This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/grogonomics/2016/nov/27/the-backpacker-tax-is-a-textbook-case-of-how-not-to-develop-policy
The article has changed 4 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| The backpacker tax is a textbook case of how not to develop policy | |
| (about 1 hour later) | |
| The backpacker tax has been a textbook example of how not to develop policy and a good reminder to those living in rural areas that having the National party as automatic members of a coalition with the Liberal party does little to serve their interests. | The backpacker tax has been a textbook example of how not to develop policy and a good reminder to those living in rural areas that having the National party as automatic members of a coalition with the Liberal party does little to serve their interests. |
| Tourists – namely backpackers – are a massive part of the labour force in the fruit industry. The working holiday visa allows foreign citizens under the age of 30 to come here for a year and work. Such workers are employed throughout Australia – including in city areas, often as restaurant staff – but are especially concentrated in rural areas where there is fruit picking. | Tourists – namely backpackers – are a massive part of the labour force in the fruit industry. The working holiday visa allows foreign citizens under the age of 30 to come here for a year and work. Such workers are employed throughout Australia – including in city areas, often as restaurant staff – but are especially concentrated in rural areas where there is fruit picking. |
| The industry was thrown into chaos in 2015 due to a decision by then treasurer Joe Hockey to change the tax rate they pay. | The industry was thrown into chaos in 2015 due to a decision by then treasurer Joe Hockey to change the tax rate they pay. |
| As a general rule, holiday workers claimed residency while here and claimed the tax-free threshold. This meant they paid no tax on the first $18,200 they earned (and most don’t earn more than that). | As a general rule, holiday workers claimed residency while here and claimed the tax-free threshold. This meant they paid no tax on the first $18,200 they earned (and most don’t earn more than that). |
| In March 2015 the Administrative Appeals Tribunal ruled that backpackers – even if they were here for more than six months – were not necessarily residents, and thus could not automatically claim the tax-free threshold. | In March 2015 the Administrative Appeals Tribunal ruled that backpackers – even if they were here for more than six months – were not necessarily residents, and thus could not automatically claim the tax-free threshold. |
| Instead they would have to pay 32.5% tax on every dollar they earned up to $80,000, like other foreign workers. | Instead they would have to pay 32.5% tax on every dollar they earned up to $80,000, like other foreign workers. |
| In the May 2015 budget Hockey removed any wriggle room the AAT decision might have offered by announcing that all holiday workers would pay 32.5% tax from the first dollar of income earned. He claimed it would bring in $540m in extra revenue over three years. | In the May 2015 budget Hockey removed any wriggle room the AAT decision might have offered by announcing that all holiday workers would pay 32.5% tax from the first dollar of income earned. He claimed it would bring in $540m in extra revenue over three years. |
| But the government at the time held no consultation with the sector and, to make matters worse, did no modelling on the impact of the changes – something that was discovered during Senate committee hearings last month. | But the government at the time held no consultation with the sector and, to make matters worse, did no modelling on the impact of the changes – something that was discovered during Senate committee hearings last month. |
| You didn’t need to be a scholar of international labour to know there would be a number of impacts. | You didn’t need to be a scholar of international labour to know there would be a number of impacts. |
| Firstly, Australia would become a much less attractive place to come on a working holiday. Under Hockey’s proposal someone who would previously have earned $15,000 would now be paying $4,875 in tax – certainly enough to make them think that maybe New Zealand or Canada would be a better place to go. | Firstly, Australia would become a much less attractive place to come on a working holiday. Under Hockey’s proposal someone who would previously have earned $15,000 would now be paying $4,875 in tax – certainly enough to make them think that maybe New Zealand or Canada would be a better place to go. |
| It was also quite obvious that the 32.5% rate would encourage a boom in cash-in-hand work. | It was also quite obvious that the 32.5% rate would encourage a boom in cash-in-hand work. |
| What would you prefer if you were a student out from Ireland working in Cairns – the $17.70 minimum wage less $5.75 in tax, or $13 cash-in-hand? | What would you prefer if you were a student out from Ireland working in Cairns – the $17.70 minimum wage less $5.75 in tax, or $13 cash-in-hand? |
| This would not only reduce the tax revenue, it would undercut the wages of Australian workers and place holiday workers outside the system – thus, ripe for exploitation – something the Fair Work ombudsman has already found happens in abundance. | This would not only reduce the tax revenue, it would undercut the wages of Australian workers and place holiday workers outside the system – thus, ripe for exploitation – something the Fair Work ombudsman has already found happens in abundance. |
| Altogether it was a train wreck of a policy – masterminded by Joe Hockey, and overseen by the minister for agriculture, Barnaby Joyce. | Altogether it was a train wreck of a policy – masterminded by Joe Hockey, and overseen by the minister for agriculture, Barnaby Joyce. |
