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Tax things that can’t move. That’s all you need to know

Jessica Irvine

by Jessica Irvine

19 Sep 05:40am

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Filed under: Henry Review, Mining Tax, Tax, Tax Reform, Taxation

43 comments

Australians are generous at heart. You see it when disaster strikes – drought, flood, fire – we all chip in and help out a friend in need.

A taxing issue: few people ever agree on which ones to increase. Image: Peter Nicholson

And the truth is, that sort of community spirit is not only reserved for crises. Every day, through the taxes we pay, we help out the community. Our taxes pay for all the services that a free market, consisting of only self-interested individuals, would fail to provide: roads, transport, education, health care, help for the elderly, the sick, the poor and other community services.

No one likes paying tax, but most of us grudgingly accept tax is a necessary evil. Necessary for all the reasons mentioned above. Evil because all taxes distort behaviour, preventing transactions from occurring that would have otherwise had mutually beneficial outcomes. For example, dollars diverted to pay income taxes are dollars that could otherwise have been spent, increasing enjoyment and creating income for business.

What really matters is that the taxes we pay are spent efficiently and raised in the least distorting way.

Of course, you’d know all this if you’d read the 1000 or so pages of the Ken Henry tax review, as I - for my sins - have.

But not to worry. I can summarise it for you in one sentence: we should tax things that can’t move. That’s it. That’s all you need to know. Tax things that can’t move.

Whenever you tax something, you create the incentive for that something to try to avoid the tax. All this tax avoidance is a drain on the economy. So we should, where possible, tax things that can’t avoid paying the tax.

If you started out with a blank sheet of paper, you’d soon find there are any number of things you could tax: paper clips, wages, interest earned on deposits, shoelaces, company profits.

Turns out these things can be grouped into roughly four main types: land, labour, consumption and capital.

It should be fairly obvious that land is the most immoveable of all these. For that reason, economists reckon land should be most heavily taxed. The ground under your feet is not about to up and leave. Land is an essential input to production and also a pretty good surface upon which to live. It is scarce, giving it value. It also tends to be owned by relatively wealthy people, making a tax on the value of land a pretty good in terms of “progressivity” – the degree to which taxes are paid by the rich, rather than the poor.

State governments do apply some land taxes, particularly on investment properties. But a major recommendation of the Henry review was for a broader land tax that could go a long way to providing state governments the revenue needed to replace inefficient taxes like stamp duty on property transfers. Stamp duty is inefficient because, as a tax on a moving house, it discourages people from moving house and downsizing to more suitable accommodation. It prevents a more efficient allocation of the housing stock that would otherwise happen.

So lesson number one: tax land.

Of course, a related source of taxation is the rare minerals located beneath the land. The investment needed to dig out these minerals is internationally mobile, in that businesses can decide to go dig up minerals in other countries instead. But the minerals themselves are immoveable, making them a good target for taxation, as, of course, the Ken Henry review also recommended through a tax on mineral resources.

What shouldn’t we tax?

The things we don’t want to tax too heavily are the very flighty things. Turns out the most flighty of things are people and business investment.

From the economic point of view, the sweat of your brow should be taxed the least. Lower income taxes encourage you to work harder, because you get to keep more of the reward. This is particularly true for women caught up in the maze of deciding whether to return to work after childbirth, facing, as they do, higher tax rates and the withdrawal of benefits. We should be seeking to remove these disincentives, and one of the ways to do that is by reducing the tax on labour income.

Capital is also mobile. Companies can invest overseas if the tax is too high.

So, in summary, tax land. Try not to tax labour and capital. Of course, it’s fairly clear we do exactly the opposite, and get most of our tax from companies and individuals and not from land and minerals.

The last of the four sources of tax is consumption. Australia’s main consumption tax is the goods and services tax. Economist think consumption taxes are pretty good because they don’t distort behaviour. Taxing consumption deters some purchases, but in the main, people continue to spend. After all, we still need to eat, wear clothes, entertain ourselves and purchase services like haircuts, vet services and so forth.

So consumption is a good target for taxation. In fact, most countries around the world tax consumption. The United Kingdom applies a 20 per cent “value added tax” on consumption. Japan recently increased its consumption tax from 5 to 10 per cent.

