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Order of Australia nominations do not reflect our diversity

By Anne Summers AO | June 26th, 2017

Some years ago, I declined to provide a reference for a well-known public figure who was being nominated for an Order of Australia. I had not been a referee for this woman’s initial nomination, but the office at Government House in Canberra that administers the awards had sought my views as to her suitability.

Rather than put in writing my low opinion of this particular person, I simply replied that I would prefer not to comment. Whether my refusal to endorse her amounted to an effective veto I cannot say. All I know is that she has never received an award and while she would be none the wiser, since nominations are supposed to be confidential, whoever put her name forward must wonder why on earth the nomination did not succeed.

We keep being told by Sir Angus Houston, who runs the advisory council to the awards, and by Sir Peter Cosgrove, the Governor-General, that the only way to increase the paltry number of women receiving awards each Australia Day and Queen’s Birthday is for us all to nominate more.

The numbers of women honoured has never exceeded a patently unjust 30-odd per cent (after being much lower until very recently), and there are no signs of this changing, especially at the most prestigious upper levels of Companion of the Order (AC) and Officer of the Order (AO).

And it is not going to be fixed by increasing the number of nominations.

Apart from the implied insult that it is somehow our fault – for not nominating more – that so few women are apparently deemed worthy of being honoured by their country, this is simply not a practical or realistic way to change the system.

Nominations can fail – as my anecdote illustrates – but the biggest flaw in the system of deciding who will succeed and at what level is that it is capricious, secretive and hypocritical.

There is no transparency to the system. If your nomination fails, you are not told, let alone given a reason. If you try to probe you will be told, in the nicest officialese, that it is none of your business. Freedom of Information laws do not apply to the awards, a decision upheld by the High Court in 2013 after a concerted campaign by a Queensland woman, Karen Kline, to access the documents used to assess her several failed nominations of a man she felt was eminently deserving.

We are told that no one is honoured who has not been nominated, and that the process from nomination to being honoured generally takes 18 months to two years.

If that is true, how is it that John Howard received an AC in the 2008 Queen’s Birthday honours, just seven months after he lost the prime ministership, whereas Julia Gillard had to wait 3½ years, until the 2017 Australia Day awards, to get hers, and Kevin Rudd is still waiting?

Why is it that Adam Goodes in 2014 and Rosie Batty in 2015 were deemed worthy to be Australian of the Year but neither has received an Australian honour?

It’s not just women who are under-represented in our honours system. No count is made of Indigenous or people of CALD (culturally and linguistically diverse) backgrounds so officially we don’t know, but a quick scan of the lists each six months gives you a pretty good idea.

This is not going to change until we have the courage to be assertive, to rely less on nominations, and reserve at least a portion of each set of honours for people who are actively sought out for consideration. Call it quotas or call it affirmative action. It’s what the British do, and their recent lists have been 50 per cent women, more than 9 per cent from a BAME (Black, Asian or other minority ethnic) background, and 8 per cent had a disability. Plus, they honour recent heroes such as Olympic champions in the same year as they won gold for their country.

We don’t do that. But we could.

We could ensure that our lists of honorees look like the Australia that exists, where a wide range of people of both sexes excel as citizens and deserve our recognition, not just the usual safe white bread parade of businessmen and academics.

It won’t happen under the current highly selective and secretive vice-regal system.

We could emulate the British and move the process to the Cabinet office in the Prime Minister’s Department. We could also set up small committees of experts in areas such as sport, the arts, science etc, and empower them to recommend worthy people for consideration and implement fast-tracking to supplement those nominated by the community. And to be mindful of gender and other overlooked backgrounds.

It shouldn’t just be former Liberals PMs who get such special treatment, nor those – and I know people who have done this – who’ve figured out how to game the system to get AOs and ACs.

This article was originally published at the Sydney Morning Herald.

