Tax is still a four-letter word

Anti Major Mistake Man. says:

07:49am | 28/04/10

@ John A Neve, spot on, Australia has always been near to the top of the list of highest taxpaying 1st world nations, but at the bottom when it comes to getting “bang for your buck”.

The “Henry”, or any tax review should be about reforming our taxation system to make it simpler, easier to collect, understand, more efficient, etc.

We were told that GST would do that, by replacing regressive state taxes. Some of the state taxes that were promised to be withdrawn are still with us & this at a time when the economy was booming, plenty of revenue was flowing into state treasuries, including the new “growth tax”, GST, which if i remember correctly exceeded expectations on how much it would give to the states.

Lets see them reduce bureaucracy & wastage of taxes first. Then look second at which regressive, inefficient taxes to withdraw next & worry about introducing new taxes later.

Regards the former snag & swinging voter.

Tom says:

09:13am | 28/04/10

Well said John. Kerry Packer once said to a group of puffed up pollies “It’s not as if you spend it well.” He was 100% correct.

I had naively expected that the Henry review would address anomalies such as the marginal rate tax disincentives for someone edging from the dole into the workforce. (I think it has been quoted as an effective marginal rate of about 75%). It does not look promising however and my bet is that the Henry review will be another empty stunt to divide the nation and confuse the voter.

Peter says:

02:00pm | 28/04/10

Tom, don’t accept what Kerry Packer had to say.. It’s these kind of “patriots” that have decimated Greece and they are now on the brink of default. Packer was not the “big employer” he claimed he was, he was just a bloke who inherited a lot of money and bought shares. Just because he was rich did not make that man a great Australian. The real great Australians are those who do their jobs day to day and pay their country what they owe them.. The last people we should be taking advise from are those who avoid their tax. Having said that, we are extremely over taxed in this country, but until the rules change, we have to pay what we owe…

Tom says:

04:39pm | 28/04/10

@Peter,
I was not trying to lionise Packer but he was 100% correct in this case. Bloated government bureacracies simply do not deliver. Politicians need to forgo their stupid media oriented “marginal electorate” Hawker Britton model of governing.

AMM refers to us being at the bottom when it comes to getting “bang for your buck”.

Peter says:

06:13pm | 28/04/10

@ Tom, agreed, our tax dollars are being abused. We are at a stage now, where i think we need to redesign our whole system of Governemt. There are Government departments that don’t need to exist anymore and waste like you would not believe. My lovely council replaced an old footpath in my street with a new one.. Great you might think? Perhaps, if there was actually something wrong with the one we had in the first place.. Im sick of it. Tax dollars should be treated with absolute respect, and they are not. When you have pollies who are used to dealing with figures in the Millions and Billions, they don’t blink twice about signing off on say $20,000 on something pointless. And this happens all the bloody time.. We are getting ripped off. The Government have been raking in many many billions extra in the last 10 years, but our services are diminising.

Bruce says:

06:42pm | 28/04/10

John A Neve: Agree. How we spend and get the best value for our our “Tax Dollars” is absolutely critical. Before raising taxes, I would like to see a full review of government and public service spending, publish the results, then let the public know that then there is no other option, but to raise taxes.

T.Chong says:

07:40am | 28/04/10

Nigel: are you,have you ever worked ? dont you believe that you have a tax paying history worth championing?
Why shouldnt workers be personalised ? and who is “dehumanising” people who are employed in the private sector?
Why is it wrong to focus on the mega bucks being made in the mining industry, or do you believe workers - public or private sector should pay tax, while the big companies get an easy ride?

PeterK says:

08:07am | 28/04/10

Not even Rudd (or the Libs ) could stuff up the next mining boom. Fact. The Chinese always get their way.

persephone says:

09:36am | 28/04/10

No, imposing taxes on mining does not mean all the other taxes will still apply.

The purpose of any review is to look at how things are being done at present and if they can be done better.

In the context of the Henry review, this should mean that some taxes are abolished because they are either ineffective or inefficient and other taxes may be introduced.

We don’t know at present but it is quite possible that the government will be able to introduce a new tax on mining but reduce the amount of taxes these companies pay overall.

John A Neve says:

09:54am | 28/04/10

Persephone,

You are tinkering again!!  “Will be able to introduce a new tax on mining but reduce the amount of tax these companies pay overal’”!!!!!!
Persephone, the government needs to raise more nincome, not less.