The Ken Henry report was prevented from discussing the GST, but most economists agree it is a relatively efficient tax that should be greater used.

The revenue raised could be used to cut taxes on company and or personal income which would boost the economy by increasing the incentive for companies to invest more and also giving workers more incentive to work harder.

Australia faces a looming problem that as our population ages, governments will have greater difficulty balancing the books. It’s already beginning to bite. An older population will require more spending on health and age care. Meanwhile, a dwindling proportion of working aged people will be under more pressure to pay for all the spending.

Unless we can have sensible debates about raising taxes like the GST or mining taxes or land taxes, it is workers who will end up carrying the can in higher taxes. That, or budgets will not be in balance.

These are the discussions we have to have. There will always winners and losers from tax reform. But everyone loses from an inefficient tax and transfer system.

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43 comments

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    • sir ronald bradnam says:

      06:03am | 19/09/12

      No one can actively steal money better from an economy than a government. It is always easier to be generous with money especially when you havent had to earn it.
      Unfortunately in every economy there are tax producers and tax consumers, the biggest problem is the tax consumers are usually the ones that have the say over the tax producers, thus making it easy to comandeer those funds and distribute to policies and idealogies that fit with the re-election of the said tax consumers.

      Reply

    • Steve says:

      06:57am | 19/09/12

      The next Treasurer needs to start the Henry Review mark 2 - including the GST in the mix.  A lot of Henry Mark 1 recommendations can be picked up in the meantime.

      Ideally, the federal-state revenue and spending imbalance would be addressed at the same time.  Ok, no chance of that happening!

      All done under the rubric of preparing for the Asian century.

      Reply

    • Stephen says:

      04:45pm | 19/09/12

      Ideally, the federal-state balance will be addressed by abolishing the States.

      Why do we have them?

    • Macca says:

      07:47am | 19/09/12

      The logic of income tax doesn’t stand up. Yes, labour is mobile, but the motivations for mobility are not tax, they are quality of living and employment. Individuals aren’t going to jump ship because they pay 30 cents in the dollar.
      I’d wager, with absolutely no evidence whatsoever, that the US, Greece, Spain and Ireland all have lower income tax rates than Australia. Our high economic prosperity, not taxation rate, encourages people mobility into Australia.

      As such, increase income taxation.

      Now, this will impact on investments and spending, temporarily. So do it at a time when inflation is increasing. Someone more knowledgable in economics will find a counter argument to this, but surely an increase in income tax during the early to mid-2000s would have reduced inflationary pressures, kept interest rates lower, and ultimately increased the size of the government’s kitty?

      Ok, someone tell me why the above doesn’t make sense? (I’m not being disingenuous, I’m honestly interested as to the opposing logic to this)

      Reply

    • Big Jay says:

      08:56am | 19/09/12

      “surely an increase in income tax during the early to mid-2000s would have reduced inflationary pressures, kept interest rates lower, and ultimately increased the size of the government’s kitty?”

      Absolutely.

      I’m not an economist but have sat through my share of econonics classes. I’d say not an increase in taxes, but there were a lot of tax cuts (and handouts!) over that period that probably didn’t need to happen.

      Anyway, that’s history. Going forward, I think you’re logic would hold. Also, the recent GFC experience would remind us younger people that economic cycle’s still exist.

    • Michael says:

      09:59am | 19/09/12

      Macca, you will find that tax is a legitimate reason behind labour mobility. Whilst it is an extreme example, take a look at France right now. President Hollande has lifted the top tax bracket to 75% for people earning over 1 million dollars. And what are all of the high income earners now doing? They are applying for citizenship in Belgium, Luxembourg, Monaco and Switzerland as to avoid paying this tax. Not only does increasing income tax make people more likely to move, it also becomes more expensive to collect. As tax increases, the propensity to evade tax also increases. Thus, the cost of compliance incurred by the tax payer becomes quite burdensome.

      In regards to increasing taxes at a time of inflation, this would be an economic disaster. As you would know, inflation is quite a fast moving indicator of consumer expenditure. Not only would changing tax rates every time inflation went in one direction or another be politically unpalpable, it would also damage the economy through the creation of an ongoing uncertainty. It would be impossible to budget sufficiently in the long term if you were to be paying different rates of tax every year. It would certainly discourage migration to Australia which has been one of our ongoing sources of growth.