 

Sectors: Government

What Australia’s Leaders Are Saying About #Budget2016

By Women For Media | May 4th, 2016

Nicki Hutley, Chief Economist, Urbis

“This budget is a case of fiscal groundhog day. We are seeing the Government move the pieces on the chess board but not actually make significant inroads into the budget deficit.”

“There’s nothing in here that inspires a vision that is going to fundamentally change the Australian economy for the better.” ABC News

“There’s very little here to get excited about. The economic predictions are ridiculously optimistic. We live in an uncertain world and you have to build on conservative forecasts. …as Australians we have to ask, what is it we want from policy and then how are we going to pay for it, because we can’t have increased expenditure and reduced taxes.” World Today, ABC Radio

Andrea Staines, Non Executive Director, QIC, Transport for NSW, SeaLink

“The government’s plan to encourage asset recycling is on the right track with its focus on proper cost benefit analysis for new projects. It was also terrific to see the scope of the program expanded from roads to also include public transport.” Sydney Morning Herald

Professor Miranda Stewart, Director, Tax and Transfer Policy Institute, Australian National University

On the income tax cut for earners over $80,000: “It’s basically a tax cut that benefits the top 20% of female taxpayers and top 35% of male taxpayers by taxable income.”

“If the government was serious about addressing real tax disincentives to work it would have looked at the high effective marginal tax rates facing many women.” News.com.au

Su-Lin Ong, Head of Australian Economics, RBC Capital

“An improvement in the budget trajectory remains the central forecast but the underlying budget remains firmly in the red.” Sydney Morning Herald

Romilly Madew, CEO, Green Building Council of Australia

“We are pleased to see a renewed national focus on Australian cities, with more than $3.4 billion allocated to urban rail projects. Only then will Australian taxpayers know they’ve invested in infrastructure that is resilient and that delivers the best value for decades to come.”

“It is disappointing that the budget announces no new funding to assist Australia to reach its international commitments for emissions reductions and to transition to a low-carbon economy.”

“The built environment represents significant opportunities for emissions reductions at relatively low cost, but there are no new incentives or support for the property and construction industry, or any other industry for that matter, to make the most of these opportunities.”

“…investment in urban forests is important, but we’d like to see the development of a national green infrastructure policy that goes further than being just about trees, and include boosting biodiversity, enhancing the public domain and building more resilient cities.” The Fifth Estate

Pauline Vamos, CEO, Association of Superannuation Funds of Australia

“We do not support the reduction of annual concessional caps to $25,000.”

“While today less than two per cent of people with superannuation make contributions above $25,000, a significant number of such individuals that have low balances are attempting to catch up. For instance, around 36,000 women with balances less than $200,000 in 2013/14, were making contributions in excess of $25,000.” SMSF Adviser

Belinda Robinson, CEO, Universities Australia

On cuts to the Higher Education Participation and Partnerships Programme (HEPPP): “Cutting such a program means we could be denying talented students a chance at higher education just because of their background. That is not only unfair but it robs Australia of future highly skilled graduates and innovators.”

“To build the highly skilled contemporary workforce of the future Australia needs all Australians – regardless of their background – to have the opportunity to gain the skills required by employers.”

“Improving equity in higher education is not only fair, but an essential platform for building the diverse, skilled workforce of the future.” Guardian Australia

Catherine Robson, CEO, Affinity Private

“There were some welcome incentives, such as the Low Income Superannuation Tax Offset (replacing Labor’s Low Income Super Contribution) and the ability to effectively average concessional contributions over five years, which will assist the self-employed with lumpy incomes and those in the early stages of their career.

However, the reality is that those who have periods out of the paid workforce, or work in low-paid or not-for-profit industries, will continue to find accumulating retirement savings challenging. These people are at a much higher risk of ending their working lives without the security and dignity of independence.” Canberra Times

Dana Fleming, Tax Partner, KPMG

“We strongly support the Government’s measures to allow those with broken work records, often women, to make top-up payments. This is a very fair and important move which will go some way to ensuring those individuals have a decent retirement package.”

