Don’t ask the economists
Peter Matters writes: Re. “‘Mild contraction’ to give birth to a big taxing and spending budget” (yesterday). As a general rule, if you need information on a subject, the most unsuitable people to ask are the experts. Re info on the Reserve Bank, the last people you should ask are economists.
How to fix our tax system
Les Heimann writes: Re. “The messy politics of multinational tax dodging” (April 9). Both sides of politics are equally and supremely guilty of treating Australians as mushrooms.
Every paper put forward at least since 1996 doesn’t shine any light on the real situation in this country. I accuse all politicians as being utterly gutless and two faced on the issue of taxation. They all refuse to acknowledge the basic system is broken and they have broken it.
This lot of methane provides the ability to expand or expound on such matters as superannuation tax, negative gearing tax deductibility and of course the GST, amongst other things.
Superannuation is a clear example of tax advantage biased toward the better off financially and negative gearing is simply a rort originally designed to encourage people to build houses for income producing purposes — an incentive that also is more affordable to those with means. GST hurts more those in direct proportion to the percentage of their disposable income is used for life’s necessities.
Yes it is true we have a tax system that is based on the percentage of tax we pay on our net income increasing as we bring in more income, that’s called a “progressive” tax regime. GST, as a flat tax regardless of one’s net income, is regarded as a “regressive” tax.
In my 36 years in the ATO I was involved in numerous studies, projects and think tanks about tax equity. Let me tell you that, at the very heart of the matter, there is a clear understanding that Australia bleeds untapped tax revenue, and nothing has been done to genuinely address that.
The answer is simple and whenever someone dares to raise it, as I am doing again today, it becomes a derided throwaway jingle — because the media and commentators simply don’t understand. A flat tax — and that by definition is regressive.
That’s bulldust. What is the magic pudding? A single gross receipts tax. Just think about a tax system where one simple rule applies to every dollar anyone gets from whatever source. You pay the government (say) 10%. There isn’t any GST, nor are there any excise duties, or petrol taxes or any other taxes of any kind anywhere in Australia, no stamp duty, no rates by local government — nothing. Equally, and most important, there are no deductions, concessions, rebates or anything available to any person or organisation. The no deduction regime is really the magic as that means say Coles, Woolworths, BHPBiiliton, the plumber next door and you, the wage earner on $60,000 pa all pay the same 10% rate but on what you receive.
That’s why big business hates this. 10% off the top no way; the big companies pay 30% off the bottom now, and that is a huge difference to them and your $60,000 salary is more than a 10% tax impost now.
Did you know there was a time, some years back, that a study was made where all taxes, charges, duties including every tier of government was added up and compared, as a percentage, to the the Gross Domestic Product of Australia. (This was pre GST.)
Answer. The total of every tax, duty impost charge levied by federal, states and local governments as a percentage of GDP (which in $ terms is theoretically the gross income of Australia) was 9%.
We don’t, and never did need the GST, we don’t need a tax system that no one in the world can understand, we don’t need over 60,000 people sponging off tax minimisation, better these clever people work to make Australia stronger, and we don’t need to worry about distortions like negative gearing, superannuation tax and all the detritus we are surrounded by — we do need a simple gross receipts tax paid by everyone, and that’s all we need.
Who has the guts to make it happen?
Superannuation is a clear example of tax advantage biased toward the better off financially […]
Yes, because it’s a flat tax…
At what level does this proposed flat income tax need to be set to match the necessary revenues ? 10% doesn’t sound even close to high enough.
How about a flat assets tax rather than a flat income tax ?
“no deductions, concessions, rebates or anything available to any person or organisation. ”
What exactly do you mean by deductions ?
Surely you don’t mean that businesses should pay tax on their revenue rather than their profiit ?
Imagine the number of taxation consultants, accountants and solicitors who would be thrown onto the dole queue.
Already said it Les…..Tax companies on Turnover just like individuals. Argue only about the Rate.
Isn’t a gross receipts tax as open to evasion as an income tax?
Can’t you just hide or fail to declare your receipts? – Just as I give the plumber cash and he gives me a discount – but on a larger scale.
The Land Value “Tax” still looks to be a better alternative if we’re up for a sweeping reform. And I put “tax” in inverted commas because it’s not really a tax, just a channeling of unearned increment (windfall) out of private pockets and into the public purse, returning to the public (whose presence and economic activity created the land value) what they earned themselves.
But I should add that I don’t dismiss Les’s idea. The fact is, as he says, the system is broken and we don’t need to sit on our hands till a perfect alternative comes along.