What is needed is to increase the tax pool, by so doing you reduce the level of personal tax, but increase the totall collected. Put simply more people pay less each.

Our current taxation system has PAYE taxpayers carrying this country.

Hamish says:

10:02am | 28/04/10

Resources taxes essentially already exist in the form of state-based mining royalties. They are different from state to state, but resources companies already do pay taxes over and above normal taxes in exchange for taking stuff out of the ground. It’s just that the feds don’t get the money.

This is something Australia needs to be very careful about. The mining sector saved us from the GFC (if anyone tells you it was Rudd’s stimulus, they’re either lying or stupid). Hopefully WA will tank any attempt by the eastern seaboard to steal their mining revenue.

Mark says:

10:16am | 28/04/10

You have no idea what the Henry review says Pers. Shhh until it is released.

All you doing is making stuff up before the fact. Stop dealing in hypothetical situations that have no basis in reality. You spout wish lists and wet dreams of stuff the government “might do” too often. And as we have seen over the last weeks they actually do not anything but rort, waste, mismanage, maim and kill.

Shameful cowards by their own definitions.

the petulant magpie says:

11:08am | 28/04/10

I have to agree with this, most people are looking for a free lunch, then they whinge when they have to pay for anything.
You can’t expect the world without paying for it.

Botfly says:

04:50pm | 28/04/10

In total agreeance without us paying taxes there is no infustructure , no pensions , no hospital system ,no roads , no schoolsand the list goes on.

persephone says:

09:38am | 28/04/10

And Liberals like Joan continue to make things up rather than engage in the issues.

But she’s right in one respect - if you want good services, you have to be prepared to pay for them.

pete3 says:

09:46am | 28/04/10

Yep and the Abbott fairytale sounds better? Not. Go back to the monkeys at the young Liberals. And cut small business some breaks we employ people too you know!

Mark says:

10:20am | 28/04/10

“And Liberals like Joan continue to make things up rather than engage in the issues.” says peresphone.

“In the context of the Henry review, this should mean that some taxes are abolished because they are either ineffective or inefficient and other taxes may be introduced.

We don’t know at present but it is quite possible that the government will be able to introduce a new tax on mining but reduce the amount of taxes these companies pay overall. ” also says peresphone.

Pot meet kettle. It “should mean” it is “possible”. Who cares. It is all a figment of my imagination dreams pers. what sounds good today. What copy do the masters that pay me want me to type.

In other words pers actually try to find a basis from which to argue other than ad homien attacks, untruths and unsubstantiated here-say. You are becoming shriller and more intellectually bereft of ideas as time goes on.

gerard says:

11:14am | 28/04/10

pete3, welcome. Yes I know, you are another labor staffer masquerading as a disillusioned small businessman who was somehow maltreated by the liberals. Your mission is to go out and float another mischievous furphey that the libs did nothing for business then divert the dumb reader from the real issue that your union masters are destroying Australia.

PS I am an ex-unionist who became disillusioned with mass wanking.

pete3 says:

01:22pm | 28/04/10

@gerard I’m a Labor staffer? Hehe… I think Rudd is not much different than Abbott , you dufus. And yes I am in small business and just like in Howard days the game is still slanted in big businesses favor.

But is Abbott listening? No. Are the Nationals listening no.

Markus says:

09:26am | 28/04/10

It was an idea that came up many years ago and one that had a lot of merit - removing all income tax and just increasing the rate of GST (to say 30%). This ensures a fair tax split as those who consume more pay more tax.
I’m just not sure how well it will work nowadays with the ease of purchasing products online and shipping them in.

John A Neve says:

09:34am | 28/04/10

Tax Lax & Markus,

While probable better than than what we currently have, I don’t believe a consumption tax is the way forward.
Would your consumption tax be the same on all goods?
Would you remove the tax exemption on food?
Would you remove any other taxes?

Believe me, a little research would show a Financial Debits Tax to be far fairer, simpler and escape proof.

persephone says:

09:43am | 28/04/10

No, our problem is the demonising of tax and thus the employment of tax professionals to find ways around paying it, resulting in people who should be paying tax evading their responsibilities.

Carole Lombard, the American film actress, was making four films a year in an era where tax rates in the US meant that, after her first film each year, she was paying 95% of her earnings for the other three in tax.

Asked how she felt about this, she replied that it made her proud to think she could make such a meaningful contribution to the wellbeing of the country she loved.