    • DOB says:

      12:58pm | 19/09/12

      Uh, no - for lots of reasons. First, your increase in income tax is, presumably, ongoing. It is therfore deflationary of your economy at all times. If your economy hits the skids, youre then really down the toilet.  And if the government spends the taxes raised then that is not deflationatry anyway. Second, “income” is a loose concept. People would just take their previous “income” as, say, a capital gain and engage many other dodgy maneuvres. Higher income taxes gives more incentive to do that. Therefore you get a lot of inefficiences from people dodging their taxes. And we know that will happen because it happened before when income taxes were higfher and we’re actually moveing away from that because it doesnt work, as well as unfairness and increased enforcement costs.

      Thats just a couple of things you might want to consider. There are a bunch of others but I dont have time to give you more at the moment.

    • Dash says:

      07:57am | 19/09/12

      The problem in Australia is that too few are paying for too many!

      The top 10% of PAYG taxpayers contribute 50% of the revenue and the top 30% contribute 70%! And those contributing sweet fuck all, seem to be the ones on here with the loudest voice! It’s wrong!

      Given the fact that the PAYG tax base is shrinking as the boomers leave the workforce, this is not only unsustainable but unfair!

      The ALP has made matters worse by increasing the tax free threshold so those that contribute little (who also happen to be traditional ALP voters), now contribute nothing. More and more of the tax responsibility is pushed onto the people already paying the most.

      Time for the tax base to be broadened. Time for PAYG effective tax rates to be capped at the corporate rate! No one in this country should have to pay 36, 38 cents in the dollar whilst multinational corporates are paying 30!

      Once again the ALP promise of root and branch tax reform was just another election eve lie!

      Reply

    • Tim says:

      09:25am | 19/09/12

      Dash,
      so you agree with the article?
      We should have higher mining, land and consumption taxes and lower income and company taxes?

      Labor has moved on only the mining and income areas (you must be a big supporter of the mining tax Dash?)

      “The top 10% of PAYG taxpayers contribute 50% of the revenue and the top 30% contribute 70%!”

      Yes, and what percentage of total wealth do those top 10% have? The top 30%? I would suggest to you that it’s much higher than the 50% and 70% you mention. Which I don’t think is that unfair. I honestly don’t think there’s much room to move on income taxes unless we significantly increase the GST.

      What we should look at doing is reducing the amount of handouts we give to the middle class. People that can look after themselves are being subsidised by all taxpayers.
      We need to limit the benefits given to people simply for breeding, over 40% of families are net tax receivers, they get more than they put in. 

      We need to reduce the benefit given to high income people through Superannuation. We need to strike a balance between getting people to save for their retirement and not having rich people simply dodge their tax obligations.
      I think the government has got this one right at the moment, no further changes except the limit should go back up to $50K for people over 50 with smaller super balances.

      The raising of the tax free threshold was a great simplification of the system. The people earning such tiny amounts weren’t contributing anything anyway and there’s simply no way to increase revenue by charging them more (blood out of a stone). All you would do is increase government churn.

      And of course, GST should be going up to 15% or 20% on everything.

    • Franky says:

      09:56am | 19/09/12

      You may be right that the 10% pay 50% revenue but that same 10% probably have control over about 90% of wealth. Let me know if you think that is fair. If you start waffing on about ‘job creators’ think about the fact that the real job creators are those that spend every extra dollar they get instead of trying to hide that extra dollar from the tax man

    • Tubesteak says:

      12:03pm | 19/09/12

      Dash
      “The top 10% of PAYG taxpayers contribute 50% of the revenue and the top 30% contribute 70%!”

      While these stats are correct the implication in your analysis isn’t. You’ll find that, especially among the top 10% that it is the big companies (and not individual high income earners) that are paying the vast bulk of the tax take. For example, CBA’s ITE in their financial statements are in the billions. Far more than any individual pays and almost as much as the total value of some billionaires. If you really want to make the complaint about who supports who then you really need to be looking at the companies and super funds.

