacted to the Report by driving up freight rates for the coal companies.
While the mining corporations were sucking money out of the public purse their export earnings were forcing up the exchange rate of the Australian dollar thereby making every other area of the economy uncompetitive, both rural and manufacturing sectors. Whitlam then made the squeeze worse with a 25 percent across the board tariff cut early in 1973.
The Fitzgerald Report focused on how the mining corporations deployed investment allowances and accelerated depreciation on capital outlays to take back more than they paid into the government coffers.
At the same time, the corporates were up to another swindle that would reduce their tax liability once their investment phase was over. This device is called transfer pricing. It works like this – I use the present tense because it is still going on, and not only among resource firms. The rort works like this. A transnational firm produces in Australia where the average tax rate is 30 percent. They export their goods to a country where the effective rate is lower. The arm of the company over there fiddles with the price it pays so that the Australian arm appears to have sold at a loss. The transnational declares its profits there and thus appears to have made little or no profit here. These off-shore locations are not all tax havens, such as the Cayman Islands, which are the extreme end of this racketeering.
Almost half of world trade takes place between arms of the same corporate entities. Transfer pricing is wrought by managers who hire accountants, recruitment services and travel agents from within the web of sub-branches that are registered in lower taxing countries. Those providers charge more than the price that their services would bring in open competition in Australia. Again earnings are reported in low-tax countries.
New twists in transfer pricing came with the era of financialisation. The Australian-based firm borrows money from a branch of the same global conglomerate. The interest rate here for a $200m. loan, let us say, is 7 percent. Instead of going to Westpac, the firm borrows overseas at 10 or more percent from a branch of itself in a lower taxing country. The result of this thimble-and-pea trick is that the firm operating here reports much less profit in Australia and so pays even less tax here.
That is a simple version of what they get up. All of the scams that gained notice during 2008, such as Default credit swaps, are used to shift profits at the touch of a computer key. Australian law stipulates a corporate tax rate of 30 percent. The average paid seems to be around 23 percent, with some down around 10 percent. The truth is that it is impossible to know for sure without a permanent commission of inquiry to take up Fitzgerald’s investigation since 1974. There is a forty-year back-log and no sign that any government is interested in finding out how much we taxpayers are contributing to the welfare of corporations.
Like tax evasion and avoidance, taxation itself comes in several guises. In recent times, levies have become the rage. They let politicians avoid having to admit that our tax rates on higher incomes and corporate earnings are too low or not collected. The spin-doctors attach these taxes to good causes such as flood relief and of course, health care.
The levies are flat-rate taxes. There is nothing progressive about them. The Medicare levy from 1974 re-introduced flat taxes into Commonwealth revenue gathering. Palmer boasts that he does not mind paying $2 million each year for his Medicare levy because he takes home $200m. It’s only fair, he says. But it is not fair at all. Fair would be if he and his ilk had to pay at least $20m. on $200m.
The co-payment is far worse. It is regressive lump sum. Take a more modest example than Palmer and his millions by looking at the Minister for Health, Peter Dutton. A co-payment of $7.00 out of his salary of $337,000 is one dollar in every 48,143. Seven dollars from a worker on $35,000 is one dollar in every 5,000. That means that someone at the bottom end of wage-scale will pay at a rate ten times higher than the Minister will for a co-payment.
Outrage over the co-payment should not blind its opponents to the unfairness of the Medicare levy. True, the levy is not as bad as the co-payment. No doubt Dutton and his kind think both are fair and equal.
Meanwhile, Abbott justifies the co-payment as introducing ‘market signals’ into health care. If that principle is established, how long will it before the coalition send the market signal that we should be buying and selling blood? And why not a futures market in organs for transplantation, run by Aspen Medical?