If people simply took that attitude, instead of doing the most incredible financial contortions to avoid paying an extra dollar here or there, we’d all pay less tax.

Ella says:

09:48am | 28/04/10

The problem with this is that the poor then get taxed on 100% of their income because they have to spend all of it just to survive, while the rich only get taxed on what they spend.

The idea of a staggered rate income tax is each person contributes according to their capacity to pay. I don’t know that this is fairer as this leaves the rich carrying the burden for the poor, but I would rather that than the other way round

Tax lax says:

11:44am | 28/04/10

@markus
The tax can be imposed at point of import (by the importer importing the good) or puchase (by the website selling the good). Either way, as soon as it is purchased then the onus is on the person constructively selling it to charge the tax. The GST works in a similar way where foreign tour operators that sell tour packages here are required to charge GST on the tour packages - this is despite the fact that they are not a registered business entity in Australia.

@John Neve
Actually a financial debits tax will put many people back to the hold days of hoarding their savings under their mattress and doing many things for cash to avoid the banking system.

@persephone
As Kerry Packer once said if you’re not trying to minimse your tax then you need your head read. Politicians don’t do anything useful with it. We are much better off using targeted taxes such as this. It gets spent on things that are considered necessary and collected at that point.

@ella
Life isn’t fair. If poor people have to spend all their money on the necessities then that is their incentive to work to earn more money. If they choose not to do so then they will continue being poor. Boo hoo. A broad based consumption tax is the most equitable tax possible as it arises from economic behaviour and choice. It doesn’t penalise those that work harder and earn more.

John A Neve says:

12:40pm | 28/04/10

Tax Lax,

In fact a Financial Debits Tax would kill the Black Money Market.
Most, if not all wages and salaries are paid into a bank or credit co-op,
to hide money “under the bed”, you’d have to draw it out and would be taxed on the withdrawal.

As I suggested Tax Lax a little research would show this is the best form of taxation to date. Nobody to date has told me why it won’t work, accept the top end of twon don’t like it. Reason you cannot beat the system.

Administration of the tax would be simple because the financil imstitutions would do the bulk of the work.

Wayne Fehlhaber says:

12:47pm | 28/04/10

Tax Lax : Very well said indeed . A broad based consumption tax is the fairest system of taxation . As you stated ” ....... it arises from economic behaviour and choice. It doesn’t penalise those who work harder and earn more. ”  You can’t get any fairer than that principal. If an individual is well off through hard work , he or she can keep it or spend it lavishly.
If he or she choses lavish spending , then he or she will pay tax accordingly.

Shane From Melbourne says:

01:26pm | 28/04/10

I agree with a Financial Debits tax, but would note that it would have to apply to international financial transactions out of Australia as well.

Tax lax says:

01:33pm | 28/04/10

John A Neve
and how soon do you think people would be asking for their salaries to be paid in cash like it was up until the 80s?

This would be rampant in small businesses.

Also, two other problems with your tax

1) Banks would pass the costs of collecting it onto consumers who will bare the entire brunt of the tax

2) it is a cumulative tax that will hamstring many vital developments in the financial world. This would put Australia well behind the 8 ball. Every trade will be taxed and then taxed again. Also more complex processes will be taxed many times. This simply cannot happen in a financial world based on ease of access and international competition. Money would flee these shores and investment would dry up.

John A Neve says:

02:08pm | 28/04/10

Tax Lax,
I am beginning to think you are either in business of the black money market, you seem to be scared of a Financial Debit Tax!!
No it wouldn’t be a cumulative tax at all, tax would only be paid on withdrawals. So how could that possibly be cumulative?

If banks did charge for administration, the charge would be on government.

Just why would people want to go back to cash?  Added to which I cannot see every body walking around with pockets full of cash, would make paying the mortgage difficult wouldn’t it?

But best of all you’d have one low% tax that no one could avoid, fair, equal and transparent. The return to government would be far greater than currently.

Shane,
There would be no need for it to be international, to take money off shore you’d have to bank it here first.

Muttley says:

11:55am | 29/04/10

You speak as though people have chosen to earn less money than thne Westpac CEO. What absolute rot. Any move to base tax solely around consumption tax will see the rich get far richer and the poor plumb the depths of severe poverty. Fortunately i now people with such attitudes as yours will never get control to enact this systematic evil.

Tax lax says:

01:38pm | 28/04/10

Why should the big wigs pay?