“Retaining the Low Income Super Contribution for low earners and allowing tax deductions for all contributions into superannuation are also welcome.” ABC Radio

“Paring back some current concessions – bringing down the 30 per cent tax threshold from $300,000 to $250,000 seems to strike a reasonable balance between equity and incentives for people to fund their own retirement.” Sydney Morning Herald


Is Scott Morrison dreaming when it comes to tax reform?

By Professor Miranda Stewart | February 19th, 2016

“This Government isn’t dreaming,” the Treasurer told us in his speech yesterday. He is right that “the scope for tax reform is limited in this economy.” As he bluntly says, “we don’t have a surplus to fund reductions in taxes.” In fact, we have a $35 billion deficit.

The Treasurer might be dreaming when he says he wants a “friendly” tax system: “Growth friendly, earner friendly and profit friendly.”

Much as I admire our Australian Tax Office, you are not supposed to be friends with your tax collector. Just pay what’s required like everyone else does so we can raise sufficient revenue to fund the public goods and services that people want.

Dreaming about spending?

Based mostly on bracket creep in the income tax, without any change, the budget is projected to reach a small surplus by 2021. The Treasurer aims instead to return to surplus with expenditure restraint, which is going to be tough. Even if expenditure is successfully “controlled” over the next five years, over the medium term that surplus is projected to decline again into the red. In the long term, the Intergenerational Report projected a growing deficit, on more heroic economic growth assumptions.

The times are not right for a GST

The Government has already said it’s not the right time for a GST increase, or a major “tax mix switch” between GST and personal income tax, finding that there would only be a modest growth effect. That seems sensible now – but we should not be looking to the GST to deliver significant growth. That does not mean the GST is irrelevant: the main thing it is good for is revenue.

In the medium term (see above on budget) – or even in the next term of either a Liberal or a Labor government – we are going to have to look again at increasing the GST rate or broadening the base. We will need to support an ageing population; fund education, retraining and early childhood human capital investment needed for a transitioning economy; let alone the true cost of the National Disability Insurance Scheme.

Will there be tax cuts aimed at “bracket creep”?

Bracket creep affects everyone because tax brackets are not indexed so your total tax payable as a percentage of income (the average tax rate ) increases with nominal and real wage growth. Is bracket creep a “killer” of economic growth? It’s far from clear. The Treasurer conspicuously did not express concern for people at the top rate of 45 per cent plus the 2 per cent temporary budget repair levy plus the 2 per cent Medicare levy (that is 49 per cent if you are counting). That temporary levy comes to an end on June 30, 2017 unless it is extended.

Instead, the Treasurer focused on the average wage earner moving into the “second top” tax bracket of 37 per cent (plus the Medicare Levy) at a threshold of $80,000. An increase in that threshold would, in fact, benefit higher bracket taxpayers too. Average full time male earnings are above the 37 per cent threshold now, but average full time female earnings are a lot lower, and most workers sit below about $60,000 in wages.

It’s been suggested that bracket creep is a disincentive to work. The Treasurer did not say this, but Treasury modelling assumes that bracket creep does affect work behaviour to some degree (it assumes work elasticity of 0.2). Yet empirical studies consistently show that most men are very unlikely to change their work behaviour because of tax rates(e.g. see a recent analysis of 30 studies around the world).

More importantly, women have much higher work responsiveness (estimated at more than four times that of men). That suggests that if the Treasurer really wants to help workers and growth by cutting taxes, he should focus on women with children working part-time and on the interaction between the tax and transfer systems.

A tried and tested approach

Tax reform does not have to be big bang. The Treasurer indicated that “modest” personal tax cuts would have to be funded from other tax changes. The biggest benefit would come from broadening the income tax base. This would help prevent the increased tax planning that we know is a behavioural response to bracket creep (as demonstrated in a US study).