      Tim
      Super is not a way of rich people to dodge their tax obligations. Every dollar not taken by the tax man is a dollar invested in the economy either through savings in bank acocunts or purchases of goods/services or investments through things like property and shares. This generates economic activity. Giving it to the government merely redistributes wealth.

      Franky
      See statement to Tim. People that generate the wealth should be able to keep it and spend it how they like. Taxation should only be to cover the costs of things that the market will not provide such as universal education (for a well-educated and ready workforce) and universal healthcare (for a healthy and ready workforce) and for infrastructure (roads, trains, ports airports etc) so that people, goods and services can get around.

    • Tator says:

      12:41pm | 19/09/12

      Tim/Frank,
      those 30% paying the 72.8% of total income tax receipts are actually only earning 55.6% of total income.  The top 10% of income earners who pay 45.3% of total income tax receipts earn 30% of total income and to show the ridiculous levels that these “high” percentiles earn, those earning over $95342 are considered to be in that top 10%.  in fact the top 1% are those 91060 people earning more than $264k, huge numbers of the mega rich people, I don’t think so.  Even if they were taxed at 100% of their income, it would barely have covered the deficit in last years budget. (total income for the 1% was $52.141 billion or only 9.1% of total income paying 17% of total income tax.) data from ATO 09/10 income tax statistics.

      As for the wealth distribution, the last ABS wealth survey stated that 20% of people held 60 odd % of total NET wealth and explained it as the vast majority of those people who had the most net wealth were those approaching retirement as the majority had paid off their family home,  had a life time of accumulating assets and superannuation and had spent their peak earning years preparing for retirement via investing.  Most people just starting out in life have little net wealth as they just haven’t had the time to accumulate it and that is generally fair for all here in Australia.  ABS survey
      http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6554.0Main Features22009-10?opendocument&tabname=Summary&prodno=6554.0&issue=2009-10#=&view;=

    • Economist says:

      12:42pm | 19/09/12

      Dash I assume you are only talking about income tax? I think you’ll find all Australians pay tax. And isn’t that the point, that we need to look at the most effective means of taxing the public.

    • Tim says:

      12:59pm | 19/09/12

      Tubesteak,
      That’s an argument against all tax. If you accept that people need to pay tax and that well off individuals need to pay proportionally more tax (which I do), then we need to make this occur as efficiently as possible. I agree broadly with your comment below although I would have a two tiered tax rate above the poverty limit that you’ve set, maybe at $100k. 

      With relation to Super, i’m saying that it has certain tax advantages which (mostly well off) people use. I know I do.

      Now I think there is definitely good reasons for the government to offer incentives to put money in Super. It allows people to save for their future and hopefully reduce their reliance on the government. It’s a trade off.

      But the government still needs to strike a balance between offering these incentives and collecting appropriate revenue off individuals. It wasn’t so long ago that people could pump hundreds of thousands into Super and reduce their tax bill significantly. I think the current arrangements strike a fairly good balance.

    • Tim says:

      02:09pm | 19/09/12

      Tator,
      that’s why I said wealth not yearly income.
      Of course those with higher incomes are going to pay a higher amount of tax because of the brackets.

      It would be interesting to see an analysis that seperated age cohorts to see what the wealth and income tax percentages are to remove the bias of stage of life.

    • Tator says:

      03:07pm | 19/09/12

      Tim,
      the ABS survey I attempted to link to actually breaks down the quintiles into age groups and by household occupancy ie couples/singles/children etc.

    • AdamC says:

      04:21pm | 19/09/12

      It seems that Dash’s main problem lies with the extent of tax progressivity and income redistribution in this country. I share his concern. I think Mitt Romney made the point well in those leaked comments of his about bludgers in the USA. If only he had made them openly, rather than seemingly being ‘caught out’ telling the truth!

      To my mind, provided the government is not raising taxes in a totally insane way, how they tax everyone matters in only a fairly limited way. There is no such thing as tax alchemy. I also see little real-world distinction between, say, taxing directly the extraction of minerals and taxing the profits of the companies doing the extraction. Again, it is rates that matter, not the form of the taxation.

      However, I do like the idea of a general land tax to fund state and local government, based on the valuation of land. It will never happen, though, because, in order to raise enough revenue, the tax would have to be levied on domestic residences. And just imagine the shrieks of our army of house-rich, income-poor pensioners!

