Peru climate talks drift off target as Australian representatives  fly in

As Julie Bishop and Andrew Robb prepare to arrive in Lima to represent Australia at the annual United Nations climate negotiations, deep divisions are emerging over whether a deal to be reached in Paris next year will include legally binding targets.

The US says national targets should be voluntary – a position that has won the support of leading Australian economist Ross Garnaut.

But the European Union has claimed that voluntary targets will not provide the necessary long-term certainty to make the cuts in carbon dioxide emissions needed to prevent dangerous climate change. Foreign Minister Julie Bishop has now made a similar argument, saying a deal without legally binding commitments would be nothing more than aspirations.

The debate came amid a new stoush over climate finance to be provided by wealthy countries to those still developing. The Abbott government has made it clear that it believes the bulk of money should be paid by industry. That contrasts with its position at home, where it has set up a $2.5 billion fund of taxpayers' money to pay industry to cut emissions.

The two-week Lima conference started positively last week, but began to get bogged down by week's end. The US wants a Paris deal to focus on emissions reduction pledges, but developing countries want to see a greater focus on measures to help the most vulnerable adapt and a stronger link between climate finance paid by the wealthy and the target of limiting the temperature rise by 2 degrees.

Australia has faced criticism from China over its refusal to give any money to the Green Climate Fund. The fund has received $9.7 billion, including pledges from the US, France, Germany, Japan and Canada.

In an interview with Associated Press,  Ms Bishop said Australia would continue to directly pay for climate-change adaptation in vulnerable South Pacific island nations through its aid budget rather than donate to a UN fund designed for the same purpose.

"The Green Climate Fund is about supporting developing countries build resilience to climate change. Australia is already doing that through our aid program," she said.

Ms Bishop said her message to the conference would be "that the new agreement should establish a common playing field for all countries to take climate action from 2020" and to call for commitments from all major economies to cut emissions.

She said any deal in Paris needed to be legally binding, and that Australia wanted to see the detail of a US-China emissions deal struck ahead of the Peru conference.

"China has already said that it will continue business as usual until 2030. We want to know whether there's some sort of binding commitment," she said.

A report by US and Chinese academics last year found that for China's emissions to peak and start reducing by 2030, as it plans, it would require significantly more action than business as usual practice.

The legal status of national targets that countries will offer up as part of a new comprehensive agreement in Paris was left deliberately vague in the so-called Durban Platform agreed to in 2011. It said the talks would lead to a "protocol, another legal instrument or an agreed outcome with legal force".

But EU lead negotiator Elina Bardram said in Lima last week that legally binding targets were needed to provide confidence for investors.

"The EU is of the mind that legally binding mitigation targets are the only way to provide the necessary long term signal," The Guardian quoted Ms Bardram as saying.

"We're not convinced that an alternative approach could provide the same signals that would be sufficient to deliver the global momentum."

US lead climate negotiator Todd Stern said previous approaches that involved legally binding commitments did not work.

"You could assign every country a particular reduction that on paper looks like a perfect result and then you can't get an agreement on it. This [a deal with voluntary commitments] is a way to get everyone in. It's not going to be perfect, but it's a strong start that would get better and better," he said.

Professor Garnaut told Fairfax Media that while countries can make "serious domestic political commitments", it would be counter-productive to demand they enter into a binding legal commitment. Countries would be more likely to be more ambitious if the targets they set were voluntary, as occurred at a 2010 UN meeting in Cancun.

"We shouldn't be aiming for a legally binding agreement," Professor Garnaut said. "We now know that even if we couldn't recognise it at the time, that at this stage of history that is neither feasible not desirable.

"The ambition of the concerted unilateral commitments at Cancun were much greater than the notionally legally binding commitments at Kyoto [in 1997]. There is good reason for that; when negotiators think they are binding their countries, they are more cautious than when countries are honestly thinking they can do, but there is less sense of the catastrophic consequences if they don't."

Climate finance has so far dominated conference talks. The US pushed to delete words in a negotiating paper stating that financial commitments should be "new and additional", predictable and adequate. The US was supported by Switzerland,which said that unless a call for new commitments of finance post-2020 was left out of the final text, there would be no agreement in Lima.

A new report by the United Nations Environment Programme has found that even if global greenhouse gas emissions are cut to the level required to keep the global temperature rise below 2 degrees this century, the cost of adapting to climate change in developing countries is likely to reach two to three times the previous estimates of $70-100 billion per year by 2050. Adaptation costs for Africa alone could reach approximately $350 billion annually by 2070.