The Treasurer criticised the Labor Party’s proposals to limit negative gearing to new housing construction and reduce the capital gains tax concession. But he seemed to leave open the option of capping deductions for higher income earners, possibly both interest and work expenses. He also did not rule out increased tax on superannuation contributions and earnings.

Unlimited negative gearing of rental losses against other income, in a context of easy finance and rising property markets, has become one of our most widely used tax shelters for wage earners. It is indeed true that some nurses, teachers and police negatively gear to reduce their taxes, although high earners get about 10 times the tax benefit from negative gearing and get much higher capital gains at a reduced tax rate. The Treasury chart below shows that a much smaller fraction of 10-15 per cent of taxpayers in income bands under $80,000 are negatively geared, compared to 24 per cent of high income taxpayers.

It’s time to apply a sensible limit, just as we did on introducing Fringe Benefits Tax in 1986 to crack down on tax-free fringe benefits. The Henry Review recommended reducing the capital gains tax discount to 40 per cent and quarantining investment expenses – both still worthwhile reforms. Deduction of property losses against wages was halted in the US by Ronald Reagan in 1986. In the UK, such losses are limited to rental income and the government announced in 2015 it would cap this deduction at a 20 per cent tax rate.

What about the federation?

It was disappointing to hear the Treasurer speak of the states as sovereign governments responsible for their own affairs (and hospital funding), when the Commonwealth continues to pick up the lion’s share of tax revenues. John Freebairn and I have previously argued that state tax reform could make the biggest contribution to economic growth through land, payroll and transport tax changes, but this needs national coordination.

And one last word… er… climate change?

The Treasurer spent quite a while talking about the global context for Australia’s tax system, but he failed to mention one aspect: climate change. Specifically, the legally binding Paris Agreement of December 2015 to keep global warming to 2 degrees.

The unpleasant reality in which the Government finds itself is partly because the Abbott-Hockey government abolished the carbon pricing mechanism, or carbon tax. It raised more than $6 billion and growing in the single year of 2012-13, with less pain per household than a GST increase, while having a positive impact on transitioning – to use the Treasurer’s word – Australia to a new economy for the 21st century. I wonder if it’s time to revisit that idea?

Professor Miranda Stewart is director of the Tax and Transfer Policy Institute at ANU.

This article was originally published at ABC’s The Drum.

Sectors: Government

Australia, Being Lucky Is No Longer Enough

By Tania de Jong AM | December 22nd, 2015

Australia has traditionally been a highly successful and prosperous nation. On almost every important business index, we are accelerating. The stakes — the financial, social, environmental and political consequences — similarly are rising.

Being lucky is no longer enough.

We lag well behind many other nations on innovation. We have to nurture our entrepreneurs and innovate faster in order keep up with the pace of growth. To compete globally we must welcome, include and empower the many diverse voices of our citizens, migrants and the refugees who are seeking a haven here.

Over the next five to 10 years it is estimated that up to 40 percent of companies on the Standard and Poor’s index will be disrupted by rapidly advancing technologies and the entrepreneurs adapting quickly to this new environment. According to international research, 47 percent of middle-class jobs will become redundant due to robotics and new technologies. And some jobs will continue to exist but will be performed in cheaper labour markets overseas.

Australia doubles the research outputs of the United States per capita but produces half the amount of patents. We generate plenty of ideas and research but we don’t commercialise them enough. We urgently need to train our young people to be entrepreneurs: makers and creators of the jobs of the future. We need to build a culture of innovation to sufficiently develop our capabilities to turn ideas into enterprises.

Willingness to experiment and fail leads to innovations creating opportunities and prosperity for millions. FAIL, after all, stands for First Attempt In Learning.

Turning ideas into enterprise also benefits from diversity. With skilled migrants and refugees seeking a home here, we have real opportunities to foster a new wave of entrepreneurship and innovation.

