Quick comments & quizzes

Quick comment: how can we make the tax system better for economic growth?

7 May 2015

In this week’s quick comment we want to hear how you think we make the tax system better for economic growth?

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16 thoughts on “Quick comment: how can we make the tax system better for economic growth?”

  1. Richard Gelski says:

    My comment is that it would be a truly retrograde step to try to limit deductibility for Environmental Funds. The work they do to keep the public informed & better educated in this area is critically important.

     1 Like
  2. Albert Anderson JP says:

    With the current tax system… you can’t.
    It’s design is no longer relevant to 21st Century economics and ‘e’ everything.
    It is too open to manipulation & exploitation by those that can afford it.

    We need a completely new, simple, totally fair, progressive and uncorruptible taxation system that has the broadest base possible, is unavoidable, has built-in future proofing and interlocks seamlessly with current electronic e-commerce systems.

    That system is right under our noses and has not been seriously investigated by taxation design ‘experts’ for reasons only known to themselves.

    A system based on the untapped resources of the Financial Institute Transactions industry is the obvious answer… every individual & entity is subject to it. It is un-avoidable and meets current and future technical and commercial requirements.
    It provides revenue every minute of every day.

    Think about it,,, it is a HUGE taxation resource base and it is just sitting there waiting to be tapped.

    A 1% Financial Institute Transaction Tax [FITT] would far exceed current tax revenue income on an on-going basis and cater for the abolishing of 125 plus Federal taxes (Henry review 2009) such as income tax, company tax & GST etc.. All State and Local Government taxes would also be abolished.

    Sound impossible ? Sound too simple ? So did the flat bottomed Taco !
    Do some basic mathematics & think about it.

    This needs to be brought into the debate for ‘honest’ discussion.

     12 Like
  3. Vic says:

    Any commercial transaction conducted in Australia today, may be subject to any of the three (3) taxation systems operated by the Commonwealth, State and Local governments.

    Some of our systems use terms other than the term, “tax” per se but operate commercially in the same manner as any impost or tax, and namely, to raise/obtain revenue (viz custom duty, tariff, levy, royalty, charges, application fees, etc). Governments also have “negative” taxes or bounties that are extant, not to collect revenue but to provide exclusive rights for or to subsidise certain activities.

    Hence, every revenue tax and subsidy operated by whatever level of government in Australia has an effect on our economic growth.

    I understand that the design of any “tax”/”subsidy” should be subjected to certain principles of taxation and they include the following (but not necessarily in such order or priority):
     * A particular tax should apply over as wide as possible part of the population, or sectors of economy. It should equally burden all individuals or entities in similar economic circumstances.
     * The cost of collection, administration, and enforcement of a specific tax by the administrating authority should not be inordinately high as a percentage or quantum of tax revenues raised.
     * A specific tax should be legislated and enforced in a manner that facilitates voluntary compliance to the maximum extent possible.

    There are taxes that are discriminatory to businesses, and do/may not raise much net revenue and are a drag on economic growth (viz Payroll Tax and mineral royalty).

    There are other taxes that are complex in design and difficult to enforce (viz capital gains tax and thin capitalisation provisions).
    Also there are taxes which breed parasite industries in and do not add to the real national economy (viz financial advisors in the superannuation industry).
    Notwithstanding, today in Australia all three tiers of government seek to maximise their collection of revenue in order to meet their legal, social, national, international, political and ideological obligations and commitments (as applicable), while purportedly trying to encourage economic growth within their jurisdiction. Hence, once a tax or subsidy is introduced the relevant government is loathed to abolish it or reduce its rate scale, due to its need to satisfy its overall political objectives.

    I believe that the current Australian tax system contains many taxes and subsidies that are a damper on encouraging national and local economic growth. [I am in no way an expert in this area but rather a humble citizen.] However, some taxes are extant due to poor or discriminatory distribution of Commonwealth revenue to the States and will not be reduced or abolished by the States until the Commonwealth reduces its influence in State affairs, matters and primary (constitutional) responsibilities, and until there is better equity in distribution.

    Hence, I feel that Australia needs a complete overhaul of Commonwealth and State, and State and Municipal, responsibilities and relationships. Once this happens, then we can discuss properly, reform of our general tax systems.

