Comment

Mike Baird.

New South Wales grabbed a monthly record $357 million in stamp duty in October. Photo: AFR

Dear treasurers,

Aside from the slight complication of your opposition shadows being no better than your second-rate selves, how do you justify taking public money when you know you're doing a poor job, when you know you are putting your party's short-term political interests ahead of the long-term good of the country?

The lack of GST on overseas online purchases of less than $1000 barely rates as a footnote in the context of the nation's real taxation issues. 

You all traipsed off to Canberra for a chat with Joe Hockey this week and what did you focus on? You received a lecture about the real world from Treasury secretary Martin Parkinson and then retreated into your own politically expedient universe of bad and damaging taxes, sideshows and circuses.

All you seemed concerned about is the relatively piddling little issue of GST on foreign online shopping, plus a proposed bribe from Hockey to get you to do what they should be doing anyway if you had any integrity: selling off what can be sold off to pay for the infrastructure your states need you to build.

The lack of GST on overseas online purchases of less than $1000 barely rates as a footnote in the context of the nation's real taxation issues. It's something that excites retailers that aren't very competitive and still won't be even if 10 per cent is added to the cost of every online purchase. (As an aside, you might have seen the retail industry overall in planning to increase its capital investment this financial year by 26 per cent to $5 billion) – I'm guessing that investment primarily is being made by the retailers who aren't pushing for protectionism under the excuse of a “level playing field”.)

Anyway, the real money in GST avoidance increasingly is for downloads, the stuff delivered over the net that never goes near the Post Office or Customs – various software, services and games, many billions of dollars' worth. Just that international champion of tax avoidance, Google, is selling more than a billion dollars' worth of ads to Australians this year without paying any GST. It takes a lot of T-shirts and bicycle parts to add up to Google's nifty Irish-routed billion. However, given that Google pays stuff-all tax of any kind, GST may be the least of its sins.

But that's not the real GST issue that was avoided again this week. The woolly mammoth in the room is the need to broaden or increase the GST or both, but that will require all the states to demand it and thus provide the federal government with a reasonable excuse for breaking another promise.

Western Australia's Colin Barnett made a start but the vast majority of state and federal pollies on all sides put their own jobs ahead of the nation's best interests, so it's not happening. Well, it doesn't look like happening until the states find themselves on the edge of a real fiscal crisis as our demographics play out – as the Productivity Commission tried to warn us last week.

And what better example could there be of short-term political opportunism and contempt for the electorate than what is allowing the states to delay facing up to the future, the sudden surge in stamp duty revenue as housing lifts off?

You are nearly all (sorry, Tasmania) basking in ill-gotten gains that are only a step ahead of your other tawdry revenue addiction – gambling fees and taxes. New South Wales is the leader in both of those fields so let's for a moment concentrate on you, Mike Baird, as you grabbed a monthly record $357 million in stamp duty in October and will probably do it again this month.

Mr Baird – and the rest of you – you do know it's a bad tax, don't you? It's iniquitous, it's unethical, it's pro-cyclical, it's economically offensive. You know that it should be replaced by a broad land tax, you know that Henry was right about that and you know that Abbott's taxation review next year will recommend the same thing if it's even semi-competent. And it's a state tax and issue, not something you need to go crying to Canberra for.

But you won't rock the boat, you won't put what's right ahead of what's expedient.

Reform is hard, it's politically painful, it requires integrity and dedication. And most of all, it might cost you your job. The economy would be stronger, we'd have a fairer and more efficient system, your electors would be better off if you do it, but most of them don't know that and they can be easily scared by the irresponsible rabble on the opposition benches. So because your job is more important than all the benefits that would flow from such a change, you won't do it.

And you don't have to – the stamp duty surge is papering over the revenue cracks for now. There's a fair chance that by the time change becomes a necessity, you will have moved on. It will be someone else's problem – maybe the opposition's. So you'll just sit back and let the tainted money roll in, relying on home buyers and the mug gamblers, the sad cases sitting on ubiquitous poker machines.

Mr Baird, you even squibbed on the absolute no-brainer of removing the tax on insurance policies. You encountered a little pushback – I think there was a column in that highly principled journal, The Daily Telegraph, attacking the change, maybe Alan Jones didn't like it - and you shuffled it off to the future for some more “study”. When a government that had such an overwhelming lead can't do the right thing and puts a decision off for a couple of years to when it probably won't be as strong, well, it would be a surprise if you don't just keep on collecting another bad tax.

Now tell me why anyone should show you any respect.

PS I'd check the fine print carefully on Joe Hockey's privatisation incentive – if the Macquarie Bank Sydney Airport privatisation model is followed, there's no tax to be rebated to you. And there are some wonderful trust structures that can work well with infrastructure assets, passing all the profits through to beneficiaries. But you probably know that.

Michael Pascoe is a BusinessDay contributing editor.