Tax reform could save manufacturing jobs

Australia’s manufacturing union has called for tax concessions for construction and mining companies that use local products; a proposal the union hopes would generate business and production activity in Australia’s struggling manufacturing sector and keep it in pace with strong growth industries, such as mining.

Australian Workers’ Union and the Australian Manufacturing Workers Union national secretaries, Paul Howes and Dave Oliver respectively, said that a tax system which allows Australian’s manufacturing industry disappear into non-existence will leave the economy dependent on volatile commodity prices, in a joint submission to the national jobs summit last Thursday.

The AWU and the AMWU are arguing that the current downturn in local manufacturing is largely a result of macro-economics; a high dollar, high input prices and wage inflation; and also the side-affects of the mining boom.

These conditions, the unions argue will leave the Australian industries exposed to global economic shocks, specifically those originating in less mature markets, such as China, India and Indonesia.

The submission comes ahead of the Federal Government’s two-day tax summit which commenced in Canberra today.

The summit will see 200 Government, industry and community representatives debate possible tax changes over the next two days. It precedes the one-day jobs summit.

Prime Minister Julia Gillard officially opened the tax forum stating that any tax changes will take into account Australia’s patchwork economy; a result of the booming mining sector and the contracting manufacturing and tourism sectors.

The two-day tax summit will look at developing tax policy that simplifies the current tax system and reduce Australia’s susceptibility to a financial crisis stemming from complex tax structures, such as those in Europe.

The new policy to be discussed will reportedly allow businesses to claim a refund when they make a loss, such as policy is said to help manufacturing and the non-mining sector to adjust to structural economic change. Ms Gillard said that any changes must be revenue neutral.

There is however concerns that such a policy would added to budgetary pressures in the short term. The unions argue that timing of tax concessions should such a policy be to implement, should be well considered not to affect the planned return to surplus in 2012-13.

There will be no changes to the carbon tax and the mining tax.

The continued discussion of tax reform follows the Henry Review released in May 2010, which made 138 recommendations.

The Government has confirmed that is working on 32 of the recommendations.

The unions’ latest push for local content adds to on-going pressure from the steel sector and industry groups on the government to provide short-term measures to help the ailing manufacturing sector. The AMWU and the AWU confirm that there is a real need for short-term assistance despite the industry’s ability to adapt over the long term.

However, the push against protectionism from certain industry members and group has fuelled the debate over the amount of assistance necessary, touching upon broader issues of free-trade.