Article by Imants Kins
Courtesy of NT News.
Why does the Northern Territory remain reliant on federal taxpayer funding, and given the record and increasing government debt, combined with the lack of importance for territory votes that federal parties outside the territory have, how long can it rely on the extent of such taxpayer funding?
Surely the path ahead should be to transform the NT from being reliant on taxpayer funding, into an economic powerhouse that raises Territorians’ standards of living, generates unprecedented jobs with higher take home pay, and offers opportunities to Aussies who want to work in the NT, pay less tax and save up their monies to invest in a home, or as they may wish.
Already our federal government record debt at close to a trillion dollars is huge, and the interest on this is already costing close to all the tax revenue from Australia’s mining industry. This taxpayer money would otherwise be available to flow into productive assets like infrastructure, sealing roads, building weatherproof airstrips and bridges, and more. Yet here it is being wasted paying interest on record debt. The path forward is clear:
By cutting taxes and stripping away regulatory burdens, we can use the proven power of a SEZ to develop Northern Australia
The Commonwealth and NT Governments must urgently establish a Special Economic Zone across the entire Territory.
Globally, nearly 8000 SEZs successfully drive regional development, and raise living standards. Astonishingly, Australia has none.
Let’s look at history. For over 200,000 years, human living standards barely moved. It was only two centuries ago that global prosperity began a sustained upward path. What drove this leap? Hard working pioneers, human endeavour, private sector investment, risk-taking and innovation.
The private sector is the engine that generates the tax revenue funding our hospitals, police, defence, and more. Today’s private investment creates our standard of living tomorrow.
If we don’t invest and own businesses ourselves, we can still benefit from owning shares, and in any event, we all benefit from private investment, given the taxes that businesses generate, albeit inefficiently, transfer into our hospitals, police, defence and more.
Yet, Australia is becoming increasingly uncompetitive and therefore undesirable as a place to invest, with higher tax rates, too much tape and regulations, and expensive, risky, approval times.
Our productivity is down, and our international cost competitiveness is down, which is very bad news for a country that relies on exports. We need to dramatically change, to welcome investment, to give hope to ourselves and our future.
The missed opportunity in Northern Australia, where vast resources lie dormant, is glaring. Incremental policy shifts, tinkering around the edges, will not reverse Australia’s or the NT’s declining investment crisis. We need an ambitious, globally attractive direction. We need tax, tape and regulation drastically cutting SEZs, where those working in the NT, no longer have to pay income tax.
Gulf States – Saudi Arabia, Oman, Qatar, Bahrain, Kuwait, UAE have no personal tax. Even Iraq’s personal income tax rates range between 3 to 15 percent.
We must incentivise current and future workforces by either cutting personal taxes, or by a major increase in the zonal taxation rebate system that will enable the attraction and retention of the skilled workers needed to build industries and lift living standards.
Then, every worker in the NT every day, works for himself, and his weekly pay is not penalised by government.
Let’s look around the world at company tax rates, to see what competition for investment we have.
Bahrain, zero company tax, except for oil sector. Qatar 0 per cent national companies and 10 per cent for foreign companies. Kuwait, 0 per cent for nationals, 15 per cent for foreigners. Oman 15 per cent. Saudi Arabia, zero tax for Saudi companies except for oil and 20 per cent for non-Saudi companies.
Countries with 15 per cent rate or below – Mauritius, Lebanon, Iraq, Tunisia, Macau, Maldives, Uzbekistan, Bermuda, Georgia, Timor-Leste, Kyrgyzstan, Tajikistan, Bahamas, Bermuda, Barbados, Paraguay, Cayman Islands, British Virgin Islands. What has to be noted is that in SEZs the corporate tax rates are usually well below the standard rates.
For example, can be zero tax (Kenya, Thailand) for a certain number of years to assist projects in its early years, or like a low 4 per cent as in Latvia for the life of the project.
Simultaneously reducing tax rates must partner with removing multi layers of bureaucracy, regulations and tape. Speeding up approvals, reducing cost, and accelerating project delivery. Reducing taxes is not enough alone.
We should also consider making investment welcome for defence industries, with for example focusing on the supply needs of the Airforce near the air bases. To attract such investment, the welcome mat needs to be out, with for example making land available to Australian and our allies companies to establish defence businesses, via long term leases at peppercorn rentals. An exciting defence industry ecosystem could be built around the urgent need for building our defence posture in Northern Australia.
By cutting taxes and stripping away regulatory burdens, we can use the proven power of a SEZ to develop Northern Australia, unleash the private sector, and secure higher living standards for Territorians.
Northern Australia’s resources, land and strategic position will not develop themselves.
The NT is today dependent, underdeveloped, and bypassed by capital investment that has so many more attractive jurisdictions to choose from, leaving the NT and Australia without valuable jobs and opportunities. A SEZ is not a subsidy or a handout; it is the removal of self-imposed barriers of onerous tape, regulations and duplicated bureaucracy, that currently make the NT less competitive than its neighbours to the North and around the world.
The Commonwealth and NT governments have the tools to set up a SEZ now. Like so many other countries have done and from which they benefit. What has been sorely missing in Australia is the will.
It is time to start implementing SEZs – starting in the NT.
Imants Kins, is co-chair, Australians for Northern Development & Economic Vision (ANDEV)