We surround ourselves with people who make us feel safe, who come from similar backgrounds and educations, who think, feel and dress like we do — and who agree with and endorse us. Yet our biggest gains as humans come from “creative abrasion”, where we rub up against people who make us feel uncomfortable and challenge our notions of ourselves and the world we live in. This is where creativity and innovation truly spark.

Inclusive leadership must be paramount. Instead of fearing people from different backgrounds and cultures, there is an opportunity for all of us to choose to create a happy, healthy, inclusive and innovative Australia. This is about removing the ‘us and them’ mentality and acknowledging our common humanity. Ultimately we are more similar than different, yet our negative focus on the differences between us creates a lot of our problems.

Let’s remove the walls between us and build bridges of understanding. As a community we need to empower all voices, no matter what their faith, background, disadvantage, disability or age. People need to feel like they have a place here, a true home, a sense of belonging, a sense of self and respect from others. Then they will truly be able to contribute to our future.

And does size matter? No.

Look at Israel, a nation founded by refugees that faces permanent geographical, political and social challenges. It thrives because it has a risk-tolerant culture producing massive innovation. Imaginations are allowed to run free, ideas are nurtured and entrepreneurs celebrated: Israel is home to over 5,000 tech start-ups and lists more companies on NASDAQ than all of Europe combined. Israel proves that small countries can be engines of entrepreneurship and innovation.

When refugees and migrants come to a new country they want to restart their lives. They work incredibly hard and bring a diverse and rich cultural background that contributes economically, politically and socially. They just need to be given a voice.

We do accept people from diverse backgrounds into Australia. Now we need to put out the welcome mat and provide everyone with the education, skills, engagement and opportunities to participate in this accelerating environment and contribute fully to their new homeland. Then they can truly call Australia home, and together we can co-create a productive, innovative and prosperous future.


Does Lobbying Promote or Challenge Democratic Principles?

By Sue Cato | September 30th, 2015

While it may not be the oldest profession in the world, organised lobbying shares a similar image problem to the one most often associated with that tag. Lobbying has, in some company, become a dirty word, and nobody has yet applied for the job of lobbying for its redemption.

The Australian government’s Code of Conduct on lobbying describes it as ‘a legitimate activity and an important part of the democratic process’. There are countless examples of reasoned lobbying campaigns shaping good policy outcomes in areas as diverse as taxation, conservation and anti-discrimination. But rightfully or wrongfully, the reputation of the lobbying industry, more specifically the practice of paid lobbying, is wallowing in the badlands. There is a fixation on how much money is expended on lobbying and how much influence these so-called masters of the dark arts wield, often with little regard for the merits of an argument. The great challenge facing lobbyists and public officials is how to encourage more people to engage in the political process, rather than putting more hurdles in the way.

It is not a challenge confined to Australia. In 2013 the American League of Lobbyists changed its name to the Association of Government Relations Professionals. It saw the writing on the wall after Barack Obama took hardline measures to avoid the scandals that plagued the former Republican administration, and it reached for the sugar soap. Back home, a string of highprofile corruption hearings in New South Wales has cultivated a perception that any encounter between a paid lobbyist and a public official leads down a path to secret deals and acts of corruption. While claims of a minister falling asleep on a masseuse and the story of a premier being undone by a bottle of red wine make great media fodder, the everyday reality of most encounters between lobbyists and public officials is far less interesting and often more productive.

So should we care that lobbying is on the nose? Do we even need lobbying? The answer to both questions is an emphatic yes.

Contrary to some reports, lobbying is not a practice reserved for the top end of town to peddle influence for narrow benefit. It occurs on many levels and contributes to the development of policy settings covering every spectrum of society. Whether it is World Vision advocating for increased foreign aid, a solarpanel manufacturer promoting the virtues of renewable energy investment, or a neighbourhood traffic group calling for a new roundabout, lobbying will always involve one party attempting to influence the decisions and spending priorities of public officials. In a democracy, elected officials can’t do their job properly without this type of consultation.