    • Dash says:

      05:02pm | 19/09/12

      @ tube- you misunderstand what I am saying. I refer to PAYG taxpayers. They are not corporates. No individual should be paying an effective tax rate greater than the corporate rate!

      @ frankly, I’m in the top 10% and everything I have I’ve worked for. Educated myself, worked bloody hard. Never asked for a thing from anyone and paid every cent of tax. Yes me having wealth is fair!! And for you to suggest that people who are wealthy don’t deserve to be, or shold be punished for it is a bloody disgrace. And a reason why this country is going down the tubes. We punish the wealth creators and reward the wealth destroyers. It’s wrong!

      @ economist - yes and I think the way we are doing it is wrong. It’s inequitable and unsustainable.

      @tim - if you had a flat tax, the higher earners would still pay more tax! The point is, the tax base has been eroded by this government. It’s inequitable. I think the few are paying too much. Everyone who earns income should pay PAYG tax! And no PAYG tax payer should pay more in effective tax than the corporate rate.

      I understand the politics. But I’m in the demographic that is not rich enough to avoid but running around with the massive ALP tax target on his back. I just want a more equitable system.

    • Tim says:

      05:05pm | 19/09/12

      Tator,
      It has the age wealth and income number totals but what I was talking about would be a wealth and income distribution and comparison (say quintiles) for each age group. I can’t see it there although I think it would be interesting.

    • Tubesteak says:

      08:09am | 19/09/12

      “All this tax avoidance is a drain on the economy”

      There is a lot less tax avoidance than you believe. There is tax planning to minimise the amount of tax paid but tax will always be paid at one point or another. You cannot escape it.

      If you tax land you will still be taxing people when they move unless you tax by land area. But people will still be reluctant to move because the difference in tax rates will be minimal and they will prefer to stay in what they’re familiar with.

      Looking at the bigger picture, it would be best if we abolished the states, give their role to the Feds and increase the size of councils to look after rubbish collection and beautification.

      What we should do is raise the tax threshold to the poverty line. That threshold of income which would be generally required for basic subsistence living. Then tax people a flat rate above this and add a broad-based consumption tax. Also, tax our minerals in the way the MCA asked for in the Henry Review. Which is what Rudd initially proposed but at a slightly higher rate (which is what the miners didn’t like about it).

      Also, remove all middle-class welfare. Keep welfare to unemployment benefits only. Don’t tax savings or investments. Keep the company rate to be the same as the personal rate with the imputation system intact.

      Reply

    • Michael says:

      01:47pm | 19/09/12

      A flat tax rate is perhaps the worst thing that could happen - even renowned free market economist Fredrick Hayek conceded a tax system needs to be progressive for the most essential of services to be provided.

      This is because basically, all other taxes (included GST) are regressive taxes. 10% of a mars bar is a larger share of a poor persons income than a rich persons income. Thus, creating a flat rate of income tax, and then relying on the myriad of other regressive taxes for Gov. revenue, would create on the whole a tax system with a disproportionate burden on low income earners.

    • AdamC says:

      04:30pm | 19/09/12

      The GST is not regressive, it is proportionate. That is, the more you spend, the more you pay. Rich people spend more than poor people, so they pay more GST. However, because better off people also save money, a GST or sales tax is less redistributive than even a flat income tax.

      The really regressive taxes is Australia are the excise duties on petrol, alcohol and tobacco. They strike me as extremely anti-poor people, who need to fill up the tank just as much as Gina Rinehart does. (And, from her comments, you would imagine that our Gina smokes and drinks less than your average kitchen hand.)

    • Tubesteak says:

      07:23pm | 19/09/12

      Michael
      I completely disagree. No person should be required to pay a higher percentage. Usually, these people are the ones that have contributed more in life and therefore should be able to keep it. If you want more then do the work necessary to earn it.

    • Trevor says:

      08:19am | 19/09/12

      I’d much rather pay tax to the government for my recreational drugs than the illegality premium I have to pay drug dealers currently.

      Reply

    • Tom says:

      02:28pm | 19/09/12

      You can always avoid the premiums by sniffing some glue? Oh, sorry, you’ve already tried that.

    • Mahhrat says:

      08:30am | 19/09/12

      You also need to spend it in the right areas.

