Leeward

by Geoffrey Lehmann

  I have never been a political party member, but in late 1990 the Federal Opposition Leader John Hewson invited me to be his capital gains tax expert in the lead-up to the 1993 election. I wrote the chapter (about two pages) on capital gains tax in Hewson’s Fightback!, his 650-page election manifesto released in November 1991.

  The centrepiece of Fightback! was a 15 per cent GST. It was at first enthusiastically received. The Labor Prime Minister Bob Hawke seemed unable to counter Hewson. Then Keating replaced Hawke and relentlessly attacked Hewson and Fightback!

  In March 1993 on the Saturday night of the election, we were ready to print thousands of copies of a hefty GST publication I had written for clients. I was in my office listening to a radio, and at 8.45 pm I decided we should all go home. It was one of the biggest disappointments of my life. My limerick in which Keating told Hewson ‘I’ll give you a terrible beating’ had come true.

  Some blamed John Hewson. There was a famous incident (now on YouTube) when he gave a complicated answer about GST on birthday cakes. He confused himself by referring to birthday candles. Only a handful of sales tax experts could have dealt with the obscure issue of the tax on birthday candles before and after a 15 per cent GST. More importantly, birthday cakes are sold without candles!

  When Keating became prime minister and moved to the Lodge he set up what were known as the Keating awards for mature artists. He had been shocked to discover his son’s piano teacher, the pianist Geoffrey Tozer, earned less than a third of what his eighteen-year-old secretary earned. Surprisingly, Donald Horne, who had been Chair of the Australia Council, attacked the Keating awards in the Sydney Morning Herald as elitist. I published an article in the Herald replying to Horne and supporting Keating.

  Keating’s commitment to artists has been unusual, if not unique, among Australian politicians. Accomplished mid-career artists are generally poorly rewarded and earn much less than the academics who study their work and publish articles about them, yet they may create work enjoyed by future generations long after their death. It is a classic example of market failure.

  In 1994 Peter Coleman, editor of Quadrant magazine, commissioned me to write a poem for Barry Humphries’s sixtieth birthday. At the birthday party I read twenty-eight lines about his stage characters, every line of the poem rhyming with the syllable ‘ate’, the easiest rhyme in the English language. Barry kissed me lightly on the cheek and John Howard, then an Opposition backbencher, struck up a conversation – we had not spoken since university debating days – with the words ‘We have to get a GST.’

  I doubt whether my many press articles over the years arguing for a GST were influential. They were just part of the groundswell resulting from New Zealand’s successful GST introduced by a Labour government in 1986. But in July 1994 I published in the Australian a duplicitous article attacking the GST, which I suspect did change the nature of the debate.

  My intention was to enlist the support of churches and welfare groups for a GST, or at least make them uncomfortable about their hypocrisy in having opposed it, when Hewson lost ‘the unloseable election’. My article suggested failure to enact a GST would cause funding for social welfare programs to run out and we would get a social welfare system with many gaps, such as the US had: one of the few large, developed economies without a value-added tax such as the GST. My recantation had to seem genuine. I wrote in my last two paragraphs:

  Fightback! was a package of great sincerity and a GST would have provided a number of benefits … But it would have created an awesome tax raising mechanism, which interest groups in our federal system of government would have exploited to create spending programs.

  Business groups may need to consider their long-term commitment to indirect tax reform, and social welfare groups may regret having opposed Dr Hewson.

  Not long after my duplicitous article appeared, social welfare groups indicated they were prepared to reconsider a GST. This attitudinal change, in particular, was necessary to persuade the Australian Democrats, who allowed the GST through the Senate several years later when it was introduced by John Howard.

  More than 140 countries have a VAT, but no country imposes a VAT on financial services generally. A VAT or GST on financial services has been as elusive as the proof of Fermat’s Last Theorem (until it was solved in 1994 after three centuries).

