Flat White

The rustbelt Libs belt their own

24 September 2019

5:00 PM

24 September 2019

5:00 PM

Business and investors are up in arms about the Liberal South Australian government’s land tax reforms. Scott Salisbury, Managing Director of Salisbury Homes, this week has become just the latest to warn that the changes not only risk handing over government back to the Labor Party with a large war chest, but that they alienating the SA Liberals’ voter base.

It’s easy to see why they’re upset. Salisbury himself will reportedly pay three times what he already does under the reforms, and a government-commissioned report from PwC reveals that the changes which target those who hold properties in trust structures will raise $63 million more a year from companies and $11 million from individuals.

It’s also easy then to see the changes as Premier Steven Marshall portrays them to be: a tax hike on the wealthy to create a “level playing field.” However, they’re ultimately an illiberal move which will be paid for by South Australians through less investment, fewer jobs and lower wages. They will also make SA companies less competitive and could increase the prices of their goods and services. Worse of all, the measures appear to have been a Treasury try-on rejected before by Labor; a “Yes, Minister” the Liberals, astoundingly, have blundered into. They should be eschewed in favour of pro-development measures to boost state revenues.

Businesses and investors in the state are already doing it tough with the world’s highest electricity prices, courtesy of historic state government policies which prioritised corporate handouts for renewable energy over affordable and reliable power.

SA’s power bills are significantly higher than those of other states and territories and are up to three times what businesses and families in the United States pay. Costly power cuts into profit margins and makes it harder to justify hiring more workers, undertaking further projects, or increasing salaries.

Effective tax hikes on land or commercial property have a similar effect. John Culshaw, a major business and property owner, reports that a majority of the 4,233 mostly South Australian staff he employs would be hit by the Marshall government’s land tax reforms and that it would drive him and others to invest and hire interstate. SA already has the highest unemployment rate of the mainland states and territories, and Marshall’s changes will only exacerbate the situation.

If politicians can understand that a tax on drink discourages drinking and that a fine on littering discourages littering, then it shouldn’t be hard to understand what the effect of a tax hike on productive capital will be.

And when it comes to addressing the state’s mounting public debt, dwindling GST revenues, small population, and relative lack of exportable resources compared to Queensland or Western Australia, it certainly makes more sense to seek windfalls that come from encouraging development rather than undermining it.

Yet a simple solution to both the state’s fiscal problems and the anti-business environment created by high taxes and expensive power already lies beneath our feet.

South Australia is home to immense reserves of natural gas, much of it locked away in the southeast due to a government moratorium on fracking. Fracking moratoriums prevent the assessment of projects on a case-by-case basis in conjunction with property owners, scientists, regulators, and communities.

The result is an undersupply of natural gas which Australians increasingly depend upon to power our homes and businesses as coal-fired plants like the Playford B station continue to close.

Natural gas remains expensive primarily due to fracking bans and transportation costs. It must be harvested close to where it’s used. South Australia is nearly three times the size of California and gas extracted in the far north isn’t the most economic solution for homes and businesses concentrated in the south.

Yet while debate in Canberra has already shifted towards increasing gas supply, the Marshall government has gone in the opposite direction. It has already opposed a proposal from the former Labor government to reward property owners who permit fracking with 10 per cent of the royalties from the project.

While this may be a small sacrifice for the state government, it would substantially increase their revenues by allowing for more royalty-bearing projects, while compensating landholders and driving down power prices. It also upholds the principle of property rights, which Marshall’s Liberals claim to support, and would create thousands of quality jobs to help replace those lost in heavy industries.

Most importantly, a well-regulated fracking industry in the state’s south that is accompanied by solid compensation for landholders, would help break up the cabal which exists between extreme green activists, who are ideologically opposed to fracking under any circumstances, and landholders stuck with a raw deal in a country where they don’t own what’s beneath their own lands. By contrast, the American gas revolution, which helped lower power prices while powering US manufacturing, remains popular as landholders benefited from the fruits of their land.

Ultimately, it’s individual property owners whose concerns matter and who should have the final say on these projects, not a leviathan state government pushing a blanket fracking ban at the behest of well-organised activists and lobby groups.

And it’s the interests of workers and businesses who drive the state’s economy which should be prioritised over the government’s plan to milk those investing or doing business in the state for some quick bucks through damaging land tax hikes.

Satya Marar is the Director of Policy at the Australian Taxpayers’ Alliance.

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