      Take health care.  What do you think is cheaper in the long term:  paying to run a clinic to help people manage a drug addiction, or NOT having that service and dealing with the aftermath of the activities of people in the grip of untreated addictions, such as emergency medical treatment and the legal fallout of crime?

      (It’s the former by a long, long way).

      Taxes are useful, the APS is useful.  There is also the reality that tax money paid to local public servants is recycled into the community, though I know not as readily as if it were not taxed in the first place.  Still, it’s a side of the argument not taken into account very often.

      Reply

    • Fiddler says:

      08:45am | 19/09/12

      explain further what is meant by the tax on land. Purchasing land already accepts a massive tax and makes people less mobile (selling and moving costs you a bundle). Ok, I actually support more of a tax on mining, but are they proposing ongoing taxes for ownership of land? That would be shit

      Reply

    • Esteban says:

      12:14pm | 19/09/12

      I think the concept would be instead of paying $50,000 in stamp duty every 15 years or so when you buy a home all landowners would pay say $5,000 a year.

      It is an interesting discussion but would be political suicide.

    • iMitchy says:

      12:52pm | 19/09/12

      Consider this:

      I go to work and get paid, I pay PAYG tax. With my net income I pay for my costs of living which incurs GST. That’s fine.

      I have some money left over and I want to buy a house or some land. So I put all my savings into the bank and it earns interest which is taxed.(I get paid interest in return for providing capital to the bank which they can then lend - the tax implication will be presented after the next asterisk (*)).
      When I finally have a deposit together, I go out and buy some land, I pay stamp duty on the purchase to the state government and each year I must pay rates to the local government. The seller also used part of my purchase price to pay an agent and lawyer for facilitating the sale, who then must pay GST, company and PAYG tax on that income. The seller made a little money on the land and as it was not their place of residence, they had to pay capital gains tax.

      * So as I said, I only had a deposit to purchase the land, I had to borrow the rest of the price from the bank. I pay interest on my mortgage which makes the bank a profit, which they then pay tax on. Because the bank made a profit, it pays dividends to its shareholders who then pay tax on that income. The shares go up and some shareholders sell and pay capital gains tax. Both the buyer and seller in the transaction use brokers who pay GST, company tax and PAYG.

      I decide to build a house on the land using another mix of savings and borrowings. I pay the local council for all of the required approvals and pay contractors to build my house who then pay GST on materials, equipment, and their services and pay company tax and PAYG.

      After a few years I decide to move and rent the house out. I pay income tax on the rent, continue to pay the rates and when I finally decide to sell I am slugged with capital gains tax and have to use an agent and lawyer to facilitate the sale.

      Yes, I realise that I have not taken into account franking, business deductions or any negative gearing deductions. But the point still stands - how much more tax does Jessica want from land?

      It’s so easy for some people to say that it is unfair that 10% of people own 90% of the wealth, but really, this is what they contribute to tax system both directly and indirectly in a large way. This is the ladder that they climb to earn their share of that 90%. Anyone is free to do the same. It is not fair to then say that they should contribute more tax because they are rich.
      (I know that these are not your comments Fiddler but I just wanted it to be clear to the people that feel this way that the whole system is connected).

    • Esteban says:

      01:30pm | 19/09/12

      The point iMitchy is no matter how pissed off you feel you can’t do anything about this form of tax ambush because your land is stuck in place.

      you can’t pick up your land and go overseas so you are vunerable to the whims of the Government.

      It might give you some insight as to why miners felt ambushed after spending billions of dollars to establish profitable mines only to have the Government charge them higher tax rates than any other sector in the country.

      Like your land they have to cop it because they can’t pick up their mine and take it away.

      Someone has to pay for the debt. More taxes or cuts in public service.

    • iMitchy says:

      04:23pm | 19/09/12

      I agree Esteban,

      Working in the resources industry I understand very well the uncertainty that was created by the mining tax.

      It just seems like an ambush to say “tax things that can’t move”. It corners those who have already commited and budgeted to do so. It punishes those who are already struggling to achieve the great Australian dream and those who already contribute the most to economic stimulation and tax revenue.

