Errors can occur silently and remain unnoticed, hidden in footnotes that no one reads. Then there are errors that occur in the midst of a live political debate, where every statistic counts and every change is interpreted as supporting what the opposing side has already stated. The recent capital gains tax blunder made by the Australian Treasury clearly fell into the second category, and the consequences have been, to put it kindly, less than quiet.
Speaking in public at one of the more contentious periods of Australia’s continuing debate over CGT reform, Treasury Secretary Jenny Wilkinson claimed that reductions on capital gains, trusts, and negative gearing had helped median-income earners by about $5,700 over their lifetimes. Delivered with the gravitas that comes with the position, it was a particular figure that nearly instantly made headlines. Subsequently, the sum was corrected to “around $10,000” via a footnote discreetly published to the Treasury website, rather than through a formal retraction or press conference. It was about $4,000 in difference. A transcribing error was the explanation provided.
It could scarcely have come at a worse time. The figures Treasury was providing were crucial to the government’s push for change of the 50% CGT discount, a long-standing concession that permits Australians to reduce the taxable share of capital gains on assets held for more than a year by half. The argument goes something like this: reforming CGT concessions is a justice measure rather than merely a revenue grab because higher earnings benefit disproportionately from them.
According to Treasury’s own study, the evidence supporting that claim indicates that since 2000, the average top one percent earner has received advantages connected to the CGT totaling more than $700,000. Whatever the median earnings receive appears little in comparison to that sum. However, it turned out that the median figure was incorrect.
Leaders of the opposition and those who opposed the reform acted swiftly. Those who were already dubious of the modeling used to support CGT adjustments found the transcribing error handy. It is, at the very least, an embarrassing breakdown in quality control when it affects a headline number in an ongoing policy discussion. Observing these debates in parliamentary discussions and economic commentary gives the impression that both sides are making mistakes in order to avoid each other.
The government maintains that the fundamental argument for reform continues despite the rectification. Critics contend that a more thorough examination of the larger modeling is warranted if Treasury is unable to accurately represent a fundamental statistic in a public statement. Perhaps the most unsettling aspect is that both of those statements could be true at the same time.
The footnote correction is currently performing a number of tasks for which it was not intended. A single paragraph on a government website that subtly changed one figure by $4,000 has become into the center of a much broader debate about who gains from Australia’s tax laws and whether they should be changed. When the political climate is already tense, it’s difficult to ignore the impact a minor administrative error can have.
It is still really unknown if the CGT reform proposal advances, stalls, or changes in reaction to the outcry. There is no doubt that Treasury’s credibility in this specific discussion simply became a variable in the calculation, which is an unnecessary complexity for the government.
