Infinite Lobbyist Lender

The unfolding ICAC investigation in NSW is set to reveal the tight network between property developers and the political process. Neil Chenoweth, lead investigative journalist at the Fin Review has written this extraordinary piece, outlining just how effective counsel Geoffrey Watson has been in unveiling the corruptive process on both the left and right. Chenoweth writes:

… And Watson showed the same pattern, where Millennium Forum executive chairman Paul Nicolaou and the Liberal Party’s acting state director, Simon McInnes, sent prohibited donations to the Free Enterprise Foundation, with a request that the funds be donated to the state Liberal Party.

This is where the big questions started. “Who was responsible for this misuse of the Free Enterprise Foundation?” Watson asked.

“Who else knew about it inside the Liberal Party? Mr Nicolaou could hardly be alone. They must have been reporting to someone.”

Chenoweth dropped this bombshell on twitter this morning:

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Check the patrons.

Prior to that, Chenoweth had tweeted:

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Reference the second website listed in Nicolaou’s email tagline www.startthechange where a visit at present reveals:

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The one page website discusses possible investment opportunities in Kiama.

With property donations from property developers illegal in NSW since the 2009 Rees reforms, one wonders how easy Paul Nicolaou, (chairman of the Liberal Party’s fundraising arm, Millennium Forum), could make it for Watson and co? Having an email tagline with (which auto re-directs to Liberal Party) whilst immediately below it (Property Investment) strikes at the link between politics and real estate.

It will be interesting to see if the ICAC inquiry finds any favours delivered to Nicolaou with reference to possible re-zoning rights in Kiama.

That’s the end point to this ICAC investigation. Such brazen corruption is motivated by the pursuit of the immense windfall gains delivered by land re-zonings. Leaving these gains untaxed intensifies the fervor. Such re-zonings deliver millions in gains by changing land use zonings from industrial to residential. The golden pen tick is accentuated with the greatest windfall when re-zonings include upzoning for multi-density apartments.

There is no other activity that can deliver so much money for such little activity. A bureaucratic pen tick can deliver millions.

Such gains are known publicly as capital gains, but we refer to the economic theory, where these windfalls are recognised as economic rents. They can be taxed without affecting supply – you can’t hide land. This is the beauty of taxes on economic rents. If we were to start the process of switching taxes off producers and onto those with legal privilege over our land, the motivation for such corruption would diminish. A Land Value Tax is the fairest process to undertake this. It should be levied at a flat rate on all land, including the family home. The profits are immense, as revealed in the December 2013 quarter, when the ABS revealed land prices increased $184bn in just three months. The property bubble could be downsized and re-directed to something useful – paying for government services, rather than sending us further into debt. Such revenues could easily enable zero income taxes.

Instead of looking at this naturally rising value of the earth as a funding source, PM Abbott is chasing a mere $5bn a year in his deficit tax on high income individuals. This will only encourage more tax evasion leading to greater inequality. Entitlements anyone? This may lead to enhanced negative gearing as a tax minimisation strategy, pushing the land bubble even higher (hurting those who can least afford it).

Perhaps the deficits tax has been floated as a diversion from the current turmoil the NSW Liberal Party is facing.

The great tragedy of this lobbyocracy curse is that politicians are only forced to pawn their policies to pay for advertising on what was once known as the public airwaves.

Nicolaou also works as the CEO of the NSW Australian Hotels Association.