Where is the money for everything coming from?
Would you be willing to pay an extra $9 every time you fill the car with petrol if it would help fund the national disability insurance scheme?
Should the rate or reach of the GST be increased to give the states more money for education?
Or are these lazy options for governments who already collect enough tax and simply waste what they’ve got?
Kerry Packer famously told a parliamentary committee 21 years ago: “If anybody in this country doesn’t minimise their tax, they want their heads read, because as a government, I can tell you you’re not spending it that well that we should be donating extra!”
There are plenty examples of politicians not spending the money they have wisely, even blowing billions on bungled schemes such as the pink batts fiasco.
No one likes paying tax but it is the price we pay for the things we want and need such as roads, schools, hospitals.
As 17th century French economist Jean Baptiste Colbert, who was Finance Minister for King Louis XIV, once said: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the least possible amount of hissing.”
There’s about to be a great deal of hissing as the government razor gang begins the search for cash to pay for disability insurance, the Gonski review increase in school funding, expanding onshore detention centres to cope with asylum seeker arrivals and keep the paper-thin surplus.
Where does the money come from to build Melbourne’s east-west link tunnel, increase the dole or boost defence spending? Should it be new or increased taxes or a cut to spending?
There’s bound to be more tough choices such as the mini-Budget reducing the baby bonus after the first child or tightening the private health insurance rebate.
The Henry Tax Review, finished in 2009 and now gathering dust, pointed out that Australia has 125 taxes ranging from those on income and companies to the obscure 10c Queen Bee levy which raises $10,000 for bee industry research. The top 10 taxes earn 90 per cent of the revenue collected.
The Greens says there’s $5.1 billion ready to pick by removing the diesel fuel rebate for the mining industry. They also want Labor to go back to the original mining super profits tax.
Since 1984 one way government has made sure revenue keeps pace with inflation has been the twice-a-year automatic rise in excise on to beer, spirits and cigarettes - the so-called sin taxes. It was introduced by the Hawke government to stop the damaging budget night headlines screaming “beer, cigs up’” and the policy was kept by Paul Keating, John Howard, Kevin Rudd and Julia Gillard.
Petrol tax used to be part of that until Howard suffered political problems with the GST in the lead-up to the 2001 election and froze the excise at 38.1 cents a litre - meaning the tax on petrol in real terms falls every year.
Back then Howard’s decision saved motorists 1.5 cents a litre or about 90 cents to fill a 60 litre tank of petrol. The cost to the Budget was $555 million. But in the 11 years since, according to figures from Deloitte Access Economics director Chris Richardson, the compound cost has grown to be an extraordinary $25 billion - including just under $5 billion alone this year.
Motorists are saving 15 cents a litre in tax at the pump. If the system had continued, the excise would now be 53.1 cents a litre and it would cost an extra $9 to fill a tank, but that revenue could help pay for the NDIS.
Smokers and drinkers were given no such relief.
Over the next four years the loss to revenue will be another $23 billion. Peter Costello considered it one of the most expensive promises the Coalition ever made. The grand total for 15 years is lost revenue of almost $50 billion, although it’s hard to be precise because there will have been some claw back in deductions for business expenses.
Richardson says the petrol tax freeze was “pretty dumb policy ... we have all these demands on the Budget and we have a tax system that is not up to it and this is one of the reasons’.
And the pressures will get worse. An ageing population means instead of five people working and paying tax for every pensioner today it will be two and a half in 40 years’ time. The Budget will be at risk of collapse.
Labor is also to blame. While it introduced the indexation of petrol excise, it sniffed political gain on the back of GST anger and put pressure on Howard to make the cut.
No one is suggesting the tax on petrol be increased by 15 cents overnight, but should indexation return? It’s one of the choices the nation needs to consider.
Tax Institute research shows a person on an average wage of $69,000 pays $14,557 in tax, or just under $40 a day.
So what does the Government do with your $40 a day? Roughly one-third of that goes to social security, welfare, pensions, family payments, carers and veterans. It works out to $14 a day on the average wage.
The next biggest slice of your tax goes to paying for the health system, about $6.47 a day. Education takes $3.13 and defence $2.28. It’s 53c a day for foreign aid, 13c for the ABC and 3c for the Australian Sports Commission. The interest bill on the government debt costs the average taxpayer 74c a day. Do we want to spend more or less?
This is one of the reasons Rob Oakeshott is keen to have a debate about the GST. Julia Gillard and Tony Abbott are terrified to even discuss it and both insist they won’t change the GST rate or base.
The Henry review was banned from looking at it as was a review of how much GST money goes to each state by former premiers John Brumby and Nick Greiner.
What’s wrong with just giving voters the facts and saying if you extend the GST to fresh food it will raise $X but mean the price of apples, bread and sausages will cost Y per cent more (after taking into account relevant factors)? Many people forget Howard won the 1998 election promising to put the GST on fresh food but the Senate made him change it.
And what about plugging the loophole that lets people buy items valued at less than $1000 from overseas GST-free?
Welfare groups backed the GST in the 1990s because they feared the shrinking tax base was becoming too narrow and ridiculous as it left toothbrushes exempt but toothpaste squeezed by a 22 per cent wholesale sales tax. Just like last time, the pollies will be too scared to start this debate.
Next week is the last sitting of federal Parliament until February. Instead of throwing political mud at each other, how about a real debate about tax, spending and choices.
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