Comments on Michelle Grattan "Turnbull points to problems in raising GST", 5/02/2016
It is strange for the PM to argue that payroll tax is efficient and at the same time also argue that company tax rate should be reduced. The two arguments are contradictory. It appears that the PM has been ill advised or not been advised but he only talk out of his own intuitive feel.
Comparing payroll tax with company income tax, the only difference is the degree of the impact on business, with payroll having a greater impact on business. That is because when without payroll tax, that amount would be profit and business pay income tax on that amount as opposed to pay the full amount when payroll tax is imposed.
It would be better if significant tax reforms or increasing taxes be put out much earlier in an election cycle, so it give plenty and adequate time to the public to consider them and make their mind on whether they would support or not support them.Leaving significant reform policy proposal to the last minute does not show enough respect to the voters!
Showing posts with label tax reform. Show all posts
Showing posts with label tax reform. Show all posts
2015-12-11
Treasurer Morrison's excellent stance on tax reform
Comments on Michelle Grattan "COAG finds agreement on terrorism but still looking for common direction on tax", 11/12/2015
The Treasurer, Scott Morrison, should be commended for arguing that the main problem for governments are spending not revenue and that tax reforms should be undertaken to improve the efficiency of the tax system but not for increasing the overall level of tax intake. Let’s hope he will stick to it and will be supported by the Prime Minister, Malcolm Turnball.
The states, if they wish, should levy their own taxes. Why can’t any of the states and territories, levy their own GST, if they think they need the revenue? Whoever levy additional GST, they should face their own electorate for their action to increase taxes.
Alternatively, they could increase and/or expand their land taxes. Land tax is an efficient tax.
The Treasurer, Scott Morrison, should be commended for arguing that the main problem for governments are spending not revenue and that tax reforms should be undertaken to improve the efficiency of the tax system but not for increasing the overall level of tax intake. Let’s hope he will stick to it and will be supported by the Prime Minister, Malcolm Turnball.
The states, if they wish, should levy their own taxes. Why can’t any of the states and territories, levy their own GST, if they think they need the revenue? Whoever levy additional GST, they should face their own electorate for their action to increase taxes.
Alternatively, they could increase and/or expand their land taxes. Land tax is an efficient tax.
2015-07-20
No Ms Irvine - it is not why we should pay more GST
Comments on Jessica Irvine "Why you should pay more GST", 20/07/2015
No, you are wrong on taxes, Ms Jessica Irvine. The GST is not the only option left to governments, even though the federal government has unwisely (or wisely I would say) ruled out touching tax breaks on property and superannuation. for example, the states and territories could trade their inefficient taxes such as stamp duties with a new property and/or a land tax or expanded property or land taxes. Both property and land taxes are efficient taxes.
The ACT has already started the increase in rates (essentially a land tax in its guise) and a supposed reduction in stamp duty (although the ACT government is very trick in that it may have quickly increased the rates but has been very slow in reducing stamp duties, so its can have more revenue. In another word, a supposedly revenue neutral is abused by that government to become a revenue raising measure).
So you failed to analyse the whole tax system and come up short with recommendations. Have a look at the ACT case you will understand where your miss is.
Arguably, there are other more efficient raxes beside the GST and property/land taxes.
No, you are wrong on taxes, Ms Jessica Irvine. The GST is not the only option left to governments, even though the federal government has unwisely (or wisely I would say) ruled out touching tax breaks on property and superannuation. for example, the states and territories could trade their inefficient taxes such as stamp duties with a new property and/or a land tax or expanded property or land taxes. Both property and land taxes are efficient taxes.
The ACT has already started the increase in rates (essentially a land tax in its guise) and a supposed reduction in stamp duty (although the ACT government is very trick in that it may have quickly increased the rates but has been very slow in reducing stamp duties, so its can have more revenue. In another word, a supposedly revenue neutral is abused by that government to become a revenue raising measure).
So you failed to analyse the whole tax system and come up short with recommendations. Have a look at the ACT case you will understand where your miss is.