Chicken hawk Howard’s Remembrance Day Address claimed that the troops went to ‘defend the weak’. No one can know how many members of the First and Second AIFs had any such idea. But there is one thing of which we can be 300 percent certain. When their fellows were injured, they did not need a market signal to donate blood. Moreover, anyone who suggested that he should be paid by the pint was likely to fall victim to ‘friendly fire’. That attitude extends beyond the battlefront. No construction worker ever thinks about being paid if a workmate needs a transfusion. If Abbott is having a hard time selling the co-payment, it is not just because of the seven dollars. It is also the insult that Australians look forward to dumping the gift relationship of the Red Cross transfusion service for a market signal that treats health as a commodity like coal or Coca-Cola.
The slogan is going around ‘It works. It’s fair. It’s Medicare’. Sad to say, Medicare neither works nor is it ‘fair’. Just one instance of why it does not work. If it worked, the death rate in non-urban areas would not be twice that in the cities. That gap applies to settler Australians not just to indigenous ones. There is much that needs to be done to redirect the health care system towards preventive and community models. On that road to wellness we have no surer guide than the socialist epidemiologist, Fiona Stanley. In her 2002 address as Australian of the Year she put the problem clearly when she pointed out that the brain drain did not start when Australian graduates left for Harvard. The real brain drain starts before children are conceived. One of her early achievements was to get folic back into bread. No wonder she is towards the top of the 100 most trusted Australians.
How medical services are delivered, like their quality, decides the degree to which a health-care system works, and works fairly. Vital as those matters are, we shall follow the money trail primarily in regard to taxes.
Equality of sacrifice was the Tory slogan during the Great Depression. Every worker had to give up ten percent of their income. A labourer lost £25 pounds out of an annual income of £250. An Arbitration Court judge lost the equivalent of the laborer’s total yearly earnings to be left with a mere £2,250.
In an unequal society, establishing equality before the law will never produce equal outcomes. For instance, people call for ‘equal love’ that same-sex couples should have the right to marry. For as long as Jamie Packer can have million-dollar weddings and honeymoons while other Australians have to go to the Vinnies for a second-hand mattress, there will not be equal love.
Equality before the law is the lie that Hansonites pushed against Aborigines and Islanders. All Australians should be treated equally, she chanted. Indeed, we should be treated equally but that rule cannot be confined to the delivery of government services. The call to treat everyone equally requires an end to unequal social, economic, political and cultural circumstances. ‘Equality of opportunity’ is a slogan to distract us from the need to achieve equality of outcomes in health, housing and education. Social equality starts from recognising that not everyone is in the same situation.
Equality before the law ignores the range of disadvantages across generations - the real brain drain.
To make matters worse, both the flat-rate levies and the progressive taxes are calculated on taxable incomes. We saw what happened with the mining companies which used accelerated depreciation and other dodges to turn their tax bill into a minus.
To reduce this criminality, here are five modest proposals for reforming the tax system. These changes are what we used to call reforms. The last thirty years has seen the term ‘reform’ applied to what are in truth ‘deforms’.
Second, abolish all deductions for persons and businesses. The moment accountants can deduct expenses in any way related to earnings, the doors and windows are flung open to evasion, and not just avoidance. Stricter rules about what is or is not a legitimate expense is great for the income of tax lawyers but little help in getting non-PAYG earners to pay their share. That is even more the case for corporations. If we abolish deductions, we can lower the tax rate on gross incomes for those most in need of more spending money.
Three, impose a HECS payment of a million dollars for business degrees if graduates work for the corporate tax accountants but suspend HECS if they work for the ATO catching the dodgers.
My fourth reform concerns another flat-rate tax, the so-called Goods and Services Tax. Here, I suggest we move in two directions. First, abolish the current GST. The tax deformers talk about extending it to health, fresh foods and education. They also want to lift the rate from 10 to 12½ or even 15 percent. Forget about extending the flat-rate tax. Forget about lifting the rate. Instead, replace the GST with a Financial Services Tax, that is, a tax on the major ‘service’ outside the GST net. The de-formers never mention the biggest ‘service’, the one that is not taxed.
