Big business should pay up
Richard Middleton writes: Re. “Big business offers guide on how to be out of touch on taxation” (Friday). Why is it so hard to tax these untouchable entities? These global companies should be taxed on their income by country, offset against the percentage of their global outgoings that country represents. “Investments” and “loans” etc to these dodgy tax sanctuaries are completely ignored. Wish I could be paid a massive salary to obfuscate this simple approach.
Les Heimann writes: So suddenly some are saying the tax burden is unfair. What a revelation! After working just on 40 years in the ATO doing tax investigations, assessing and reviews as well as litigation covering wage earners up to and including the very largest of the large multinationals I can tell you the tax burden is unfair. The tax paid by companies in the top cohort internationally is minimal. “Minimal — a lovely word and quite respectable , one hears about tax minimisation being legal. Yes, after huge legal fees and massive amounts of electronic and book entries most of the largest multi-nationals pay a pittance in tax — anywhere.
All this massive tax “avoidance” activity is hugely assisted through the existence of double tax agreements between countries and of course “deductions” that are — let’s be direct about this — bullshit. The whole world wide issue is entirely avoidable but this is kept a big secret, not only by wealthy tax “experts” but also by governments all around the free world. Before I let you in on the big secret think about Australia’s GST and the UK and USA and other countries consumption taxes and please include the effect of these taxes on the end consumers. Us poor citizens.
If we want to cut out all this nonsense and at the same time put lawyers and accountants grown fat on tax crap into meaningful work, then tax everyone and every business on gross income at source. What’s this? Is it so simple? Yes it is. Think of it like this: When you spend $200 on your weekly Woolworths food stuffs. Woolworths have to pay $20 tax (this is based on a 10% tax levy). When you receive your fortnightly salary payment of $2000, $200 goes straight to the ATO in tax (the same 10% levy). So at the end of the year you have paid $5,000 tax on your $50,000 salary and Woolworths have paid around $800,000,000.
Any monies received from sales, services, labour or investments in Australia by any person or entity would attract the 10% tax levy. Any monies received by any person or entity anywhere else in the world would also attract the same tax levy. Unless that person or entity paid an equivalent amount of tax in another country. Wait, wait you say. This is a flat tax regime and that’s a regressive tax. Rubbish, it is not regressive when tax is levied on gross income. Think of the benefits, no tax returns, no consumption tax, no waste of human resources in tax minimisation – no deductions of gross income by anyone.
It is a simple elegant tax system and it is just a matter for the G20 to agree on and legislate across the globe. Will it happen? No, no, no. The vested interests of this globe have all of us by the short and curlies and that includes governments. It hurts when they twist, doesn’t it?
The ABC debate
Dennis Pratt writes: Re. “Crikey says: why does does the ABC exist?” (Oct 20) On Monday October 20, Crikey’s editorial and Eric Beecher’s article asked “why does the ABC exist in 2014?” Beecher went on to say “without a detailed consensus answer to that question the emotional debates about ABC funding are futile”. Some seven articles and a few other comments followed before Crikey’s interest in the topic apparently fizzled out without, I suggest, getting us any closer to a “detailed consensus”. So what now? Presumably, we all continue on with the “futile” emotional debates about ABC funding?
Where’s Margie?
Anne Coulthurst writes: Re. “Missing from memorial” (Friday). To those who queried where Mrs Abbott was: why should she necessarily have had to go? Perhaps she was busy, or unwell, or really disliked Whitlam, or just didn’t want to go — whatever. If the spouse of any PM is expected to present him/herself at function after function, fulfilling what some seem to regard as “duty”, then they should be paid a salary, too.
Anne – The PM’s salary, at over $400,000, should be enough for his/her spouse to put in an appearance at public functions now and again.
Or are you saying that Margie Abbott doesn’t benefit from the taxpayer funded remuneration her husband receives? That just adds to the rumours already around about these two!!
Les – Why should the long-suffering taxpayer, especially those in the lower socio-economic groups, be disadvantaged because corporations are gaming the system, world-wide?
IMHO, said corporations should be taxed at point of sale/bill for service fees, AT THE TIME these transactions take place.
If the GST and Income Tax can be collected on a ‘pay as you go’ system, why can’t company tax? That way Tax is paid when cash changes hands in the country where the transaction takes place. Adjustments can be made at the end of the financial year, just as is now the case for wage and salary earners.