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No, the rich don’t pay a ‘fair share’ of tax. They pay all of it

You have to include what people get back from the government

THE degree of ignorance about the distribution of tax across households is remarkable, especially given that the truth is so easily and freely accessible. For politicians perhaps it is wilful; the facts suit neither side.

The Left typically tries to create the impression the “rich” aren’t paying their “fair share”. Consider former treasurer Wayne Swan’s attacks on “mining billionaires” and welfare groups’ continual prattling about the financial benefit of concessional super taxation to high-income earners.

The Right, meanwhile, evokes the ordinary, “battling” taxpayer, whose hard-won earnings, so the argument goes, are siphoned off to pay for inefficient or ineffective government programs.

But the overwhelming bulk of people in Australia pay no net tax at all. High-income earners have become a giant pinata that the majority hit for extra money to pay for whatever new social spending programs the political class proposes to stay in office.

Our constitutional democracy, rather than safeguarding a set of inviolable tax rules applied under the rule of law, has become an elaborate mechanism for extracting resources from a small minority for the much larger majority. A crude summary might be “pay up or else”.

Only the top fifth of households ranked by their income - those with incomes of more than $200,000 a year in the financial year ending June 2012 - pay anything into the system net of the value of social security in cash and kind received, according to data from the latest Australian Bureau of Statistics survey of household income.

The distribution of personal income tax - the federal government’s biggest source of revenue, raising about 45 per cent of the total ($165 billion this year) - is far more progressive than headline marginal tax rates suggest. Including the 1.5 per cent Medicare levy, Australia’s income tax rates range from 19 per cent for every dollar of income above $18,200 to 46.5 per cent for every dollar above $180,000. Most taxpayers face a 34.5 per cent marginal rate.

But average income tax rates on households’ privately generated income (ordinarily wages and salaries, but dividends and rental income too) ranged from 1.5 per cent for the bottom fifth of households in 2012 to 22 per cent for the top fifth.

The 1.73 million households in the middle quintile paid an average tax rate of 12.3 per cent on average incomes of $88,900. But the ABS survey estimates these households received $31 a week in Age Pension payments, $13 in disability payments, $48 in child-related payments and $12 in unemployment benefits, along with a host of others that whittle their average net tax payments down to $84 a week.

This sort of analysis excludes the value of government benefits beyond cash: “free” schools, hospitals, public transport and the like, which the ABS estimated to be $413 a week for these middle-ranked households. Netting everything off shows even “average”, let alone lower-income, households got back $2.70 for every $1 they paid in tax. Households in the bottom quintile enjoyed benefits worth more than 320 times what they paid in tax compared with about 10 times for those in the second-lowest quintile.

Notwithstanding the enormous variation in the circumstances of individuals and households within each of these five buckets - for instance, childless, healthy workers will pay in much more than unemployed families with sick children - the disparities are as remarkable as they are little-known.

Factoring in payment of “regressive” taxes such as the GST and tobacco and alcohol excise doesn’t appear to alter the overall picture. Every six or so years the ABS painstakingly distributes the burden of these “taxes on production” across households, based on estimated consumption patterns.

In the financial year ending June 2010, what one might call “holistic average tax rates” (including indirect and direct taxes and net of social security in cash and kind) ranged from -64 per cent for the bottom quintile, to -22 per cent for median households and 13 per cent for the top fifth of households.

Put simply, only the top fifth of households paid any tax. The bottom 6.9 million households, while often incurring income tax liabilities and regularly paying GST, received more in cash welfare and services than they paid in.

The concentration of the tax burden on higher-income earners would be starker still if the many tens of thousands of senior local, state and federal public servants - whose salaries often exceed $200,000 a year - were considered a cost. One could argue that the taxes paid by workers whose jobs depend on taxing other workers are akin to a cash refund to everyone else, rather than an organic contribution.

It is absurd to claim the “rich” - assuming incomes rather than wealth are the defining criterion - aren’t paying their “fair share” of tax when they in fact pay all of it. Equally, to argue that the “average” worker is subsidising government folly is difficult given that their aggregate benefits exceed the tax they pay.

Without making any judgment about the merits or fairness of the status quo, the burden appears to be shifting further toward higher-income earners. Comparing the 2003-04 and 2009-10 financial years, holistic average tax rates fell on average 8.2 percentage points for the bottom three income quintiles, but only 4.6 per cent for the top two quintiles.

It is still difficult to explain why these rates fell because there are so many moving parts to the social security and income tax systems. Of course, lower tax rates do not imply that less tax is collected: the level and growth rates of income across income quintiles varies and a one-percentage-point drop in average tax rates for higher-income earners has far greater consequences for revenue than much bigger changes for others.