The proposal is to replace the unfair GST at 10 percent with a Financial Services Tax of 0.1 percent on each dollar traded. The annual turnover on Australian foreign-exchange markets alone is $50 trillion. One cent out of every thousand of those five thousand trillion cents would collect $ 50 billion. That is the same amount as is gathered by the current GST. On top of the foreign exchange trades, there are those on the stock exchange and the futures markets. If they also paid a 0.1 percent Financial Services Tax on each dollar traded, who knows how many welfare services could be funded for citizens instead of for the corporates.
No doubt you have already worked out what the traders will say. A Financial Services Tax will not generate anything like the revenues I’m predicting because it drive those transactions off shore. There is no doubt that an FST will be a blow to Merchant Bankers like billionaire Malcolm Turnbull. The FST would also bring down an exchange rate that has been kept high by parasites whose ‘value adding’ to fictitious capital has helped to destroy manufacturing jobs and to stymie the export of other services. Before Hawke and Keating floated the dollar in December 1983, foreign exchange trading met the costs of trading real goods and services. Since the biggest deform of all, FOREX has become a diamond mine for speculators. The huge trades on foreign exchange add to the volatility of an inherently chaotic system. In 1980 the annual turnover on the local futures market was $100 million, a fraction of the trillions this year. We can’t afford to wait for the next crash. We have to take the fight up to the Masters of the Universe by re-regulating the financial sector. Re-opening a peoples’ bank to replace the Commonwealth Bank that the ALP sold out would be a start.
It is true that Mr Mellon, Mr Ford, My Roosevelt, Mr Schwab, Mr Morgan and a great many others not only manage to keep their enormous fortunes intact, but increase their fortunes every year … But can any one of them improve on the financial genius of Mrs Maria Esposito or Mrs Rebecca Epstein or Mrs Maggie Flynn who is keeping house in a New York tenement raising five or six children on a weekly envelope of thirty dollars …?
Think of working single mums who have been forced off benefits to scramble for work as temporary casuals while juggling school hours and working hours and we see that the finest financial planners in Australia have annual incomes of around $10-12,000.
The fifth reform takes up income management. This morning I had the pleasure and the privilege of speaking at the protest outside the Hilton against the extension of income management to ever more categories of tax-funded beneficiaries. [In parenthesis, I might say that I was pleased that the protest was at Victoria Square because I could then go across to one of my favourite places in Australia, the Central Market. My other favourite public space is Southbank in Brisbane which, this weekend, has been enclosed within the stockade built to protect the crime bosses at the G20 summit.]
I shall sketch what I said then because the issues involved are vital to a great deal more than this latest deform.
First, the Northern Territory Intervention has proved to be the thin edge of yet another wedge. Income management has spread beyond the Territory and beyond indigenous communities. We are now confronted by the de-form proposed by paper billionaire Andrew Forrest. The Coalition had commissioned him to investigate indigenous affairs. He went way outside that brief to say the regime should apply to two million Australians. He exempted pensioners and war service benefits because that would be politically disastrous – for the moment. The Coalition has not accepted Forrest’s ambit claim – for the moment. But the universal management of incomes is now on the agenda. The boundaries of what is acceptable to argue over has been thrust further to the Right.
The second point takes up an assumption behind the Forrest report, an attitude which is crucial because it takes us back to the unequal version of ‘equality’ that Forrest uses to extend income management to settler Australians. He justifies extending the regime so as not to be seen to discriminate against indigenous ones. Once more, we encounter the doctrine of equality before the law, but it still the Hansonite mantra: ‘treat everyone the same’ and ignore generations of social inequalities.
Finally, managed incomes really are a great idea - if applied to the likes of Andrew Forrest. Socialists should turn the tables by arguing that Forrest did not go far enough to achieve equality. We should demand income management for billionaires by stripping them of their booty. Let’s manage his income by relieving him of most of it. A marginal tax rate of 90 per cent would be a start. At the same time, we should manage corporate welfare by putting an end to it.
