Commentary by Peter Mackay, Canberra
Pauline Hanson came up and shook my hand. She was wearing an elegant navy blue outfit and, as always, looked stunning. "You're looking good, Pauline." I said "As always."
She smiled. As always.
Beside me, Aldo looked at his hand with disbelief. I got the feeling that he wasn't intending to wash it ever again.
I've met Pauline in her backbencher's office at Parliament House, I've walked down the streets of Queanbeyan with her, I've knelt down before her while she signed my necktie, and I've watched her dancing with burly copper miners on the lawns of Parliament House at midnight.
And now I was watching Australia's most famous lady parliamentarian work her way around a room filled with just a few of her One Nation candidates for the upcoming Federal election. David Ettridge I knew, Peter James was recognisable, I had worked with the candidates for the ACT and the surrounding electorates for months, but the remainder of the sixty or so people I hadn't met before.
Though there was a Senate candidate from Western Australia and a few Victorian Representatives candidates, most were from New South Wales, gathered here to listen to Pauline and some of her advisers explain her tax policy, a few days ahead of the official release.
David Ettridge had given we Canberrans a teaser over dinner on Saturday night. "I wish I could tell you about it," he had said "for I know that you will be excited as I am."
He had gone on to tell us that it was a simple, revolutionary scheme, that would be fair, would stimulate employment, would gain revenue from multinational companies, and pay off the national debt within five years.
That night I'd gone to bed, my brain whirling with possibilities and wonder. I was all agog to kind out more, as I am sure had been David Ettridge's intention, so I had turned up, keen with anticipation, for this Tuesday morning meeting for "candidates and key personnel" in the back room of a suburban pub.
My standard answer, when asked what I do in the party, is to reply that "Oh, I'm just here to make up the numbers.", but I was glad to have been invited to this event.
Peter James, the Queensland State director, was hauling piles of photocopied paper out of cardboard boxes and setting them in rows on a side table. I joined the throng, collected a set, and sat down to flip through them.
But I didn't have much of a chance to read them before the show started.
First up was party director David Ettridge. David heads up the national office in Manly and his staff are currently overloaded with a growing flood of membership applications and renewals. David was dapper and unflappable, as always, as he said a few words and introduced the lady who needed no introduction.
Pauline, in her turn, kicked off by introducing her team. Or rather she got all the candidates to stand up and introduce themselves. Each named themselves, their electorate, and their opponent, usually with a few caustic words. One of the Sydney candidates scored a laugh when he stated "I drink water, and I vote!".
A fine group of people, a far cry from the usual line up of lawyers and professional politicians we have come to expect from the major parties. Pauline has attracted members who are truly representative of the people -- no wonder the established parties are scared of One Nation. Forget about the old struggle of Labor versus Liberal -- this election is politicians against the people.
Pauline must have been feeling proud as she listened. And well she might, for in just over a year she had assembled a national team that could stand in every electorate in Australia. And win in many of them. One Nation will not win government this time around, but I knew that of the people on their feet giving a good account of themselves, I'd see many of them back in Canberra again after the election as Members of Parliament.
The last candidate sat down and the show began. I'd be happy to listen to Pauline all day, but she handed over to Peter James, who took us through the basics of the tax plan.
The essence of the plan is to scrap the existing tax system and impose a 2% tax, an Easytax, on all transactions where there is a sale or ownership changes in some way.
This applies to all goods, services and labour. Think about that for a moment. Forget about John Howard's 10% GST, the existing wholesale taxes of up to 40%, and income tax of up to 47%. Just 2%, but it applies on everything.
The existing tax base is a narrow one, and rates must be high to raise the money required for government services, such as they are. John Howard has broadened the base and lowered the rate to 10%. And Pauline Hanson has broadened the base still wider and dropped the rate still further to 2%.
And the good news keeps coming. Easytax replaces income tax, company tax, wholesale tax, payroll tax, fringe benefits tax, capital gains tax, superannuation tax, withholding tax and provisional tax, as well as a range of excises, duties and minor taxes.
The paperwork required to run the system is correspondingly simple. A one page tax return. None of the cascading claims and clawbacks of the current system. We can get rid of ten thousand pages of tax acts and a library of regulations, interpretations and precedents. At last we will return to a tax system that everybody can understand.
It all sounds too good to be true, but the key to understanding how it works is to look at the broadening of the tax base. There are very few exemptions. Taxes on bank deposits and withdrawals are abolished as these are not sales. Payments within family units do not incur tax.
The exciting part of the tax is its effect on employment. Employers collect existing income tax and send it direct to the Tax Office, at rates of up to 47%. Under Easytax, they collect only 2%. The difference is now available for expansion.
David Ettridge stepped in and drew a diagram, which I shall attempt to reproduce.
Say an employee gets $100 000 salary, of which he takes home $60 000 and pays $40 000 in income tax:
** $40K
** Income
** Tax
**
----------
**
** $60K
** Take
** home
** pay
**
An employer with three such employees therefore pays $120 000 in tax and $180 000 in take home pay. If he no longer has to pay $120 000 in tax, he can use that money to pay two more employees:
** ** ** ** ** ** = $120K Income Tax. Now pays for ** ** ** | ** ** ** V -------------------------------------------------- ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** = $180K Take Home Pay ** ** = $120K Take Home Pay ** ** ** ** ** ** ** ** ** ** 3 existing workers 2 new workers
At this point a question began to form in my mind. If income tax (of 40% in the above example) were abolished and 2% Easytax substituted, then wouldn't the take home pay become $98 000, rather than remaining constant at $60 000?