     3 Like
  4. Patrick says:

    If the aim is to make the tax system better for economic growth, then I assume it is also the aim to minimise the distortionary impact and deadweight cost of taxes.

    To this end we could replace the current tax system (GST, income tax, payroll tax, stamp duty, land tax, royalties, etc) with :
    – a progressive consumption tax;
    – a lowish but universal land tax;
    – a flat rate withholding tax on distributions of deductible payments or untaxed profits (which would be all profits) to foreigners; and
    – a simplified version of the original Henry review resource rent tax.

    The radical part of this would be the progressive income tax, which is supported by Bill Gates and Tim Worstall, Peter Orszag

     1 Like
  5. Grace McCaughey says:

    There are far too many taxes which are costing taxpayers billions to collect and take so much time out of employers’ time.. Why not simplify the whole tax system and have only 5 or so taxes? E.G. land tax, GST, income tax, and other simpler taxes.
    Remove FBT, CGT, Stamp duty and most other state taxes.

     3 Like
  6. Fergal says:

    Put a reasonable cap the amount of tax that can be reclaimed under negative gearing. A person with a property or two as their super; fine. A person with 10+ properties is making life hell for people trying to get on the property ladder. Pour every cent that that saves into promoting small business and support for start-ups.

     6 Like
  7. Aileen says:

    Phase out negative gearing over 2 years, with the exception of new dwellings purpose built for renting and investment. Deductions applied against income earned by investors should be stringently scrutinised . This would lower the price of houses (less people making use of tax dodging) , and make rentals more affordable.
    By doing this more people would be paying the correct amount of tax on their income.
    CEO’s, directors, politicians etc should pay tax on their FULL earnings – no clever accountants schemes.
    Foreign companies should have no loopholes to avoid their share of taxation.
    It’s only the worker who pays their full share of tax.

     4 Like
  8. Gavin R. Putland says:

    Get the tax burden off production. E.g.:

    “To implement a maximalist fiscal devaluation in Australia, we would replace the GST with a Cash Flow Tax [CFT], abolish FBT, and allow employers to offset withheld PAYG personal income tax and compulsory superannuation contributions against the CFT. While there would be no reduction in after-tax wages, and no widening of after-tax wage inequalities, the cost of labour FOR EMPLOYERS would fall, creating more jobs, hence more domestic demand for domestic products. As the CFT, unlike the cost of labour, would not feed into export prices, there would also be more foreign demand for domestic products, creating still more jobs. Without the new jobs, the required CFT rate would cause a rise in import prices but little change in prices of local products. WITH the new jobs, the required CFT rate would allow prices of local products to FALL. The lowest-hanging fruit of tax reform has not yet been picked.”

     2 Like
  9. peter davidson says:

    By taxing different kinds of investments more consistently, for example by removing tax biases favouring speculation in property and different business and investment structures.
    Rule nothing in or out, including curbing of rental property deductions.

     4 Like
  10. HNJ says:

    Why are we always so scared of self funded retirees and trying to get them to move from super into more liquid and more volatile saving/spending patterns? What we should be doing is rewarding their foresight and giving them an encouragement to do more, not less for themselves. The latest hit (reducing the assets test below $1M) will mean that fewer people get a health card. WRONG! What we should do is the following. Encourage people to tie their super up in an income stream via an annuity. Everyone who set up an annuity of at least 75% from their super fund is given a health card and nothing else. Unless their income falls below a certain point as a result, ie they need “income support” . A health card when we get old is really what we need when we get that old. Currently older people are encouraged to draw down on super for things they would like, not need, to get their assets below the threshold, not because they want the pension, but because they want the health card. In the UK most of any super saved has to be converted into an annuity and cannot be drawn down until you really retire other than by an annuity.. There is a small % rate which can be drawn down, but it’s not it all. and everyone over 65 (maybe that’s gone up now) gets free health service including prescription drugs etc. Also everyone who has worked and paid into the National Insurance gets a small pension. Not enough to live on, but it’s a base line, as long as you’ve worked and paid in. If they want better health outcomes they pay, they can chose to have health insurance if they need it. But they don’t use super for inheritance, or as a savings fund for world cruises and to buy a home and put it in trust and rent it to the family. those loop holes just aren’t available. We should adopt annuities much more than we do and reward anyone who opens an annuity.They would be allowed to define who inherits, similar to a binding nomination and there would be no inheritance tax on an annuity, but it you had super you’d not used for a pension it would be subject to inheritance tax, and so would all liquid assets over a threshold. This again would encourage people to open annuities and would inject masses of money into the economy via the pension companies. They in turn would have more certainty over cash-flows, income streams etc. Instead of all these odd ball get rich schemes that people throw money at. Oh and of course the Politian’s should join the real world where they get a pension from their works like the rest of us by spending their own money and not just by turning up for 12 years!
    And while you’re at it increase GST and remove all of the state based taxes which are an impost on business, like payroll tax, stamp duties on cars etc. And of course get rid of the States, never have so few people been ruled, managed, controlled, and over governed as the Australians. Remove that layer of take and bureaucracy and see Australia BLOOM! no more fighting between the states, we are all Team Australia!