Surely you’ve seen that email where the group of 10 people go out for a meal and make the wealthiest person pay for all of it while the 4 poorest bludgers pay nothign. So the wealthy person leaves and stops eating with them.

The big wigs earned their position through hard work, skill, guile, cunning and ability. They deserve to be where they are.

Gerard says:

01:12pm | 28/04/10

I’ll go with 75% tax deductibility of rental properties, Justin, if you reduce the taxability of rents received to 75%. If you genuinely believe that being a landlord is a rort, give it a go. Bet you are too lazy.

AdamC says:

03:47pm | 28/04/10

I don’t know how the (totally publicly-funded) BER and batts fiascos relate to my suggestion that health and education be reformed to facilitate greater competition and private investment. For the record, I never supported either programme, especially not the batts. When the government takes a bag of money and a baseball bat, the outcomes always include waste and inefficient resource allocation.

The strength of Australia’s health and educatio systems is the combination of public and private funding and providers. I simply propose building on those strengths.

And I can make international comparisons too. What about comparing Australia’s tax rates to those of its Asian neighbours like Singapore and Hong Kong? It’s not such a favourable comparison when you make it with our neighbours, trading partners and rivals for investment, is it, Economost? That’s OK, Denmark is far more economically relevant to Australia. It has an Australian Princess, after all.

Hamish says:

04:14pm | 28/04/10

AdamC,

Isn’t it hilarious how lefties, whenever they want to compare the Australian economy to another country’s, it’s always Europe? Yeah, let’s copy the economic model of a continent which has been in relative decline for, conservatively, 25 years. Why can’t we have unemployment of 10+% or government debt of 100% of GDP? I hear Greece, Spain, Ireland and Portugal are doing particularly well.

By the way, you shouldn’t talk about things like resource allocation with lefties, they don’t understand.

Justin, are you saying public servants couldn’t get a job in the private sector? Is that what you mean? That they’ll all end up on the dole queue? You don’t think they’ll get another job? I mean, I don’t have much faith in bureaucrats, but surely not all of them are so imcompetent they couldn’t get a job in the private sector.

Economist says:

06:45pm | 28/04/10

Adam C No you stated that we pay too much in tax, we don’t. As for comparing us with Singapore and Hong Kong, combined they’re not even the size of the ACT, so why wouldn’t they charge less tax.Why not go to the Middle East with tax rates well below 10%?:

You’d be better off comparing us with Canada and the US (33% and 28%) respectively. In addition Europe is a valid comparison because socio-economic indexes indicate a better quality of life, but you and Hamish are only concerned about the bottom line and have no comprehension of sustainability.

You did not propose to build on the strengths of the private public mix, which I might add is already in place. You advocated the private sector to primarily deliver ‘public goods’ and services. The voucher system would reduce an individuals ability to achieve economies of scale that the government can achieve, think PBS. The BER and Batts scheme are relevant because you are advocating the private sector to deliver public services via your voucher system. The private sector does not have as its primary objective social outcomes, but profit. No matter how good your contract is they’ll find away around it. If you expect quality, ironically you will require more public servants middle managers to oversee and enforce, which is why precisely the Batt and BER schemes failed, too much trust was placed in self regulation and supposed competition.

The issue is the tax mix, not the overall tax take and something we can both agree on is there are better ways of spending the money.

Hamish what’s hilarious is you accusing an economist of being a lefty, but I’m not a rabid righty hell bent on handing everything over the private sector and I’d argue I have a better understanding of opportunity cost and efficient resource allocation then yourself.

AdamC says:

09:59am | 29/04/10

Economist, I already noted the current private/public mix of service delivery. I argue that we should expand this mix and make their interaction more coherent. Your scale argument makes sense with the PBS (which, again, you raised not me) but is not compelling in the cases of, say, school and hospital administration.

And I note your continuing, broken-record references to the BER/Batts schemes. This reliance on fallacies and misrepresentation (while Singapore and HK are geographically small, their populations are much larger than the ACT’s, or WA’s, or SA’s) suggests to me you are just dressing up an ideological aversion to private sector service provision with spurious efficiency arguments.

Hamish says:

10:31am | 29/04/10

Economist,

So you’re saying that European economies are more ‘sustainable’ are you? That’s interesting. It would seem to me that monolithic and expanding welfare states with static or declining tax revenues are not sustainable. I had thought that this was the problem Greece has. You know, that insolvent country. But obviously as an economist you must know more about this stuff than me.