  The fact that there is no GST or VAT on many financial services is economically distorting. There was an attempt to remedy this, when the Australian Government proposed introducing a GST. Technical experts in financial institutions looked at a complex algorithm considered by the Canadian government. This produced a plausible number but did not reflect the actual value added. Eventually they found a true workable basis for taxing general financial services. An approximation of the actual value added by the financial institution could be taxed by using standardised values which are reset annually – a ‘pure intermediation margin’ for loans, and standardised cost plus profit margin for the other fifty varieties of financial services.

  To prove these radical concepts could be turned into legislative words which would apply in the real world, I was asked to prepare draft legislation. There was no Australian GST legislation at the time, so I drafted my thirty-odd pages of legislation as though it was part of New Zealand’s Goods and Services Tax Act.

  None of us could imagine how to tax life assurance. I spoke to a senior actuary I knew – a delightful, thoughtful older man. I explained our methodology and he laughed. The value added by life assurance companies was a simple line in their annual accounts. Taxing life assurance was an extra three-quarters of a page.

  When all of this was presented to the Federal Treasurer Peter Costello, the risks and complexity were seen as too great – a decision I think was correct. I may have the last copy of this draft legislation – the VAT aficionado’s equivalent of a solution for Fermat’s Last Theorem.

  In about 1998 Sandra Peacock invited me to join the Consolidation Focus Group, a panel she headed of tax practitioners and government officials who were scoping out the rules for taxing consolidated groups of companies. At that time each company in a related group – there might be hundreds of them – had to calculate its tax and file separately. The proposed regime would allow a group of related companies to file a single tax return, eliminate double tax and prevent company groups co-ordinating their affairs to avoid tax.

  I had been involved in the various waves of tax reform since 1986. I was still involved with the GST, but I realised I would soon find it very boring. It was relatively straightforward.

  The consolidation regime would be a much bigger challenge. It would be radical and complicated, and almost every difficult tax issue would pass through the gateway of consolidation for our corporate clients. I had not yet become a Washington office–style technical partner at a desk answering interesting questions, but the consolidation regime would allow me to do this.

  The main architects of this regime were two middle-level officials: Bill Stock, who had a scholarly manner and was responsible for the asset-based model; and Irene Sim, vivacious and blunt, with a trace of Singapore or Hong Kong in her accent, who was responsible for the rules under which losses of a joining member could be used by the group.

  Bill welcomed new ideas. When he disagreed he would crane his neck and smile and start his response with ‘Au contraire…’ At early meetings of the Focus Group we were all excited. If the model could be made to work, Australia would get a world first – based partly on US rules, but more radical. Ken Spence was one of the private sector representatives who took a leading role in suggesting features of the new legislation. I suggested the rule for the joining time of new members, a rule to cover unrealised losses on joining and what became known as ‘tax sharing agreements’. Some of us were also engaged on the government side. I reported on the complex rules that were devised to allow a joining member’s losses to transfer to the group.

  In 2004 the International Fiscal Association held a meeting in Vienna. Th
ere was a session on the taxation of consolidated groups. Ken Spence represented Australia and his paper described our regime, which was far in advance of anything elsewhere in the world. My daughter Lucy was in Vienna and I took her to the IFA’s ball at the end of the conference. Ken took a photograph of Lucy and me – Lucy was in a ball gown and I was wearing a tuxedo.

  I co-authored a taxation law text with Cynthia Coleman, who taught tax law at Sydney University. Gail and I knew Cynthia and her husband Richard from morning coffees at the Bar Roma. Our first edition was published in 1990 and we wrote four subsequent editions of a 1200-page book. We did not review each other’s chapters. I was hypersensitive about errors, after making a bad error in a client brochure in 1986. Perhaps because of this hypersensitivity, over a decade I found only one error in our book – an incomplete sentence, where I may have fallen asleep.

  One of the mirages of tax policy is that there is a simple and clear way of identifying taxable income. Boffins within Treasury began work on a Tax Value Method to replace the old common law rules for distinguishing income and capital. I was at first a supporter – I hoped it would bring tax into closer alignment with accounting principles.