Arguably, there are other more efficient raxes beside the GST and property/land taxes.
2015-07-16
On the property taxes of John Daley and Brendan Coates
Comments on John Daley and Brendan Coates "Property taxes", 16/07/2015
I have not read the full report and as a result I don't know if the authors have discussed and included the existing effective taxes on properties or not. There are already quite heavy taxes on properties, such as rates, not to mention the increased rates in the ACT which was supposed to replace the stamp duty on property purchases.
It is easy to say you can get so much tax revenue from this and that. It can be very sensational to make dramatic claims for so many billions of revenue could be raised and to grab the media headlines.
Why do the authors are so obsessed with increasing taxes or imposing new taxes? Why don't the author study whether all the governments' spending are appropriate or not in the first place.
There are enough taxes in Australia and we don't need more of them.
I think the authors need to take a cold shower to be intellectually sane. There is enough of this and no need for them to lecture people on this tax and that tax.
It is easy to say you can get so much tax revenue from this and that. It can be very sensational to make dramatic claims for so many billions of revenue could be raised and to grab the media headlines.
Why do the authors are so obsessed with increasing taxes or imposing new taxes? Why don't the author study whether all the governments' spending are appropriate or not in the first place.
There are enough taxes in Australia and we don't need more of them.
I think the authors need to take a cold shower to be intellectually sane. There is enough of this and no need for them to lecture people on this tax and that tax.
2015-07-09
A balanced approach not a particular ideology is needed
Comments on John Daley and Danielle Wood "Fiscal challenges for Australia", 9/07/2015
It is all increase tax or have another new tax or reducing superannuation concessions. Why not reduce government spending? Why not to regard spending as so needy? You say the following on the one hand:
The Commonwealth Government has run deficits for six years, largely due to a rapid increase in net spending on older households. The costs of repaying these deficits will fall primarily on younger households."
Then on the other hand, you say to reduce superannuation concessions, its uttally self contradiction.
Further it is worst behaviour to pit the old against the young, as your statement of the last sentence in the paragraph implies. Isn't it a fact that Australia is among the lowest government debts to GDP ratio and even IMF argues for Australian government to increase spending to stimulate the economy due to our relatively low debt to GDP ratio?
It all seems a particular ideology at working.
It is all increase tax or have another new tax or reducing superannuation concessions. Why not reduce government spending? Why not to regard spending as so needy? You say the following on the one hand:
The Commonwealth Government has run deficits for six years, largely due to a rapid increase in net spending on older households. The costs of repaying these deficits will fall primarily on younger households."
Then on the other hand, you say to reduce superannuation concessions, its uttally self contradiction.
Further it is worst behaviour to pit the old against the young, as your statement of the last sentence in the paragraph implies. Isn't it a fact that Australia is among the lowest government debts to GDP ratio and even IMF argues for Australian government to increase spending to stimulate the economy due to our relatively low debt to GDP ratio?
It all seems a particular ideology at working.
2011-10-03
Which is worse - the tax forum or the 2020 Summit?
Comments on Peter Anderson “Six immediate reforms to make tax forum more than a talkfest”, 3/09/2011, http://www.theaustralian.com.au/national-affairs/six-immediate-reforms-to-make-tax-forum-more-than-a-talkfest/story-fnab4up0-1226156384664
Your suggestion of increasing the efficiency dividend from the APS is more like an insult to many APS employees who work very hard but their pay increase cannot even match the inflation. It is so easy for you gays to say to increase the efficiency dividend! Why don't you say to increase tax on business profit to provide revenue for services?
No matter how much cynicism, it is well justified.
When the 2020 summit was held, the Rudd government was very strong and popular. But how many of the ideas from that summit have been actioned?
Back to now, the Gillard government was a minority government and deeply unpopular. Besides, there is the Henry taxation review report with the government for nearly two years. So, what can one really and seriously expect from this taxation forum?
Now back to your argument about lower tax rate to raise more tax revenue. It is not too dissimilar to the already tried and failed Reagan experiment in the US based on the Laffer curve idea. Hoping it will work in the Australian context is more likely to be akin to wishful thinking.