Changes to legislation support changes to the way our society operates. State and federal ministers are rarely experts in their portfolio areas. They are not expected to be. Their job is responsibly to apportion the allocated budget for each portfolio area in line with government policy and public need. It is therefore incumbent on them to seek advice from departmental advisers and experts external to government.

Take the technology sector as an example. Google spent $16.8 million on lobbying in the United States last year. Amazon, Apple and Facebook also set new records, and the top fifteen tech companies spent just shy of $117 million on lobbying in 2014. This prompted Consumer Watchdog, a prominent lobby monitor, to lament that ‘Policymaking is now all about big bucks, not big ideas.’

The truth is that big ideas are not developed in a vacuum by politicians with little understanding of industry challenges and public views. When you consider the average age of representatives in the US Congress is sixty-three, the need for consultation with industry leaders in this fastest growing of all sectors becomes apparent. While age should never be viewed as a barrier to the adoption of technology, it is safe to assume few members of Congress have been at the forefront of technological innovation. Lobbying efforts in this space are as much about education as they are about persuasion. Combined with broader consultation, that translates into benefits across the community.

So what can be done to address the negative perception about lobbying and reinstate its original purpose as a channel that facilitates direct communication between policymakers and the community on matters of public interest? The answer lies, as it does in every other area of regulation, in strong guidelines, effective enforcement and transparent practice.

Public officials the world over are forever tinkering with rules of engagement for corporate lobbyists in the vain hope of perfecting a model that will be universally accepted as sufficiently robust. In the United States and Canada, statutory lobbying regimes cover external and in-house lobbyists and include sanctions from large fines to prison terms. In most Australian jurisdictions, the disclosure requirements for lobbyists are not as onerous, the penalties are less stringent and in-house lobbyists are not required to be registered.

Too much time has been spent on the potential for a handful of rogue operators to act improperly. Just like the rules governing political donations, there is an obligation on parties on both sides of the political divide to comply with lobbying rules. In case the penny hasn’t dropped yet, in the age of unprecedented access to information, those who flout the rules are dinosaurs that will soon become extinct by their own hand. The time is ripe to align our lobbying regulations with world’s best practice and get on with the job of governing without fear of constructive engagement with third parties, including lobbyists.

A change of approach from public officials is also required. Everyone has a right to engage with their elected representatives. With the technological tools at our disposal today, this type of dialogue should be easier than ever. Organisations such as GetUp!, whether they identify as lobbyists or not, have blazed a trail in using technology to help more people express a view on issues important to them. Ministers, MPs and local councillors need to embrace this opportunity and broaden their interaction with the community at all levels, rather than just talking at each other on Sky News. If they don’t get on board with this concept they will miss the bus and further lose relevance in the eyes of the community.

There will continue to be a role for corporate lobbyists as the interface between business and government, but they need to be smart about how they work. Progressive lobbyists have known this for some time. They are empowering their clients with the tools to engage more effectively with policymakers, using cogent, evidence-based arguments, rather than promising favours because of some old connection or relationship. Those days are nearing an end.

Lobbying will always present challenges in a democracy where the motives behind every decision are scrutinised with a cynical eye. But when conducted ethically and responsibly, lobbying has the ability to connect individuals and organisations to decision-makers and help them articulate their views. That is an outcome that surely promotes democratic principles, and one that is worth supporting.

This article was published in Meanjin, Vol. 74, No. 3, Spring 2015: 166-168.


Around the world, regulators are realising Bitcoin is money

By Professor Miranda Stewart | August 13th, 2015

The tax treatment of digital currencies is a challenge for governments around the world, as it is for other aspects of the “disruptive” digital economy.

In October 2014, the Commonwealth Senate Economics Committee launched an inquiry into digital currencies. The Committee released its report last week, with a particular focus on tax.