Economist says:

12:20pm | 29/04/10

Mr C you said ” I argue that we should expand this mix and make their interaction more coherent” How are you going to make it coherent as I’ve argued the contracts are poorly managed by government, because te governments probably not resourced enough to oversee and I see your arguments as an aversion to public service delivery aversion with spurious efficiency arguments. The fact is private delivery of public service should be treated on a case by case basis, but I maintain you were not arguing this, you were arguing for a larger role of the private sector through vouchers. You also forget that government love to hand things over to the private sector so when things go wrong they can blame someone else.

Hamish for every government failure I can name a private sector failure. the key point I’ve being trying to make is that public good delivery has different goals to the market hence the need for government.  Gee we could each right a book on this.

Peter says:

05:55pm | 28/04/10

Those minerals belong to all of us anyway.. so we should tax them as high as we possibly can to take the tax burdon of the real owners of that stuff..

Harquebus says:

12:21pm | 29/04/10

Peter.
I agree and is the point I was trying to make. Our indigenous Australians, many living in third world conditions, have really been shafted.

Peter says:

02:06pm | 29/04/10

Your 100% correct Harquebus. When I try to tell some of my racists friends this, that instead of hating Aboriginies, they should be thankful to them and perhaps buy them a beer next time they see one at a pub, in gratitude of the wealth we all enjoy today.. they simply don’t understand.. It is sad. I know this country has more lovely, good and kind people in it than racists, but these racists are so loud, they make the rest of us look bad…

John A Neve says:

04:29pm | 28/04/10

Enough is Enough,
You pay more, take your 39c in the dollar + 1.5c Medicare levy + tax on petrol + tax on smokes + tax on alcohol + GST now add all this up and tell me how much of your dollar you really get?

With a Financial Debits Tax you’d pay 1 - 3 cent in the dollar on every withdrawal from your account, all other taxes could/should be abolished.  A bigger tax pool mean less individual tax but a bigger return for government. Think about it.

Harquebus says:

03:00pm | 30/04/10

The edited propaganda we see each night is news? The censored rubbish of our choice is entertainment? Asio can take you away, not tell anyone and it would be an offense for anyone who knows to tell about it.
Google “Australia censorship” and take your own advice before you spout off agblaster.

Peter says:

07:34pm | 29/04/10

Hi pc, thanks for your response. The GFC is the only thing this government has handled ok, but some could argue that they did over spend a little.. With regards to climate change, i think we all need to know more about it, and these arrogant scientists who don’t think explaining to the rest of us plebs because may not understand, does not help matters either.. I want to see more data, more information and more proof before I commit to an ETS. I am not opposed to an ETS per se, but I want more proof. The only meaningful thing ive ever seen on the topic is Al Gores doco and the opposing view from Lord Monk.. This is not enough… And the way energy prices have risen over the last 2 years you might as well consider that we have an ETS anyway. I am not convinced that taxation is the answer to all our ills, like Rudd seems to think.. Re: expectation, do you seriously believe that Rudd has raised our expectations from Government? Me, as a life long Labour supporter (but i am a swinging voter), have been very disappointed in this Government. Rudds only saving grace is the lack of a credible opposition but that might not even save him.. Labours answer to everything seems to be taxation.. Too much of a heavy burdon of taxation actually takes away peoples freedoms especially when they are not getting a “bang for their buck”. How many poor people will miss out on dinner or lunch because they can’t give up smoking and Rudd increased the tax on it? Is it fair that people should go hungry because of a government tax? I just heard Rudd on ABC saying he makes no apology for this tax. How about he goes to visit a poor pensioner and tell him or her to a national audience that he makes no apology that he or she is going hungry because of his tax. Let’s see how that goes down with voters…

H of SA says:

04:09pm | 29/04/10

Jack, this is one of the finest comments I have seen on the punch. My one point of slight digression is about public servants being resistant to efficiany.  I reckon a lot of public servants are frustrated by the “Too many chiefs not enough Indians” aspect of public service life - where they get angry is cuts to front line staff. T

hese cuts are often inefficient anyway - as cutting staff leads to burnout (this is incredibly prevelant in the public service for nurses, teachers and social workers) and the loss of experienced staff/retraining costs. This is what angers the Public Service - not the idea of cut budjets per se but where the cuts occur.