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Part 1

Over the centuries, governments have only excelled at two things. Killing (mainly by declaring wars) and stealing (mainly by taxation and redistribution).

In Part 1 (Killing) we draw attention to the unintended consequences of a misguided Fringe Benefit Tax introduced into Australia on 1st July 1986.

It was obviously introduced as a way of raising money to cover the unfunded liabilities of the over-generous superannuation and pensions schemes for politicians and public servants.

Surprisingly, it did not result in a vast expected cash flow as this industry, instead, modified their operations. 

The unintended consequences were that employers promptly ceased providing housing and cars and in the case of the mining industry immediately stopped building homes and facilities in regional Australia.  One example was Pancontinental Mining Ltd who, at the time of the Fringe Benefits Tax introduction, simply put their 30 Kalgoorlie homes on the market for sale because they ‘refused to pay an FBT fine’ just for providing homes to their employees.

Instead of living in local homes, provided by such companies, the employees of such companies, Fly-In Fly-Out (FIFO) – mainly from capital cities.

Currently now, in 2019, there is a mounting public concern that this FIFO operation is virtually killing employees as suicides and mental health issues are seen, by some, to be a bi-product of FIFO.

I’m not debating this issue, other than to suggest that if they wish to blame FIFO for this problem, people should attack the cause, that being the absurd Fringe Benefits Tax.

A research document on ‘The unintended consequences of the Fringe Benefits Tax on regional Australia’ by Mannkal scholar, Patrick Leclezio, 8th April 2019 is here.

Note: Part II, on Taxation will follow next month.

3 Comments

  • Thanks for drawing attention to the unintended consequences of government intervention. Hopefully this will slow the rush for yet more government intervention with yet more unintended consequences to cure past government intervention’s unintended consequences.

  • Ian Love says:

    Good work Mannkal. I remember when FBT was brought in, it was essentially an anti-avoidance tax…but it did have unintended consequences to a number of industries, not the least being the restaurant business….but guess what…it did not solve the tax avoidance issue…

    Typical aim, ready, fire approach that caused problems but solved nothing.

  • Kirt Griffin says:

    It’s more like “Fire, Ready, aim” Thanks for this analysis Ron. So many legislative decisions are made by people with the least understanding and likely whatever some friendly NGO was pushing.

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