Constitutional Capers

By Global Tax Weekly

There is a tale of two countries Down Under this week, with both New Zealand and Australia launching their annual budgets. Both have right-wing governments, but whereas New Zealand is reaping the harvest of four years of sensible, low-key, pro-business taxation policies, turning in annual surpluses as far as the eye can see, Australia’s equally pro-business government is left with the bitter stubble of seven years of left-wing Labor rule, and is forced into a tax-raising budget to try to repair some of the damage done to the economy by Labor’s spendthrift policies. The Australian Labor Party did occasionally make gestures in the direction of business, but that’s all they were – virtually every substantive measure taken by the last government was either populist or overtly negative for the economy.

One other important difference between the twin countries, one much bigger than the other, obviously, is that whereas New Zealand has a unicameral Parliament, with no upper house and no competing provincial legislatures (there used to be both, but they were abolished, in the 20th and 19th centuries, respectively), Australia has a real dog’s dinner of a legislative constitution, with an upper house (the Senate), elected on a different timescale to the lower house, and with extensive possibilities to change or impede a government’s legislative program if it doesn’t have a majority in both houses. In addition, the states of the Commonwealth of Australia have significant legislative powers of their own, including over some aspects of taxation. Given the lengths that the framers of the Constitution went to in order to deal with potential stand-offs between the chambers, it’s obvious that they were aware of the dangers, so you have to ask yourself why they persisted. Yet they did, and the result is a situation in which an elected majority in the lower house can be completely hamstrung by an antipathetic Senate (does this remind you at all of another large, English-speaking republic?) The constitutional solution prescribed, after the upper house has twice defied the will of the elected parliament, is a “double dissolution,” in which both houses are dissolved and new elections take place, and that’s what we seem to be heading for now, given that the Senate has dug itself into a position of entrenched enmity to some of the Government’s tax proposals. “Checks and balances” are all very well, but this just doesn’t seem to be a sensible way to run a country; Australia’s current experience seems to bear out the evidence coming from the United States that in modern, over-politicized countries, 19th century legislative contraptions are past their sell-by date, and need root and branch reform. Blame the media, I suppose. One problem (or advantage, depending on your perspective) that Australia doesn’t have is a President, since, like New Zealand, it has a (totally powerless) Queen. Canada’s constitution, for the record, is closest to that of Australia in legislative terms, but with the crucial difference that the Senate is appointed rather than elected, constructive rather than destructive, you might say.

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