No! Part of the three year transition process involves salaries being recalculated to equate to the take home pay. The effect on the employee will be invisible -- he will still have the same amount of money in his pocket each pay day.
The employee no longer pays income tax, instead the employer, who is buying the labour of the worker, now pays the Easytax, as for any other purchase.
Say goodbye to bracket creep or disincentives to promotion or overtime or second jobs. If you work for an extra dollar, you take home all of it.
I still couldn't work out how the base could be so broadened as to allow a flat 2% tax. The author of the tax package, Brisbane engineer John McRobert, got up to explain this.
No longer are company profits taxed, but turnover will be taxed instead, through 2% Easytax on all transactions. If a company once paid 37% on a 5% profit (after deducting a raft of business expenses), they will now pay 2% on the whole 100%. Better yet, multinational companies, currently sending vast untaxed profits overseas, will now have to pay their fair share.
Secondly, the tax is a cascading one. Everyone along the line of production pays 2% Easytax. Between the graingrower and the bread rack at the supermarket are the miller and the baker. Other goods might have a wholesaler. So for a loaf of bread there are four transactions to be taxed, when the grower sells his wheat to the miller, the miller sells to the baker, the baker sells to the grocer and the grocer sells to the customer.
Each transaction attracts 2% Easytax. But as John McRobert pointed out, in somewhat saltier language, the end customer pays 2% of three/fifths of two/thirds of not a lot. Sure, the customer pays tax on taxes, but at 2% each time, this isn't a real lot. Where the expense really kicks in, and this is true of the existing system as well, is the profit added at each stage, which is usually a good deal higher than a 2% Easytax. Rest assured that of the loaf of bread sold at the supermarket for $2, the graingrower would be lucky to have received more than a cent for the wheat. The cost difference is made up of value adding (such as milling, baking and packaging), labour, and profit.
John McRobert has worked on this tax plan for thirteen years, and has assembled a mass of studies, statistics and calculations to back it up. I'm not a great number-cruncher, but it looks like he has done his homework.
John was somewhat scathing about the existing tax system. "Barnacles grow on a ship's hull over the years, and after a century since Federation, we have the barnacles of taxation growing thick on the hull of the ship of state."
I think we can all agree with this sentiment. Peter Costello certainly does, as he has been selling the need for reform of the existing unfair tax system for months now, and he is the latest in a long line. When Paul Keating was Treasurer, he was selling reform. We cannot keep on slapping bandaids and patches to plug the holes in our tax system. Every budget adds a new scheme, and every election adds more complexity as the rival parties attempt to buy votes.
The Tax Act hos now been amended to 6 000 pages. Subsequent tax amendment acts have added yet more thousands of pages. Explanatory rulings and regulations and tables and precedents and policies add millions more pages. Nobody understands all this, and there is a vast growth industry in tax lawyers and accountants finding ways to minimise taxes.
It is time to trim off the barnacles and sail a fast course into the future. We need to tax the dollar, not the person, and provide incentive to work harder, employ more people and promote Australian interests.
I had a few questions, and there were a lot more from the rest of the audience. But as the questions were answered, and understanding grew, smiles began to appear. The candidates knew that they had a winner with this system, something that they could explain and sell to the voters.
David Barton, candidate for the seat of Riverina, asked a few questions about imported harvesters and farmers, before finally making the observation that "We should call this a Happy Tax!"
The experts sat down, drained, and Pauline stood up. She gave a good summary of how the system worked and demonstrated that she understood it well. From her point of view, community consulation is important, and where the major parties have put forward their plans on a take-it-or-leave-it basis, the 2% Easytax will be put forward for examination and consultation for at least a year.
Following this, there will be a three year transition period before implementation.
She ended to sustained applause. Pauline Hanson has once again changed the rules, and where the major parties were promising reform and delivering a new set of bandaids, One Nation will deliver the goods.
For me, this is the real thing. Ever since I had to fill out my first tax return and realised that multimillionaires pay less tax than I do, i've wanted a fairer system. When I see chocolate milk being taxed at a different rate to strawberry milk, I want a uniform system. And when I see multinational companies sending billions of dollars out of the country without paying their fair share, I want a tax system that favours Australians.
This 2% Easytax will be attacked by all of the major parties as pie in the sky, snake oil, flat earth economics and all the rest of it, but cheap shots are all they can come up with. Pauline Hanson is fair dinkum, and as I looked around the room and the smiling candidates eagerly talking amongst themselves, I knew that we were not talking about a bare handful of seats at this election.
The candidates and their staffers left, Pauline moved out, flanked by her bodyguards, and the papers were packed up and put away. I heard John McRobert ask where he could find a taxi, and I offered to drive him to the airport, which was on my way home.
In the car, as we negotiated an endless series of roundabouts, he told me about himself. He's not the loveless economist camped in a back room, but an engineer, a real person with a lifetime of hands on work behind him. Pauline Hanson was just a fish and chip lady, but she unlocked the hearts of the people and stood Australian politics on its head. John McRobert is another common sense person, who is about to clean off the barnacles from the tax ship.
I dropped him off at the airport and drove home, smiling happily.