| Prior to the 2016 election, in response to the industry’s loud complaints, the government pushed out the start date for the 32.5% tax rate from 1 July to 1 January, and pledged to review the decision. | Prior to the 2016 election, in response to the industry’s loud complaints, the government pushed out the start date for the 32.5% tax rate from 1 July to 1 January, and pledged to review the decision. |
| Subsequently it decided to make the tax rate 19%, but the legislation last week was voted down in the Senate with an amended rate of 10.5% – the same as for similar workers in New Zealand – supported by senator Jaqui Lambie and the ALP. | Subsequently it decided to make the tax rate 19%, but the legislation last week was voted down in the Senate with an amended rate of 10.5% – the same as for similar workers in New Zealand – supported by senator Jaqui Lambie and the ALP. |
| Unfortunately for the government, Joyce has been the lead advocate on the policy. | Unfortunately for the government, Joyce has been the lead advocate on the policy. |
| And Joyce has been all over the shop. | And Joyce has been all over the shop. |
| Laughably, he tried to paint it as an issue of fairness because the 10.5% rate would see Australian workers pay a higher tax rate than foreign workers. | Laughably, he tried to paint it as an issue of fairness because the 10.5% rate would see Australian workers pay a higher tax rate than foreign workers. |
| You would have thought that given he was once the shadow finance minister, Joyce would understand the concept of average tax rates, and that the 19% tax rate paid is only on the income over $18,200. | You would have thought that given he was once the shadow finance minister, Joyce would understand the concept of average tax rates, and that the 19% tax rate paid is only on the income over $18,200. |
| By the time the Australian worker starts paying tax, the foreign holiday worker would have paid $1,921 in tax if the rate is 10.5% (and they pay tax from the first dollar earned) and from $3,477 if it is at the government’s preferred rate of 19%. | By the time the Australian worker starts paying tax, the foreign holiday worker would have paid $1,921 in tax if the rate is 10.5% (and they pay tax from the first dollar earned) and from $3,477 if it is at the government’s preferred rate of 19%. |
| Joyce has also been trying to lay all the blame on the AAT, telling the ABC’s Fran Kelly this week the 19% rate is already a “compromise” and there was “never a vote to have a 32.5% tax”. | Joyce has also been trying to lay all the blame on the AAT, telling the ABC’s Fran Kelly this week the 19% rate is already a “compromise” and there was “never a vote to have a 32.5% tax”. |
| Joyce likes to overlook the 2015 budget – a budget delivered when he was minister for agriculture. He was happy to defend the 32.5% rate, telling 7.30’s Leigh Sales in May last year the rate wasn’t an issue because he thought “the vast majority come here because we still have a great wage rate”. | Joyce likes to overlook the 2015 budget – a budget delivered when he was minister for agriculture. He was happy to defend the 32.5% rate, telling 7.30’s Leigh Sales in May last year the rate wasn’t an issue because he thought “the vast majority come here because we still have a great wage rate”. |
| Now the 32.5% rate is something he suggests “will be a disaster”. | Now the 32.5% rate is something he suggests “will be a disaster”. |
| Joyce also told Fran Kelly the issue was about “protecting Australian jobs”, which is a bit odd, because the issue is about what people receive after tax, not what employers pay them in a wage. | Joyce also told Fran Kelly the issue was about “protecting Australian jobs”, which is a bit odd, because the issue is about what people receive after tax, not what employers pay them in a wage. |
| The tax, whether 0% or 32.5% doesn’t make it cheaper to employee foreign workers, and the tax does not affect any Australians’ incentive to work. | The tax, whether 0% or 32.5% doesn’t make it cheaper to employee foreign workers, and the tax does not affect any Australians’ incentive to work. |
| Joyce also attacks the Labor party for claiming the revenue from the 32.5% rate in their election costing. And that is true, but so too did the Coalition! The only issue was the Coalition cut $40m off the expected $540m, due to the six-month deferral. | Joyce also attacks the Labor party for claiming the revenue from the 32.5% rate in their election costing. And that is true, but so too did the Coalition! The only issue was the Coalition cut $40m off the expected $540m, due to the six-month deferral. |
| Right now it is all about urgency – if the legislation is unable to be passed then come 1 January the rate will be 32.5% from the first dollar earned. And so the government and organisations like the National Farmers’ Federation are calling for the 19% to be passed – despite no modelling of the impacts – purely because the alternative is worse. | Right now it is all about urgency – if the legislation is unable to be passed then come 1 January the rate will be 32.5% from the first dollar earned. And so the government and organisations like the National Farmers’ Federation are calling for the 19% to be passed – despite no modelling of the impacts – purely because the alternative is worse. |
| That is not how tax policy should be decided. | That is not how tax policy should be decided. |
| At some point voters in the rural areas of Australian might reflect on this process and ask themselves what was the point of having a National party member in cabinet and as minister for agriculture if such a policy was able to first be introduced and then take nearly 18 months to still not be fixed? | At some point voters in the rural areas of Australian might reflect on this process and ask themselves what was the point of having a National party member in cabinet and as minister for agriculture if such a policy was able to first be introduced and then take nearly 18 months to still not be fixed? |