Forrest has also been promoting a campaign against slavery. Where does he get the money for his philanthropic projects? From his wage-slaves. He picks and choses which kind of slaves to liberate. Forrest plans to employ as many indigenous labourers as he can. That plan is more welcome than Rinehart’s importing 1,700 workers under 457 visas to work without the protection of activist unions. Forrest’s anti-slavery campaign ignores the evil under his nose.
William Wilberforce drew the same distinction between abolishing chattel slavery and living off wage-slavery. In 1799, he took a break from trying to talk the Commons into banning the slave trade when he introduced a bill to make it illegal for workers to combine. He had been scared by women joining the Abolition campaign behind banners which read: ‘ABROAD AND AT HOME.’
Elizabeth Murdoch and Dick Pratt were another pair of philanthropists. The Dame was a receiver of ill-gotten gains, first from her husband and later from her son. Say what you like against Mass Murdoch, he is not such a swine that he would let his mother pay tax.
Pratt was a hands-on crook who, through a price-fixing cartel, stole tens of millions from every Australian who ever bought a package. He used some of the loot to big-note himself by sponsoring the arts and donating to charity. So successful was his cover-up that the prime minister flew to his bedside even though Pratt should have died in prison. Pratt’s mates attacked the head of the Competition Commission for going after him since he had enjoyed Pratt’s hospitality. So the rule of the house at the Big End of Town is that it is okay to break the law so long as you also break bread together while the majority are left with the crumbs.
Transfield, the corporation with the contract to manage the off-shore detention centers, has been big sponsor the visual arts. Its co-founder, Franco Belgiorno-Nettis, confessed to his corporation’s official historian that he had engaged in corruption and strong-arm tactics: ‘We cover this with a veneer of civilisation’.
We are not supposed to speak like this. We are not supposed to use the language of class war. They practice class warfare but that we are ill-mannered to point it out. They accuse us of the politics of envy? What person in their right mind would envy Rinehart or Palmer? They project their vices onto us.
One reaction to these five tax-reforms will be to say that they are too extreme ever to get up. If that is so, it is high time to ask why? How has it come to pass that the confiscation of unearned income is ‘too extreme’, while Forest’s call for massive income management can become part of the ‘conversation’?
A wider point is even more important. The only battle that the Left has won in the twenty-first century was Work Choices. That victory for mass action was soon lost because the unions did not continue to pressure the ALP administration after 2007. The failure to ground the super-profit tax in a mass campaign meant that it was doomed. The same backroom mentality doomed Rex Connor’s plan to buy back the farm in 1975.
One reason why the Left has been losing is that the Right is no longer afraid to reset the agenda by launching what start out seeming to be outrageous ambit claims. The ALP limps along behind them or establishes its cred with the Big End of Town by coming up with more efficient ways to end up with the same results. The outcome is that the goalposts keep being shifted to the Right. That downhill drift will continue for as long as the Left fails to take up confiscatory rates of tax on individuals and corporations and the replacement of the Goods and Services Tax with a Financial Services Tax. Those reforms would remove the cravenness of seeming to be ‘fair’ by imposing a means test for social services on ultra-high-income earners since they would no longer exist.
We shall be told that these five tax reforms are impractical, that it is no longer possible to raise such matters. Not so. Such matters are part of what Australians do raise when given a chance. Canberra has an increasingly active group called SEE Change, where SEE stands for Social, Economic and Environment. Its motif is ‘Is the country being run for the majority, or for vested interests?’ It encourages the Kitchen Table Conversations that did so much to unseat Mirabella in Indi. Once strangers sit down to ask what they look forward to, tough matters come to the fore.
To the extent that these challenges have been marginalised, again we must ask why? Why is it that progressive taxation is not a vote winner? Part of the reason is that the forces of progress have perfected the preemptive buckle as a strategy. At every advance by the corporates, the ALP and most of the unions have gone along with the latest deforms, even to leading the charge. At best, they have retreated to a new defensive position, saying ‘Okay, you can take this much from us, but no more.’ The result is that the principle of social equality is surrendered. The battlers for progress become confused and then dispirited. The field is thus left open to one more deform after another.