Last year, the ATO published several rulings outlining how bitcoin and similar cryptocurrencies should be treated under the Australian income tax and GST regimes.

The rulings provided useful clarity on bitcoin’s tax treatment, but the ATO’s approach received widespread criticism.

Bitcoin purportedly functions as money, but the ATO rulings treat bitcoin as a commodity for tax purposes. This disparity creates a number of tax inconsistencies.

The impact is particularly acute under the GST regime, where bitcoin transactions are taxed as barter transactions. Australia’s GST regime applies somewhat clumsily to barter transactions, which may cause double taxation, or at least double tax administration, as we emphasised in our submission.

Why should the law be changed?

Imposing 10% GST on bitcoin transactions increases the price of purchasing bitcoin from Australian vendors, affecting the commercial viability of operating a digital currency business in Australia, as we have highlighted before. Submissions to the inquiry outlined the potential benefits the industry could offer Australia, but many argued the GST treatment stood in the way of success.

From a regulatory perspective, supporting Australian digital currency intermediaries to establish an industry here is likely to make financial supervision and taxation easier for government.

The ATO’s characterisation of digital currencies as a commodity is probably the best interpretation of the current law, which emphasises wide use and sovereign backing for currencies. But it’s not clear cut. There is a legal basis to treat digital currencies as money based on their function as a medium of exchange, especially as this becomes more widespread.

Digital currency and GST

The Senate report identified the GST anomalies arising from the ATO’s characterisation of digital currencies and recommends the government amend the GST regime to treat digital currencies as money. This would promote fairness and neutrality in the taxation of both modern and traditional forms of money.

Implementing the necessary changes to the GST Act and Regulations will ultimately require approval from the Commonwealth and all State governments, as it affects the GST base.

Adopting the report’s GST recommendation would bring Australia’s GST treatment in line with the UK, and some other EU nations. Last year, the UK changed its VAT laws (the UK’s GST) to exclude digital currenciesfrom taxation as a commodity.

When the UK first introduced this approach, it was praised for supporting the local digital currency industry, although there is little empirical evidence at this early stage.

Digital currencies are also treated by the ATO as commodities for income tax. The evidence before the Committee, although limited, suggests most bitcoin holders are investors not traders.

The report did not recommend any alterations to the income tax treatment at this stage – and we agree that caution is needed before altering income tax treatment. The report recommended further research to determine whether change is needed.

The regulatory future of digital currencies

The Committee concluded that digital currencies fall outside the scope of many of Australia’s financial, banking, and consumer protection regulations. It recommended that Australia’s anti-terror and anti-money laundering regimes should be extended to ensure they encompass digital currency activity.

However, the report does relatively little to address the longer-term regulatory concerns surrounding digital currencies. At this early stage, the report proposes to allow the industry to self-regulate, with oversight from a proposed “Digital Economy Taskforce”, rather than introducing a specific regulatory framework.

The Committee accepted that extensive regulations might stifle the growth of the digital currency industry. Although digital currencies’ utility has been emphasised recently, their future remains uncertain. Bitcoin, the largest digital currency, has seen a steady, significant price decline over the past two years. Further, much of the industry’s innovation comes from small start-ups, which have relatively few resources to comply with regulations. Regulatory simplicity seems proportionate at this stage.

It will be interesting to see how effective the self-regulation approach is, particularly given digital currencies’ historic involvement in illicit activities and the regulatory concerns voiced by other governments and the OECD.

The combination of introducing a more favourable GST treatment, and a relatively simple regulatory framework will hopefully foster this nascent industry’s development. If the industry experiences any major growth in Australia, the greater number of users (and more tax dollars at stake) may heighten regulatory attention surrounding the technology.

Ultimately, the self regulatory approach and Digital Economy Taskforce is the beginning, not the end, of the government’s involvement in regulating and taxing this new technology.

This article was originally published at The Conversation. Co-author is Joel Emery.

Sectors: Government