Separate data from the Australian Taxation Office confirm rising progressivity. Based on income tax returns from the 2010-11 financial year, the top 1 per cent of individual income earners - who in the 2010-11 tax year were those with taxable incomes of more than $281,800 a year - paid $23.55bn or 17.7 per cent of the total income tax haul, up from 17 per cent in 2009-10.

Meanwhile, the top 10 per cent of taxpayers - with taxable incomes of more than $105,500 - paid 46 per cent, up from 45.3 per cent a year earlier. The bottom third paid less than 5 per cent in both periods.

The highly and increasingly progressive nature of Australia’s tax burden is clear, but why?

First, income tax becomes more progressive every year without any deliberate change because of what economists call “fiscal drag”. Because the income tax thresholds are fixed in nominal terms and prices tend to rise, every year more taxpayers are pushed into ever-higher tax brackets and larger portions of their real incomes are taxed at higher rates.

Also, most people earn relatively little. While the ABS reports that average annual earnings for individuals were $74,000 a year last May, this figure doesn’t reflect typical circumstances because the “average” is an irrelevant socio-economic metric, increasingly undermined by rare but very large individual incomes. According to the 2011 census, the median household income, which is unaffected by outliers, was only $64,100.

Within advanced countries, the distribution of incomes has become more and more skewed since the 1980s, albeit less rapidly here than in the US and Britain. Economists debate vigorously whether this is because globalisation has boosted the financial returns to innovation, talent and skilled work, or whether the corporate (especially the finance) sector has become more skilled at extracting income at the expense of everyone else (”rent seeking”).

Regardless, burgeoning incomes at the top have given governments a lucrative and politically attractive revenue source. Both major political parties in Australia have been able to promise extra, vote-winning government spending that increasingly overwhelms growth in taxes paid by the vast bulk of the population.

The Labor government’s decision to lift the Medicare levy to 2 per cent from this July to partly pay for the forthcoming disability insurance scheme is a good recent example. For its part, the Coalition wants to impose a temporary “levy” on big companies’ profits (which will reduce dividend income flowing to upper-income earners) to pay for its paid parental leave scheme.

The massive disparity between gross and net payments of tax - 12.6 million people lodged income tax returns in 2010-11 - suggests “churn” is rampant and an immensely complex system is rife for rationalisation: we have more than 100 different taxes across three tiers of government interacting with a multitude of social security services in cash and kind.

The administrative costs of collecting taxes - especially income tax - are large, not to mention the damage they cause to enterprise and effort.

Cutting cash social security along with the first few marginal income tax rates, for instance, would create a more honest tax system and prompt a virtuous cycle of reducing welfare dependency, boosting employment to boot. By converting “in-kind” social security to cash, state governments could provide parents with a voucher to spend on schools administered in the private sector, would help to boost transparency.

Only a tiny share of the population were eligible for the very low rates of income tax that emerged in English-speaking countries in the late 19th and early 20th centuries. While the scope and size of governments have soared since then, the price of civilisation still, rightly, falls disproportionately on the richest.

The distribution of tax is not the problem but its growth as a share of national income is (along with undue focus on income rather than wealth as the determinant of someone’s capacity to pay).

Critics tend to argue that ever-greater taxes drive economic activity overseas and reduce the incentive to work, undermining growth. These are valid arguments but they do not answer the question of what is the most desirable “inequality-economic growth” trade-off.

No number of studies showing that rising tax rates stifle growth, however statistically persuasive, will match glib, emotional arguments that the “rich” can “afford” to pay, so we should make them. The moral case for fixed, reasonable taxesmay resonate more than the pure economic one. Arbitrary increases in taxes to pay for services the market can and should provide offend the rule of law and erode individual property rights.

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10 myths about Gough Whitlam

1. He got us out of Vietnam.

Australian military commitment was almost complete by December 1972.  A proclamation by the Governor-General on January 11, 1973, means Whitlam officially ended our involvement in the war, putting him in the history books. But it doesn't tell the full story. Whitlam did abolish conscription, which sometimes gets conflated with this issue.

2. He abolished the White Australia policy.

A fading myth. Commentators, Bob Carr being the most recent, give a greater role to the Coalition's Harold Holt. Whitlam did abolish the vestiges. Yes, a bit like the vestiges of Australian involvement in Vietnam.

