Tuesday, June 22, 2010

"Put down your weapons" - Ken Henry

Treasury boss Ken Henry has reentered the tax debate issuing an extraordinary call for economists and tax experts to "put down their weapons" and get behind proposals such as the government's proposed resource super profits tax.

Briefly interrupting an overseas holiday to address a Sydney conference on the outcome of the Henry Tax Review he said it was "unbelievably frustrating, incredibly frustrating" for people advising governments of both stripes that economists seemed "loathe to come to a consensus position on anything".

"Whenever an idea is ventured publicly by a person, whether that person is a policy advisor or whether it's a government minister, there's at least a handful of academics who will contest it," he said. "I've seen it on both sides of politics - this is not a partisan comment at all - but for governments, government ministers who are seeking to get ideas legislated - it is unbelievably frustrating, incredibly frustrating."

"It is a great strength of economics as a discipline. It is one of the things that as a young person I found very attractive about the study of economics, this contest of ideas. But I think there are occasions on which economists might, at least for a period, put down their weapons and join a consensus"...

Dr Henry spoke as the mining giant Xtrata and the West Australian Chamber of Minerals released what they said was new economic research confirming the mining tax would harm Australia's economy.

"There is a recent example of what I am talking about," Dr Henry said. "I'm not going to comment about the resource super profits tax, but I will talk about the emissions trading scheme. Most academic economists accepted, at least behind closed doors, that it was a sound policy idea. Yet there were no end of academics who wanted to say for example, it's not bad, but a carbon tax would be better."

"That did not increase at all the chances of a carbon tax being legislated. All it did was reduce the chance of an emissions trading scheme being legislated."

"In the way in which political debate occurs in Australia, such statements do enormous damage to the prospects of sensible reform. There are times when it would serve the national interest if economists could just call a halt to the war for a while."

The Treasury Secretary said he saw no sign of the Rudd government backing down on the resource tax.

"I haven't myself come to the view that this particular reform proposal has dim prospects, he said. "I do not see it that way yet at all. The tax is not due to start for two years."

"What I am witnessing at the moment doesn't surprise me in the least," he said referring to the mining industry's campaign.

"Does it cause me any particular grief? Maybe the scar tissue has hardened. After 25 years of providing tax policy advice, no particular grief."

"It is tough to convince a wary public; tougher still cynical media. And virtually impossible – in Australia at least - to secure political consensus on any tax proposal other than a straightforward cut."

Published in today's SMH and Age

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