Why Australia's flood levy seems inappropriate

Australia has recently been faced with natural disasters of extreme proportions - the flood and cyclone Yasi in Queensland and other states, followed by the Perth bushfires.

Julia Gillard in response to the disasters proposed a flood levy and since then the bill has been tabled. What strikes me as odd is the timing of the flood levy. At the the time when the news on the Queensland floods was unfolding, the Australian Prime Minister made the announcement on the flood levy. It was almost as if, Gillard went to Queensland to assess the structural damage and forgot entirely about the danger to lives and at that critical moment, made a calculation of the cost of repair and spent that time worrying about rebuilding cost. Instead of focusing on rescue efforts. That level of detachment of central government is shocking.

While the country is making a big profit, the super profits tax which was introduced was called off.

Now, when there is a disaster and the extent of the disaster cannot really be measured, it seems odd to impose a flood levy. It is almost as if, the government is looking at the reaction of the general public expressing their concerns over the disaster and decided to bank in on the emotions. A flood levy is very different from calling for a donation from the public. Gillard does not seem to know the difference. Anna Bligh, the Queensland Premier made an appeal for donations. In contrast, Julia Gillard as Prime Minister called for a flood levy.

In developing a fiscal policy, governments should track where the profits are. In Australia, that clearly must be the resources industry where the wealth is. a super profits tax on the resources industry would have been more appropriate because that's where the money is.

Governments should never take advantage of people's emotions. To see the charity in people's hearts and to take that opportunity to impose tax on the emotion must clearly be wrong. Never mistake a tax from a donation. Taxes have this regressive character of cutting across all sectors of the public eventhough those receiving aid is exempted. That kind of exemption is not capable of removing all the regressive character of the tax. Businesses or people who's lives are inadvertently and indirectly affected by the disasters cannot be properly exempted. The sad result is that poorer people end up paying out a bigger percentage of their disposal income for a tax such as this flood levy. This, against a backdrop of rising cost of living, again inadvertently caused by wealth of resources in Australia, must be a double jeopardy for the taxpayers in Australia. I almost cannot recognize what the Labor party typically stands for in Australia.

My concern at the end of the day is that, if Australia, with its sophisticated first world government machinery in place can make such a fiscal disaster, where would a country like Malaysia stand in tackling resource allocation for coping with disasters.