3. He ran a big immigration program.

Yes and no. Multiculturalism is unambiguously a legacy of Whitlam, but the all-white, all-male cabinet embraced it warily. The first half of the government featured, in Al Grassby, an immigration minister who won plenty of publicity, favourable and not so, for his flamboyant style and lairy dress sense. After Grassby's electoral defeat in May 1974 immigration was scaled back in response to the economic crisis. And Whitlam's unwillingness to allow Vietnamese anti-communist refugees into Australia is regarded now as hideous racism.

4. He saved us from the whitebread Australia.

Or as Paul Keating puts it: "He snapped Australia out of the Menzian torpor - the orthodoxy that had rocked the country asleep - giving it new vitality and focus."

 The Liberal governments between the retirement of Robert Menzies in 1966 and defeat in 1972 did their own bit of snapping Australia out of the torpor. Don Chipp, minister for customs, unbanned many novels and liberalised film censorship, introducing the R certificate for previously banned films.

 Anyway, what's this about Menzies? He was the only prime minister Whitlam rated as competition to his place in the history books.

5. He swept to power in a landslide, thrashing Billy McMahon in 1972.

Labor won a healthy popular vote (49.59 per cent) but Labor was the sole party on the left, apart from the Australia Party. It is more accurate to say Australia cleaved towards Whitlam, decisively but narrowly. The two-party-preferred vote of 52.7 per cent to Labor, 47.3 to the Coalition, is a fair reflection of this.

6. Australia in 1972 was fed up with the Liberals.

A more contemporary account of the era was provided by someone deep in the Labor camp, Graham Freudenberg, speechwriter to Calwell, Whitlam, Wran and Hawke. He wrote (A Certain Grandeur, 1977) that 1972 was Australia's happiest year, with "a brilliant balance between hope for better things and satisfaction with the present; between expectation and experience; between a desire for change and enjoyment of the present. It was a time of general good humour and general goodwill such as Australians have not shared before."

Which is not to say that by 1972 there was a huge cohort who felt their needs had been neglected - indigenous Australians, "women's libbers".  And gays were hardly on the radar. Which leads to the next myth:

7. Whitlam was a radical reformer who rushed at everything with a near-revolutionary haste.

He was much more a gradualist, a legislator, a parliamentarian. His style infuriated the hard left, which only rallied behind him at the outset of the constitutional crisis in October 1975.  Whitlam did preside over the first legalisation of homosexuality - in the ACT, under federal jurisdiction then,  in 1973. Oddly that's a reform he doesn't get credited for.

8. Whitlam betrayed East Timor.

Whitlam remains a bogy figure to advocates of East Timor's independence and opponents of the Indonesian occupation of 1975 to 1999.  That United States President Gerald Ford and Secretary of State Henry Kissinger were in Jakarta on  December 7, 1975, and did not demur when President Suharto told  them of the impending invasion, is of far greater significance than anything Australia might have said to Indonesia.

Whitlam believed an independent East Timor was not a viable nation. His assessment is at least arguable.

9. Rupert Murdoch brought Gough down.

Yes, News Corp papers ran a partisan campaign against Whitlam in 1975 that disgusted a segment of their readership, in a precursor to the anti-Labor coverage of the 2013 election. But many Murdoch papers recommended a Labor vote in 1972.  For the record, the Herald did not endorse Labor until 1961, and not again until 1984.

10. He said all the stuff people quote him on.

Maybe he did, but some stories have been embellished. If I've heard a different location and time once for the anecdote that ends "Both sides, comrade", I've heard it three times.

In some ways the Whitlam myth is the reality. The Liberals have been slow to embrace their role in the history of Australian progressivism. And even when our heroes have feet of clay, we still put them on the pedestal.

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Corruption on the run. The High Court of Australia – ICAC / Margaret Cunneen case

The NSW judiciary seem to be digging in to try to protect corruption in the legal fraternity in the Margaret Cunneen matter. We are now off to the High Court of Australia to see what they have to say. It is really the last stand by the judiciary as their own days of widespread corruption are coming to an end and they know it.

On Friday (5/12/14) NSW Crown Prosecutor Margaret Cunneen won an appeal stopping an inquiry by the NSW Independent Commission Against Corruption (ICAC) into allegations that Ms Cunneen acted corruptly. Cunneen and the 2 judges that found in her favour have achieved nothing except to damage the reputation of the NSW Supreme Court.

ICAC issued a press release within a few hour of the judgement which said:

“Today’s majority decision of the NSW Court of Appeal with respect to the NSW Independent Commission Against Corruption (ICAC)’s Operation Hale public inquiry fundamentally affects the scope of the Commission’s powers to conduct investigations into corrupt conduct.” (Operation Hale is the name given to the investigation into Margaret Cunneen)

“It is critical to the exercise of the Commission’s powers generally that the construction of section 8 of the ICAC Act is settled.”