     3 Like
  11. Russell Moffet says:

    GST is derived from Expenditure. Paying Interest is expenditure.
    Expand the GST to make all interest received have the 10% rate of GST deducted and remitted to the Taxation Office.
    Banks and Lenders will be barred from adding the 10% GST to the interest the debtor has to pay.
    Billions of dollars will be raised for the Government each day, and be a major contributor to the Budget being balanced each year.

     1 Like
  12. Russell Moffet says:

    Without the Nation and the Social Contract inherit in being a citizen, no enterprise or incorporation is achievable. Nor are the wages and profits thereof achievable. In short, corporations are non-human citizens of the Social Contract, only being able to exist because of the laws of the Nation of Australia.
    The incentive for human and small company entrepreneurs to employ fellow taxpayers would be, not by grants or subsidies, but from the tax employees pay through the PAYE system. The Taxation Department receives the tax collected, but entrepreneurial employers will receive a credit for the amount paid against their tax liability. This is because, without them sharing their workload with employees, their profit would be higher by the equivalent of the wages not paid, and hence paying a higher rate of tax equivalent to or higher than the tax PAYE collects if employing people.
    Nett Revenue is affectively unaffected, so by sharing the workload by creating jobs and remitting the PAYE, the small enterprise deserves a tax break equivalent to the PAYE tax remitted for employing people, by way of a tax credit [not able to be cashed]. What greater equitable incentive to employing more taxpayers, than entrepreneurs and small companies, to receive tax credits applied against their own taxation liability?

     1 Like
  13. David Ireland says:

    In order to provide sustainable and politically acceptable claw back of superannuation concessions into the future avoid taxing super fund earnings for retirees, see remedy below.

    Ensure that the expenditure side of the budget is better managed to reduce reliance on the endless search for taxation opportunities.

    Re-introduce Death duties on the estates where the primary partners are deceases. No trigger upon the death of one partner just once both are deceased. Have a higher 20% rate on superannuation estates and say 10% on estates outside of superannuation.

    Avoid broadening the G.S.T. because it penalised the less well off so maybe tax imports a little more and certainly adjust the way in which royalties are determined and collected.

    Ensure that foreign multinationals are properly accountable for their taxes.

    Ensure that all government superannuation is fully funded from member’s resources.

     1 Like
  14. mark says:

    The rate cut should’ve been the first step in this connected with government spending.
    Cut RBA rate by 0.25 basis points, of which there will be a tax of 0.2 basis points(towards a future gst on interest) and of the 0.2 basis points, half, or 0.1 basis points goes to new spending – pensions, public transport, etc.
    Effectively, money flowing immediately into economy, money that will trickle on..

  15. Julio Altamirano says:

    A Progressive GST (Fiscal Policy) as a Tool of Inflation Targeting – allows up to a 15% per annum inflation target without many of the costs of inflation nor deflation…a tool to combat the Global Financial Crisis…

     2 Like
  16. Colin says:

    Broad based with fewer carve outs. The test should be in tax policy – will this change peoples pre and post tax economic decisions? If not, then thats a good outcome.


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