Anything else is just a giant rort by business!
Dennis – If you have been reading Crikey since Oct 20, you should know that the ABC debate ‘fizzled out’ because around 90% of commentators disagreed with the first and following Crikey articles on the ABC.
Bit hard to continue a debate when almost everyone says, “Leave the ABC alone – it’s doing a great job”!!
I can understand why Margie Abbott wouldn’t want to attend, I certainly wouldn’t want to be seen in public with him!
Les Heimann,
Great minds think alike….here was my latest plan to Hockey and Cormann:
I have been arguing for years that all companies should be taxed on Turnover.
Sales (turnover) in Australia for the Googles and Amazons and other international players would be impossible to hide and the issue of profit irrelevant.
Company tax would be a cost of doing business just like Council Rates are a cost of owning property regardless of what is earned from it.
The issue of capital investment and recouping the depreciation of same would be handled by exempting a portion of Sales at a fixed rate on historical capital invested and no exemption on future capital invested.
Miners and Resource extractors should be paying a federal royalty based on the tonnage extracted (at possibly variable rates depending on prices) instead of any calculation of profit. In effect a turnover tax with no deductions.
Federal royalties should be offset against company turnover tax, so the Extractors pay the larger of the two.
International companies would pay the same tax as local companies so no advantage to them against the locals.
Revenue would be more reliable as Sales are much more stable than profits, and tax paid easily checked against the reported sales of all public companies and returns of private companies.
The Rate? Federal Company Tax Revenue / Total Turnover of all Companies = Rate. Government sets the amount it wants to collect.
For example, let us suppose that the range of before tax profit for companies (based on currently allowable deductions) is 5-10% of Sales Turnover. Say 7.5%. The existing Company Tax Rate is 30% of 7.5% which is approx 2.5% of Turnover. I would expect a Tax Rate between 2% and 3% of Turnover would be in the ballpark to replace existing company tax receipts.
If policy objectives deem different rates for different categories of company, this is easy to do. Maybe export turnover could attract a lower rate than domestic turnover. Maybe Resources Extractors pay a higher rate than Manufacturers and Farmers. Very simple to do when a few categories of Turnover are involved.
The Economists would probably agree that the rate should be uniform across all companies.
The cardinal objection would be that it would put most of the tax accountancy firms out of business inside 12 months and the ATO would only need 50 people and a dozen $10 calculators to administer Company Tax. Masses of complex tax law would be jettisoned. The GST which is an inefficient VAT with heavy reporting cost could be eliminated with a higher rate of Turnover Tax.
The next serious objection is that companies making losses would be forced to pay tax. Well that happens with Land Tax, Rates, GST and Wages PAYG in any case, plus toxic taxes like Payroll Tax. The price levels would adjust as all companies would pay tax and in particular international companies shifting profit would pay the same as local companies, leveling the playing field.
A Company Turnover Tax would be too simple for the public service and the Ken Henry’s who need the extreme complexity of trying to tax profit to keep in a job. A Turnover Tax would be avoidance proof for all local and international public companies which must publish their Sales (Turnover) figures, and private companies who already disclose same in GST and Income Tax returns.
Job losses in useless jobs (The ATO, tax lawyers and accountants) would be enormous, and in a couple of years all those unemployed would be in productive jobs lifting Australian productivity enormously.
And the clincher argument is that Company Tax would then be brought onto the same basis as PAYG Income Tax for Individuals, which is in effect a turnover tax levied at high rates with a threshold.
Imagine if Individual Income Tax was levied on Individual Profit viz. your income less your living expenses ie. your annual surplus or loss. It would collect nothing for those who spend all their income and very little from others because people would adjust their expenditure to their income if the ATO didn’t take first bite at their income through PAYG.
Which is what International Companies are doing through Tax Havens – adjusting their expenses with overseas inflated costs to their Australian Income to make little if any taxable profit in Australia.
Further, when the rest of the OECD or G20 saw what Australia was doing, it would be not long before all agreed to a uniform turnover tax rate so that their revenues could be similarly assured, via global companies paying the same tax globally.
I don’t see how Hockey & Cormann could not enact such a plan and earn the gratitude of Governments everywhere. A Nobel prize for economics would put them and the Australian Company Turnover Tax (ACTT) on the global map forever.
ACTT…..even sounds much better than MRRT or the other Rudd fiasco (F.A.R.T. was it? Failed Australian Resources Tax)??