“Accordingly, the ICAC will seek leave to appeal to the High Court of Australia.”

Background

It was announced in early November that ICAC would hold public hearings to investigate Margaret Cunneen in relation to allegations she tried to pervert the course of justice. It is alleged Cunneen advised her son’s girlfriend to fake chest pains to avoid being breath tested when she was in a car crash.

ICAC had been investigating Margaret Cunneen for several months, which was unknown to the public at the time, and summoned her to a secret hearing on the 1st of August 2014.  Obviously the secret hearing with Cunneen did not go well for her and ICAC decided to have a public hearing into the whole affair.

Ms Cunneen, her son Stephen Wyllie and girlfriend Sophia Tilly instituted proceedings in the NSW Supreme Court to stop the ICAC investigation.  The Chief Judge at Common Law, Clifton Hoeben, heard the case and dismissed it.

Ms Cunneen, Mr Wyllie and Ms Tilley then appealed. The appeal succeeded with Justice Basten and Justice Ward upholding the appeal and Chief Justice Tom Bathurst who was the third judge dissenting.

As it currently stands we have 2 judges dismissing Ms Cunneen’s case and two upholding it. Now it is in the hands of the High Court of Australia to decide the matter.

The legal argument

What Margaret Cunneen’s barrister argued in court was total garbage and the two Judges who upheld the case should be ashamed. The argument was a technicality that what Cunneen was alleged to have done did not fall within the laws that give ICAC the power to investigate corruption. If you look at section 8(2) of the Independent Commission Against Corruption Act 1988 it is so broad it covers everything and anything.

(2) Corrupt conduct is also any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of official functions by any public official, any group or body of public officials or any public authority and which could involve any of the following matters:

(a) official misconduct (including breach of trust, fraud in office, nonfeasance, misfeasance, malfeasance, oppression, extortion or imposition), (b) bribery, (c) blackmail, (d) obtaining or offering secret commissions, (e) fraud, (f) theft, (g) perverting the course of justice, (h) embezzlement, (i) election bribery, (j) election funding offences, (k) election fraud, (l) treating, (m) tax evasion, (n) revenue evasion, (o) currency violations, (p) illegal drug dealings, (q) illegal gambling, (r) obtaining financial benefit by vice engaged in by others, (s) bankruptcy and company violations, (t) harbouring criminals, (u) forgery, (v) treason or other offences against the Sovereign, (w) homicide or violence, (x) matters of the same or a similar nature to any listed above, (y) any conspiracy or attempt in relation to any of the above. (Click here to read more)

The laws being broad is the way it needs to be so that it gives ICAC the power to leave no stone unturned in investigating corruption.

The 2 judges who upheld the appeal said:

“The alleged conduct could amount to an attempt to pervert the course of justice but it was not “corrupt conduct” within the meaning of s 8(2) as it could not be said a police officer (or other public official) might be led to exercise his or her powers improperly”.

That is garbage and will be overturned by the High Court otherwise the High Court will embarrass themselves.

Chief Justice Bathurst said: “Conduct will have an adverse effect where it limits or prevents the proper performance of a public official’s functions. The alleged conduct fell within the meaning of s 8(2) as it had the potential to divert the police officer from investigating a suspected offence”.

What Bathurst said is basic logic and common sense. Justice Basten and Justice Ward who upheld the appeal knew they were handing down a dodgy judgement. The positive of it going to the High Court is that it will greatly limit the scope for these types of dodgy appeals in the future. If it doesn’t the government will have to change the laws so it does.

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Official: Nearly half of us are happy little Vegemites and eat the classic Aussie spread every day

It's the quintessential way for Australians to start their day - and now a new study has revealed how many people eat Vegemite for breakfast on a typical day.

The Roy Morgan research found that of the 7,550,000 people who eat the iconic spread in an average week, 6,405,000 were born in Australia.

This figure equates to 45 per cent of people born in Australia and 83 per cent of the world's total consumption.

By comparison, 43 per cent of New Zealanders, 30 per cent of those born in the UK or Ireland and just 12 per cent of Asian-born residents eat a yeast-based spread in an average week.

Meanwhile, jam is the most popular spread among people born in the UK or Ireland with 39 per cent eating the spread in an average week.

Those born elsewhere in Europe, 38 per cent, and Asia, 28 per cent, prefer honey as their spread of choice, while those born in the US are most likely to eat peanut butter at 49 per cent.

'With its unique taste and unappealing appearance, Vegemite inspires either love or hate in people,' said Angela Smith, Group Account Director of Roy Morgan Research.

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