      Nobody likes paying tax but it’s high time we just left the system alone. Hikes and cuts are just vote buying exercises. Hikes pay for fulfilling unbudgeted election promises and leave space for pre-election tax cuts to stay in power. It’s bullshit. It has become impossible to budget for tax.

      And don’t even get me started on the flood fiasco. Gillard deliberately didn’t make a sound about a flood tax until charitable donations started drying up even though it was well and truly on the cards. Small business owners who forked out thousands to charities out of pure kindness were then slogged with an additional tax.

      And people think T20 isn’t cricket…

    • Esteban says:

      06:32pm | 19/09/12

      The reason it feels like an ambush is because it would be an ambush.

      Actually I think it would be too hard for any Govt to introduce so I can’t see it coming any time soon.

      However if Gillard promises to not introduce it before the next election I will start worrying.

    • Borderer says:

      08:54am | 19/09/12

      The current theory in federal taxation seems to be to ride the horse till it drops…
      They make policy decisions to raise more tax revenue and then are scratching their heads wondering why the revenue estimates don’t match the actual taxes raised and that other revenues have fallen. Cause and effect seem alien concepts to them.

      Reply

    • Fed Up says:

      10:19am | 19/09/12

      Why in heck would you want to give the Gov more of our money to waste…sheeesh!!!!

      Reply

    • Anna C says:

      12:00pm | 19/09/12

      “Australia faces a looming problem that as our population ages, governments will have greater difficulty balancing the books. It’s already beginning to bite. An older population will require more spending on health and age care.”

      Perhaps this (future) older population could downsize their expectations and expect a more moderate standard of living in the future because of our financial constraints.  Silly me what am I saying?  That would go totally against the whole Baby Boomer philosophy now wouldn’t it?

      Reply

    • Esteban says:

      12:08pm | 19/09/12

      I am a bit confused Jessica. Last week you stated that our government debt level was not a problem. This was based on the fact that other countries have higher debt levels.

      This week you say “Unless we can have sensible debates about raising taxes like the GST or mining taxes or land taxes, it is workers who will end up carrying the can in higher taxes. That, or budgets will not be in balance.”

      In order to repay the government debt we need not just a balanced budget but a budget surplus.

      As you are now claiming that to just achieve a balanced budget we have to raise taxe rates would you care to revise last week’s statement that our debt is not a problem?

      Reply

    • Sam Scout says:

      12:14pm | 19/09/12

      Jessica,

      You are wrong - you should tax everything that moves - especially financial transactions - the two ways to do are 1) reintroduce stamp duty on share trading - this will cut down on high frequency trading and speculative activities - the funds raised can be used to remove payroll taxes encouraging employments and 2) increase withholdings taxes on foreign funds transers (especially S128F of the 97 ITAA)  - has anyone ever stopped to wonder who the US, Europe, OZ owe all their debts too - the bond holders reside in tax havens - the institute for internal tax justice estimate there are 24 trillion dollars sitting in offshore tax havens - they do this because there are no taxes in these countries - the only way to get at this money is by withholding taxes from the fund transfers to these countries as the profits are shipped from the OECD countries.

      The myth that gets sprouted around that you shouldn’t tax mobile capital is damaging the western countries.

      Jessica - I suggest you find yourself a sharper tax advisor.

      Reply

    • expat says:

      06:01pm | 19/09/12

      Financial transaction taxes are an interesting path to go down. I do think its acceptable to levy a small duty on share trades, perhaps 0.15% - 0.2% but no more. International transfers however, not a chance.

      Rather than trying to solve our lack of international tax competitiveness with more taxes, we should try and become more competitive? Tax havens and low tax economic area’s are going to become big business in the not to distant future, especially given the rise in internet transactions.

    • Big Jay says:

      12:15pm | 19/09/12

      My two cents on tax (I’m probably borrowing bits and pieces from those above) from a polical left-leaner;

      - Middle class welfare, in the form of cash handouts, needs to stop. If people need assistance then assist them. Provide public health and education, even housing and/or food stamps if necessary but don’t give cash to people to spend on superfluous rubbish like SUV’s and pokies. (Similar to what others like Tubesteak are referring too above).

      - Increasing land tax probably needs to happen too. The people building houses now have to pay for all this additional red (green) tape like BASIX and infrastructure levies etc that earlier generations didn’t have to pay for. So if society wants these things (like higher environmental standards for new construction) then it should be a shared cost.