  Many of us became sceptical as draft legislation appeared. Eventually I was commissioned by the Board of Tax to report on TVM. I presented my fifty-six-page report to a meeting, including the Secretary of Treasury and Commissioner of Taxation. I explained that in its own complicated way TVM was able to duplicate existing income tax rules with remarkable ingenuity. Mixing up the French rococo painter with the jewellery maker Fabergé – but no-one seemed to notice my mistake – I said TVM was ‘like a Fragonard toy from Imperial Russia’.

  But how it applied was unclear without a detailed explanation from an expert. TVM was a black box. Its seventy-nine pages of ‘core rules’ compared unfavourably with seventeen pages of core rules in existing legislation, and TVM used many invented concepts and distinctions. It was more complex than what it replaced. By 2002, after almost twenty years of continual legislative change, when the Federal Government decided not to proceed with TVM, the public enthusiasm for tax reform was waning.

  My friend Gordon Cooper had helped my move to the large accounting firm where I became a partner. Gordon also nominated me for membership of a discussion group of tax specialist lawyers and accountants. I was a member for twenty years. We met for dinner once a month and discussed a member’s paper. Although we were from competing firms, information was freely shared. There was a friendliness within this fraternity that did not exist among poets after the early 1970s.

  Gordon also arranged for me to become a member of the Research Committee of the Australian Tax Research Foundation. At that time Sir Harry Gibbs, the retired High Court Chief Justice, was the chairman. Some years later I joined the main board and eventually became chairman myself.

  Professor Ross Parsons was a member of the Research Committee. He had initiated the first university tax law course I had scorned thirty years before. Ross lived on the North Shore so I began driving him home.

  Ross’s roneoed income tax course notes were greatly prized by his students and eventually in 1985 he was talked into publishing these as a 1000 page text: Income Taxation in Australia. Ross hated the banal cover which his publisher chose: a photograph of a varnished box for lodging income tax returns inscribed ‘Deputy Commissioner of Taxation’ in gold letters. Ross’s book is still quoted by the courts.

  I attended Ross’s farewell lecture given to a large audience of legal luminaries. I had been expecting Ross would elucidate some profound issues in his usual way. Instead his lecture became a recital of the brilliant students he had learned from over the previous thirty years, referring to them by name. He was not their teacher, they had had taught him. All of these former students were sitting in the audience. I think they were as surprised as I was – it was typical of Ross’s modesty.

  In 1993 I published a Collected Poems. Ross and I were again driving north after a meeting. We had never talked about poetry. He mentioned he had bought my book. ‘I was really surprised’, he said. ‘I don’t read a lot of poetry. It was like reading a novel.’

  Along with no-fault divorce, one of the great legacies of the Whitlam Government was its 25 per cent reduction of tariffs in its 1973 Budget. I was in Melbourne when the Centre for Independent Studies held a memorial function for Bert Kelly ‘the modest member’ of parliament who had written a newspaper column over many years advocating free trade and tariff reductions. One of the speakers was Gough Whitlam.

  Afterwards a group of us gathered at a nearby Melbourne restaurant. I could not stay, nor could Gough. We both had to catch a plane. He pressed me to drive out to the airport in his Commonwealth car. As we settled ourselves in the back seat I congratulated him on his speech – how outstanding it was. ‘Very po-etical’, he said in his deep tones, mocking himself and glancing at me wryly. We talked about the legal profession when he had been younger and his father, the Solicitor-General.

  Les Murray and I had been drifting apart over the 1970s. In 1980 he loaned me a copy of his verse novel The Boys Who Stole the Funeral. I did not know how to respond. There were some remarkable poems. But it strained credibility that two city youths would choose to take the corpse of a simple old countryman back to the bush for burial. (I don’t think it occurred to either of us that the smell would have made their journey unbearable.)

