Parliamentary inquiry into the implications of removing franking credits: Fair game or a misuse of power!

Written by Professor Bob Deutsch, CTA, Senior Tax Counsel

The recently released “Report on the Inquiry into the implications of removing refundable franking credits” is without doubt one of the most peculiar documents ever to be released by the Parliament of Australia.

To put this in context, this report was the culmination of a reference made by the Treasurer, the Hon. Josh Frydenberg MP, to a Committee which was set up to inquire into the removal of refundable franking credits. In particular, and I quote “The Treasurer asked the Committee to inquire into and report on the implications of removing refundable franking credits, and, in particular, the stress and complexity it will cause for Australians, including older Australians who will be impacted in their retirement.” 

I say this is the strangest of reports because it is so fundamentally politically motivated, and to use a Parliamentary Committee to report on a measure which has been suggested by your political opponents is in my view as outrageous as it is a misuse of public money. 
So that there is no confusion, I have commented previously on the two views that exist in relation to Labor’s proposal and on balance, I am certainly not in favour of what Labor is proposing in the context of denying excess imputation credits. 

At the very least, my view, as I have expressed previously, is that if Labor wishes to move in that direction, they should do it on a phased in basis rather than cutting it off from one day to the next. It must not be forgotten that this refund benefit has become an amount which people, most particularly retired people, have come to rely on as part of their retirement income. After all this benefit has now been in existence for some 19 years and it is quite legitimate for people to expect that it might be turned off more gently with a phased withdrawal of the amount of the refund perhaps over a few years rather than in one fell swoop. 

Be that as it may, it nonetheless does not change my view, that using a parliamentary process to fundamentally challenge your political opponents view is utterly inappropriate. I would add that it is particularly even more galling that the language used in the reference to the Committee is so heavily biased against the Labor party’s proposal. To refer to stress and complexity it will cause for Australians, including older Australians who will be impacted in their retirement, is very clearly an attempt to pre-judge the outcome of what is supposedly an independent parliamentary inquiry. 

I do not believe that there is a precedent for the use of a parliamentary process which is equivalent in any way to what has occurred here. I certainly hope that future governments do not use this as a precedent to rely on for similar inquiries beyond this election. 
No doubt members, who perhaps take a different view, will point me in the direction of other inquiries where something similar has happened.

Members, we welcome your thoughts via the TaxVineFeedback inbox.


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