Don't just stand there -- have a review! This appears to be the Labor government's new motto. No portfolio area is exempt. We've got big reviews like the writing of the new white paper on Australia's defence strategy. And we've got little reviews like the ministerial consultations on flavoured cigarettes.
The latest review, announced this week, is of the citizenship test. Expect more reviews to come.
It's understandable that a recently elected government would want to consider what's gone on previously but eventually some decisions are going to have to be made.
Unfortunately for Kevin Rudd and Wayne Swan, their biggest present challenge doesn't easily lend itself to being solved through a review, an inquiry or a summit. They can't avoid delivering the federal budget in two weeks' time on May 13.
Given this new-found penchant for reviews, it's no surprise that a "tax review" was one of the ideas to emerge from the 2020 Summit. In the absence of any specifics about such a review it was easy for summit participants to agree to it. Almost anything can count as a good idea if it is not attached to a timeline, a process or an objective. Only a brave person would have opposed the idea of the review. And only an especially brave person would have said: "Wait a minute -- should we trust a brand new federal Labor government with a review of the country's taxation system?" A query of such impertinence would most definitely have spoiled the bonhomie of the occasion.
Those parts of the business community that partook of the summit presented the tax review as a win for business. Exactly what business won is not yet clear. Rudd and Swan are decidedly lukewarm on the idea -- and for understandable reasons.
A "root and branch" examination of the tax system must necessarily involve a consideration of not just federal taxes, but also state and local government taxes. And this is where it starts to get difficult. Co-operation between a Labor prime minister and Labor premiers extends only so far. Opening up questions about revenue-sharing between Canberra and the states, and between the states themselves, would provoke a brawl of Joh Bjelke-Petersen versus Bob Hawke proportions.
It's not the sort of fight that any federal government would want in its first or second or even third term. So far Rudd has attempted to build his prime ministership on consensus, not conflict. And managing the expectations of a review of this kind would be problematic. The bigger the review, the bigger the expected result.
The business community's enthusiasm for a review is based on two assumptions. The first is that a review would result in a reduction in the overall tax burden. The second is that a review would result in tax reductions for business. Neither of these assumptions is particularly well-founded.
As Fred Hilmer pointed out yesterday, there was no agreement at the summit upon these two principles. Some participants, for example, wanted higher taxes and a more progressive system, while some wanted less tax and a flatter system. Based on the experience of both Labor and coalition governments, realistically the best to be hoped for is that anything that emerges from a review is revenue neutral.
The progress of the economic inquiries already commissioned by the Rudd government does not inspire any particular confidence in the direction that any future reviews might take. If the government had wanted its review of tariffs to be dispassionate and analytically rigorous it would have got the Productivity Commission to conduct it. But instead the commission was sidelined.
Business organisations have convinced themselves that the Labor government will listen to them when it comes to tax. The problem with this theory is that those same business organisations did not have too much success getting Labor to listen to their views on Work Choices.
Business should not delude itself into thinking that the trade union movement will not be intensely interested in a tax debate. Under Hawke and Paul Keating the ACTU had as big a say over tax policy as it did over industrial relations.
Any Labor government faced with a choice of cutting taxes for "working families" and cutting corporate tax would always choose the first option.
None of this is to deny that something useful may come from an analysis of the tax system. But tax is complicated. Reviewing the tax system involves more than just jotting down a few dot points on a whiteboard.
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