      - Increasing resource (minerals and fossil fuel) tax is a good idea but this needs to be tied some form of capital account (infrastructure only POST-BOOM, or sovereign wealth fund, etc) or some other effort to counter dutch disease.

      - Allowing more rapid depreciation on plant and equipment will encourage more productive investment (tools/machines/buildings/oil rigs/gas trains)  instead of this BS financial and speculative property investment. (The increase to instance write off $6,500, for small business, is a step in the right direction at least).

      - Stop wasting revenue you’re already getting before asking for more. I supported stimulus measures during the GFC but anyone who says the BER was value for money is an idiot, this before we start talking about Mike Kaiser’s employment at the NBN, NSW (labor) govt waste on the metro line ($400mil), the digital set top box scheme, QLD (labor) govt waste on the Traveston dam ($500mil).

      - Tax reform is USELESS without something that addresses the relationship between the Fed and the States. I’m not sure if this needs constitutional reform or something less official but I’ve seen nothing but BS here even when we had Fed Labor and all Labor states.

      Reply

    • Jay says:

      12:19pm | 19/09/12

      A single person on an income of 70K will pay:
      $14,297.00 in PAYE tax.
      $1050.00 Medicare.
      Also add the GST, petrol excise, registration and other hidden taxes put on Insurance policies. God forbid if they smoke, drink and enjoy a punt.. You are looking at $30K per year in taxes or a tax rate of approximately 43%. Then you have taxes on Superannuation which is the craziest thing I have ever heard since the Govt is relying on Super to reduce paying pensions. The Govt is addicted to taxation and yes we need services it is getting out of control. Does spending another 15 billion dollars on education guarantee that we will have better performing students? Never has and never will.
      Teachers can only do so much. We are teaching a generation that Govt will do everythong for them. It is not sustainable as Greece, Spain and italy has discovered.

      Reply

    • Shane From Melbourne says:

      12:46pm | 19/09/12

      1) Tax reform must be also be welfare reform
      2) Tax reform must be reform upon Federal - State relations and areas of responsibility
      3) Tax reform must take into account movement of capital, transfer pricing and other methods of tax avoidance.

      Reply

    • expat says:

      01:14pm | 19/09/12

      One of the better articles on taxation, and the theory makes sense. My thoughts on Australian taxation.

      - Income taxation above 30% is an absolute joke, how many individuals who would otherwise be investing and working locally have moved overseas because of our ridiculous income taxation? Hint, have a look at the level of high salaried expats in Asia and the Middle East.
      30% of a professional making $300k a year is better than 0% because that professional has moved somewhere more competitive. Not to mention the intangible loss of their experience and knowledge from the local market.

      - Corporate Taxation, cap it at 25%. The extra 5% may not seem like much, but again it is enough to persuade a niche and innovative business to move elsewhere. I have recently been doing business with a venture that involves Australians and an Australian idea, but due to the uncompetitive nature of Australia has been persuaded to the UAE to undertake design, manufacture and implementation. $80 million in investment, 20+ jobs, not to mention the work passed through the local economy, all gone…

      - Consumption based taxes, I have to say that 10% is a fair number. To think that an increase will have no effect on the economy defies logic though, all actions have a reaction.

      Get competitive on taxes or lose to those countries that know low taxes are the key to attracting quality business investment and bringing prosperity to their country.

      Reply

    • Bananabender56 says:

      04:18pm | 19/09/12

      Surely it has to be grossly inefficient to be collecting odd taxes in each state. Stamp duty is applied at varying percentages by different states - why it’s still collected has been lost. NZ decided that the collection of stamp duty, as a separate item wasn’t worth it and consequently housing and motor cars are cheaper (I acknowledge house prices are different for other reasons as well).
      GST is higher in NZ and income tax if you earn over about $170k pa is less. Our taxes also support more layers of Govnment than our neighbors. Before anyone looks at different ways of collecting existing taxes, we should be carefully scrutinizing where and why our tax dollars are being spent. Australia’s biggest problem is that it’s ambitions exceeds its capabilities - we think we’re more important in the world stage than we really are - and spend accordingly.

      Reply
 
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