A system riddled with perks, rorts, inefficiencies, unfairness and complexity

This was a woman taxpayer's plea at an Australian Administrative Appeals Tribunal hearing I was reporting on in the early 1980s. No, no, said the tribunal, that is a personal expense.

Forty years later, childcare is still not tax deductible.

Some good changes have been made since then, but in the past quarter century, the whole of the Australian tax system has become riddled with perks, rorts, economic inefficiencies, unfairness, complexity and enforcement costs that make evasion and avoidance too easy.

So, what did the Coalition do at the weekend? It resuscitated one of the unfair perks that had been abolished by then treasurer Paul Keating 40 years ago. Opposition Leader Peter Dutton promised at the weekend to bring back the tax-deductible business lunch and the tax-deductible golf afternoon.

It was a piecemeal, spur-of-the-moment thought-bubble from the leader of a well-resourced major party with access to any number of tax experts and economists.

Coalition members should see it as a shameful embarrassment when compared to the tax work done by independent think tanks and by independent MP Allegra Spender. Her well-thought-out and well-researched 50-page Green Paper on Tax is here.

The major parties put tax back into the "too scared basket" when Bill Shorten lost the 2019 election.

But this inaction is catching up. Voters are so desperate to see government action to address a myriad of issues, that polls (and the Trump victory in the US) suggest they will grasp at any hint of action no matter how impractical, ill-thought-out, costly, or unfair (repatriating immigrants, the wall, tariffs, and tax cuts for the rich in the US; nuclear energy, coal-mine extensions, and tax cuts for the rich in Australia).

There was at least some detail in Dutton's thought bubble. Deductions will be limited to $20,000 and will not include alcohol.

But the detail reveals the flaw: a misplaced trust that everyone in the private sector will never rort the system when history tells us that it happens all the time. Any tax perk or government spending program from pink batts to aged care and the NDIS attracts rorters like iron filings to a magnet.

You can bet the restaurateurs will glibly go along with putting a bottle or two of sauvignon blanc down as a Mississippi mud cake to bring it within the tax-deductible ambit. Enforcement will be a nightmare.

Companies with a turnover of more than $10 million would not get the tax-deductible lunch. Ho, ho. Many companies with a turnover of more than $10 million don't need to. They can send their earnings to tax havens and not have much, if any, income to deduct against.

In 1985, when Keating announced the end of the deductions, the restaurant industry predicted vast job losses and business closures. Didn't happen.

It was just like the pharmacy industry's prediction of job losses and pharmacy closures when Labor reduced prescription costs for patients in August 2023. There are more pharmacies and people working in pharmacies now than then.

These examples show that politicians should stand up to vested interests. There is no good economic reason for reintroducing the deductible lunch. It is just a deal for donor mates.

Of course, it may be too late. Action-starved voters might be willing to approve of any measure rather than none.

It should be a great opening for Labor. But Prime Minister Anthony Albanese's record suggests he will be too timid to drag a few things out of the "too scared" basket.

But the pandora's box of tax has been opened. Labor could announce a few things that would contrast favourably against Dutton's tax-deductible lunches.

Childcare would be a good start. Match that.

Better still, Labor could use subtlety and nuance to tackle negative gearing and the capital-gains tax concession. It could announce that the Medicare levy in future would be levied against income BEFORE deductions for negative gearing and BEFORE the capital-gains tax concession.

This is not difficult stuff. A lot of social security works this way: the health card; the aged pension; and child-support calculations are all made on the basis of before-perks income.

The government should just calculate the extra revenue and promise to pump it all into Medicare and wedge the Opposition to match the tax measure or find the funding from elsewhere.

Bring on an election about tax - because tax policy is a least half the story of how society runs.

Forget the concocted patriotic outrage over Australia Day and not standing in front of Indigenous flags. How about stressing the real patriotism of paying a fair amount of tax so that Australian society can function safely and equitably and provide the environment in which people make their money in the first place.

Australian politicians and voters have to stop talking about trivial gotchas and detail-free announceables and start talking about the bigger issues.

We know it can be done because time and time again the independent think tanks provide the data and reasonable policy conclusions based on it.

For example, the Grattan Institute published a well-researched report on superannuation at the weekend. But each of its three recommendations start with the words "the federal government should ... ", so it will be headed for the "too scared" basket.

The Australia Institute has issued numerous reports of misdirected tax breaks; aged care short-comings; political influencers; climate change; the list goes on.

Other independent think tanks do similar work. But the major parties seem to have walked away from big policy. And the voters are understandably walking away from the big parties.

Dutton's weekend tax announcement - as tiny as mousetrap bait that no voter should take seriously - exemplifies how small-minded policy discussion has become in Australia.