EDITORIAL : THE AUSTRALIAN, AUSTRALIA

Winners to write history of mining tax?

KEVIN Rudd always looked like an imposter in his own party: popular with the public but a man without deep factional backing or real philosophical connection with Labor.

Despite his huge victory at the 2007 election, there was a lingering sense he and his supporters had "stolen" the party of working men and women. But it is only now, nine months after his deposition as Labor leader, that the extent of Mr Rudd's isolation within his own government has been laid bare.

The revelations by The Australian's political editor, Dennis Shanahan, that it was Mr Rudd as prime minister who led the move to find a compromise on the original mining tax throw a rare light on the workings of government. There is only one conclusion that can be reached from the documents obtained under Freedom of Information laws -- it was not Mr Rudd who failed to grasp the gravity of his party's situation and the need to head off the damaging campaign launched by mining companies against the tax last year. We now learn that he was looking for a compromise within two weeks of the policy announcement. The question for voters -- and ultimately for the history books -- is what role his deputy, Julia Gillard, and his Treasurer, Wayne Swan, played in these efforts to fix the debacle that led to the collapse of support for Labor at the August federal election.

At the least, responsibility for Labor's failure to act must rest with the Treasurer, who had pushed for the super-profits tax to be taken out of the Henry tax report and presented as a fait accompli in May last year, only to see it blow up in the government's face. As the tax debate damaged Australia's business reputation, Mr Swan maintained an aggressive stance. The documents from Treasury show his demonising of the miners as liars was contrary to his own advice that the effective tax rate was 55 per cent -- as the miners claimed. In the seven weeks between announcing the tax and winning the Deputy Prime Minister's job, the Treasurer did nothing publicly to solve this mess. The best that can be said about Ms Gillard was that she was missing in action on the tax, absorbed in managing the crisis over her Building the Education Revolution.

Yesterday, Mr Swan was forced to admit the government had discussed a compromise model for the tax before Mr Rudd's demise. He agreed there were elements in common with the version of the tax finally put forward by Ms Gillard as Prime Minister, but he refused to spell out where the two plans overlapped. That is disingenuous: the documents from Treasury and Mr Swan's office show considerable similarities between the two models. The industry has known this all along: Fortescue Metals boss Andrew Forrest, is on the record about the compromise offered by Mr Rudd.

So what was the problem? Why did the Rudd government not move as the Gillard government did to change tack and remove the most damaging aspects of the mining impost? Yes, Mr Rudd had been distracted in the lead-up, tramping up and down the east coast on his hospitals tour and trying to win support from the premiers for his hospitals package. But it appears he was not well served by the two people, in Ms Gillard and Mr Swan, who would eventually emerge as the big winners from the mining tax debacle. Indeed, much of the negativity within the electorate and the party that was attached to Mr Rudd in the weeks leading up to the "palace coup" was possibly driven by his isolation from those who should have been watching his back. It is well known that Ms Gillard was among those who, after the December 2009 Copenhagen climate change summit, were urging Mr Rudd to dump the carbon pollution reduction scheme upon which he had staked his prime ministership. It proved bad advice. Labor's abandoning of the CPRS was a key factor in its loss of electoral support -- yet Ms Gillard got off scot-free, just as Mr Swan emerged unscathed from the mauling of his tax.

Here are some more facts for historians to consider when they come to look at the Rudd prime ministership. A key advocate of Mr Swan's original mining tax was the powerful Australian Workers Union, through national secretary Paul Howes. The AWU's national president and Queensland branch secretary, Bill Ludwig, a hugely powerful backroom operator in the ALP, goes way back with the Treasurer. It was the withdrawal of AWU support that sealed Mr Rudd's fate last June and led to Mr Swan's elevation to the deputy's job under Ms Gillard.

History will judge the extent to which Mr Rudd was the architect of his own political demise and whether his parliamentary colleagues were pragmatic or principled when they turned against him last year. But it is likely that as more details emerge about the handling of the mining tax, history will be kinder to the former prime minister's policy capacity. For the moment, Ms Gillard and Mr Swan have everything to prove when it comes to their policy delivery.

When reform becomes a circus

LAST week The Australian welcomed the possibility of a belated but sorely needed national political debate about serious tax reform.

Our hopes did not even live through the weekend, with Treasurer Wayne Swan unexpectedly hastening his ongoing retreat from a reform agenda. On Sunday morning, just days after the government's climate change adviser, Ross Garnaut, pointed out the opportunity to link the carbon tax compensation measures to some of the meaningful tax reform recommendations in the Henry review, Mr Swan sent out an underwhelming first message from his new Twitter account. "I have news to share: tax forum will be Oct 4 & 5," he tweeted. "More details in my eco note later, Swanny." And so, officially, a serious taxation summit promised for the first half of the year was relegated to a "forum" and delayed until after the government has carried out all the taxation tinkering it intends for this term.

Labor commissioned the Henry taxation review in its first term, quarantining the goods and services tax, thereby deliberately shunning even the discussion of opportunities to increase or broaden that tax so that inefficient or undesirable taxes such as payroll tax or various stamp duties could be eliminated. Instead of releasing the Henry report to foster a genuine debate, the Treasurer sat on it and eventually cherry-picked the mineral resources rent tax, announcing an unsaleable version, unleashing a series of events discussed above. After a change of prime minister, a compromise was agreed, but it is yet to be delivered. In order to win over the independent MPs post-election, the government provided a written promise to hold a tax summit before June 30 this year.

The significance of the delayed timing announced by "Swanny" is that it almost certainly guarantees that the mining tax and the carbon tax legislation will already have been dealt with by parliament. The event the Treasurer now calls a tax "forum" effectively cannot have any policy impact on the areas of GST, mining taxes or the carbon tax and its compensation measures. In reality, our high hopes for meaningful reform seem dashed. While the carbon tax itself is not a productivity-enhancing reform, if Mr Swan wanted to use carbon tax compensation as an opportunity for productivity improvements through the tax system he would be bringing forward the summit, not pushing it back.

The contrast with the genuine reformist zeal of Labor's Hawke-Keating years could hardly be sharper. In late 1984, prime minister Bob Hawke promised a tax summit and outlined nine reform principles before the December election, then convened the gathering in July the following year. More than 100 business, union, government and community leaders assembled for a full week in the nation's parliament, having had six weeks to consider a draft white paper containing detailed options for significant changes. The pre-positioning, manoeuvring, debate and deliberations all played out in public. Then treasurer Paul Keating could not carry the day with his preferred plan, but a compromise option led to meaningful reform, including capital gains and fringe benefits taxes offsetting income tax cuts.

By comparison, Mr Swan's October forum promises to be a desultory affair. If the government has failed to implement its mining tax or carbon tax it will be on life-support, in no mood for serious debate and, if as is more likely, it has legislated mining and carbon taxes, it will be preoccupied with implementing them and extremely reluctant to grasp an adventurous new agenda.

The independent MPs who demanded this summit, by June, as a condition of support for the Gillard government already sound underwhelmed by what has eventuated and they are promising to force discussion on a full range of tax options. But, as they come to understand what has transpired, and how redundant the gathering is likely to be, they might conclude that the Treasurer promised them Cirque du Soleil and delivered a flea circus.