In the 1930s, R.H. Tawney’s Equality was the Old Testament to the British Labour Party. From the 1940s, R.M. Titmuss supplied a New Testament for the age of the welfare state. Under New Labour, anyone who wanted to implement Tawney’s Christian Socialism was in danger of being expelled as a mad Trot by the unctuous Anglican Blair. A ‘mad Trot’ is anyone who doubts that it is okay for the market to rule. Sad to say, none of the contributors to the current special issue of the Journal of Australian Political Economy on health care refer to R.M. Titmuss or to Fiona Stanley. It is as if the intelligentsia has performed lobotomy on the Left side of its brain.
Reformers used to feel comfortable repeating the 1930 remark by U.S. Supreme Court Justice Oliver Wendell Holmes Jr: ‘I pay my tax bills more readily than any others – for whether the money is well or ill spent I get civilised society for it.’
Those of us who are imbued with the spirit of Eureka remain ready to pay our taxes when they buy civilisation, when they fund libraries, women’s refuges, swimming pools and immunisation. But we can’t go along with Holmes’s carefree acceptance that taxes are a good thing ‘whether the money is well or ill spent’. We must oppose taxes when they are spent on barbarism, not civilisation.
Taxes funded the police and troopers who bayonetted the wounded at Eureka, taxes paid for the slaughter of the original owners of this land, taxes funded conscription for ecocide against the peoples of Indo-China, and today they underwrite the Building and Construction Commission.
In addition, we are opposed to ill-spent taxes which end up in the misnamed private-public partnerships to build schools, hospitals or toll-ways behind the racket of commercial-in-confidence deals, not just the ones arranged between the casino bosses and State cabinets.
We oppose pouring hundreds of billions of taxes each year towards making democracy safe for oil. It is past time to take a step back from the submarine project to ask whether our taxes should be going to serve the needs of US and Japanese corporates.
The world has more than enough desperate need to employ the creativity of the people now working on the war machine. If the next submarine contract does go to the Japanese militarists, the opportunity is here to apply the skills of Adelaide workers to civilising projects in public housing, public transport and renewable energy. It is always a good time to turn swords into ploughshares. Peace is still union business.
We don’t have to imagine very hard to appreciate that none of my speech found its echo at the Adelaide Club. You doubtless heard the thundering NO to the question: ‘Shall we tax ourselves?’ Another after-dinner text is remote from their satiated stomachs, this time from young Oliver Twist who had been selected as job delegate to approach the Beadle in the workhouse. ‘Please, sir, I want some more.’ ‘More!’, explodes Mr Bumble, ‘More!’ Instead of more ‘gruel’, Oliver is apprenticed to an undertaker. We all know that you rarely get more merely by asking.
For how much ‘more’ are we asking? Enough to live in dignity. Unlike the tax cheats, we are not afflicted with envy, which is the one vice that gives no pleasure. Bringing the New Start allowance up to a living wage is a good instance of how little More we insist upon. That increase will never be won if we do more than to fight off attacks on who is eligible for the present pittance; the livable income will never be won if we do no more than to retain the current regulations about when, and for how long and under what conditions the unemployed qualify for their bowl of gruel. The only way to win against the onslaught is to keep insisting on a massive increase. That strategy applies to every aspect of life. We need to block the co-payment by insisting on a health care system that is at least as fair and works as effectively as the UK National Health did in its glory days. Once we get that far, we can go after one as good as Cuba’s. The Business Council proposed a $15.00 co-payment. The budget brought that impost down to $7. Should that lesser deform get up, the BCA’s push for a higher charge will reappear as surely as day follows night. The only defence is to attack. “Audace! Audace! Toujours Audace!’
Like Oliver, we won’t get ‘more’ by being ‘too polite girls’ when we need to ‘show a little fight, girls’. The one way to make sure that our taxes deliver civilisation and not more barbarism is to put into practice the Eureka oath:
‘to stand truly by each other and fight for our rights and liberties.’