  I did not contact Les for a few days. I was slowly reading the book. He turned up at my house while I was at work. He had an emotional conversation with Gail and took the book back. Our friendship was unable to recover from that moment. (I have said the book was ‘loaned’. Until then he gave me a copy of his books when they were published.)

  Les decided to make the break between us permanent in a spectacular fashion after Nero’s Poems was published in 1981. He wrote a long and hostile review in the Catholic Weekly. This newspaper was distributed in Catholic churches and was not noted for its interest in literature. I concluded Les had written his critique and then been desperate to get it published – anywhere.

  I was embarrassed. I lived four doors down from a Catholic church. Most of my neighbours were Catholic and literate: an English teacher across the road, a large family next to them and the Curtin family next to me. I was also astonished. As editor of Poetry Australia Les had published a large batch of these poems – they had taken up almost half an issue.

  His close friend Bob Ellis was associated with a periodical, The Review. We were chatting and he told me they were publishing a ‘big Christian article’ by Les. I asked whether he would like to publish my poem about Nero murdering his mother directly under Les’s article. I would also choose the most pejorative quotes from Les’s review in the Catholic Weekly for them to reprint with my poem. Bob loved mischief and immediately agreed. Les’s article appeared a few days later under the heading ‘Les Murray’s journey into the great southern soul’ with a poem of Les’s, and my poem about Nero murdering his mother directly underneath.

  The Review published the following comment above the Nero poem:

  This is one of the more controversial extracts from Geoffrey Lehmann’s latest volume Nero’s Poems. Though many critics liked it, his friend Les Murray said of it: ‘It consistently reads as the grubby moral fantasies of a fourteen-year-old trying to shock himself … It is impossible to believe any such thing (as matricide) of Geoffrey Lehmann’s little suburban Nero … It is really a teenager burning off some old resentments, not a prince watching the cremation of a mighty parent he has killed. Even the most pedestrian Robert Graves got further into Roman and human darkness than this.’

  Some of the more trivial poems may have merited Les’s comments, but the long matricidal ‘Mother’ was the wrong target, and why I chose it to be juxtaposed in The Review with Les’s article. Les was deeply offended by ‘Mother’. He had lost his own mother at age ten and had never experienced the distancing between mother and son that happens to many young men. The last three li
nes of my poem were partly autobiographical when I had Nero say:

  I don’t forget the debt,

  but Nero leaves you drowning, mother,

  not your boy.

  Les could not imagine someone not wanting to be his mother’s boy.

  I was upset by my split with Les. I had always believed we would be life-long friends. But I have not wanted to resume the friendship. Nor, I assume, would he. We stay in touch in a strange way. Piers Laverty, a potter and tree surgeon, is fifteen years younger than us and has become perhaps Les’s closest and most loyal friend. For some years Piers and I have had dinner together once every week or fortnight. Les and I continue our friendship by proxy.

  In 1979 John Tranter published The New Australian Poetry with a cover stating it was ‘The work of twenty-four poets from Australian poetry’s most exciting decade’. Les Murray and I were already well represented in recent Australian poetry anthologies. I did not mind being left out of Tranter’s anthology. However, Tranter had nothing from Geoff Page, Alan Gould, Kevin Hart, Robert Gray, Rhyll McMaster or Jamie Grant, and there was no general anthology representing their work. The Younger Australian Poets, which Robert Gray and I edited and which was published in 1983, was intended to correct this. We also included some poets from Tranter’s anthology, including Tranter himself.

  One interesting aspect of Tranter’s anthology was that only two out of his twenty-four poets were women. Earlier ‘traditional’ anthologies of Australian poetry had a higher proportion of women, but ‘Australian poetry’s most exciting decade’ was a male decade. The anthology Gray and I edited had six women out of twenty-nine poets. We were only slightly less sexist.

  In 1991 Gray and I published our second anthology: Australian Poetry in the Twentieth Century. As with our previous book, Bob had located a willing publisher and was again the main driving force. He now had an international reputation as one of Australia’s major poets. I was surprised (but pleased) he wished to involve me.