When the 2020 summit was held, the Rudd government was very strong and popular. But how many of the ideas from that summit have been actioned?
Back to now, the Gillard government was a minority government and deeply unpopular. Besides, there is the Henry taxation review report with the government for nearly two years. So, what can one really and seriously expect from this taxation forum?
Now back to your argument about lower tax rate to raise more tax revenue. It is not too dissimilar to the already tried and failed Reagan experiment in the US based on the Laffer curve idea. Hoping it will work in the Australian context is more likely to be akin to wishful thinking.
One of your proposals is to blame the states for the green energy measures they have introduced, without mentioning federal failures in this area,such as the pink batts program. That also means your argument that the GST is not raised by the states and hence they don't have incentives to contain their expenditures is empty.
Your suggestion of increasing the efficiency dividend from the APS is more like an insult to many APS employees who work very hard but their pay increase cannot even match the inflation. It is so easy for you gays to say to increase the efficiency dividend! Why don't you say to increase tax on business profit to provide revenue for services?
2011-03-29
Need to fundamentally reform federal financial relations
Comments on George Williams “O'Farrell needs to prove that states can do things better”, 29/03/2011, http://www.smh.com.au/opinion/politics/ofarrell-needs-to-prove-that-states-can-do-things-better-20110328-1cddj.html?posted=successful
It is true that money is the key determinant in the federal state relations.
Assuming that will continue to be true into the future, then what the states should and can do is to renegotiate with the federal government to iterate the state's role in many of the existing services and to realign revenue responsibilities between the two levels of government to relinquish some of the federal's financial power over the states by specifying more revenue sources transferred to the states as their own revenues.
For example, the MRRT is a resource rent tax, that is, a mineral royalty supposedly to be in a more efficient form, should belong to the states. Equally, the states should be given a fixed share of the income taxes, agreed by inter-governmental agreement, or a constitution reform, should it be necessary.
Past experiences from the performances of both federal and state governments indicate that each of them has provided poor services and wasted taxpayer’s money and neither has been perfect. For the federal government, the wastes and some disasters in the more recent pink batts and the BER programs have demonstrated its serious deficiencies in providing services.
Only when the financial resources of each and every level of the two levels of government in Australia are guaranteed to be adequate to the tasks of services, the Australia federation would function properly and in the most efficient way to provide the best services to all Australians.
There is no point for either the federal or the states to have an unfair advantage over the other, especially from the financial point of view.
While health reforms, education, infrastructure can all be short term targets for O’Farrell to work on in his fight with the federal government to reclaim state rights, he, and all other state and territory leaders should set their eyes on the longer term solution.
PS: of course, these fundamental reforms in the federal financial relations should be considered in the overall tax reforms that may include reforms to some state taxes to make the tax system more efficient and reduce distortions.
It is true that money is the key determinant in the federal state relations.
Assuming that will continue to be true into the future, then what the states should and can do is to renegotiate with the federal government to iterate the state's role in many of the existing services and to realign revenue responsibilities between the two levels of government to relinquish some of the federal's financial power over the states by specifying more revenue sources transferred to the states as their own revenues.
For example, the MRRT is a resource rent tax, that is, a mineral royalty supposedly to be in a more efficient form, should belong to the states. Equally, the states should be given a fixed share of the income taxes, agreed by inter-governmental agreement, or a constitution reform, should it be necessary.
Past experiences from the performances of both federal and state governments indicate that each of them has provided poor services and wasted taxpayer’s money and neither has been perfect. For the federal government, the wastes and some disasters in the more recent pink batts and the BER programs have demonstrated its serious deficiencies in providing services.
Only when the financial resources of each and every level of the two levels of government in Australia are guaranteed to be adequate to the tasks of services, the Australia federation would function properly and in the most efficient way to provide the best services to all Australians.
There is no point for either the federal or the states to have an unfair advantage over the other, especially from the financial point of view.
While health reforms, education, infrastructure can all be short term targets for O’Farrell to work on in his fight with the federal government to reclaim state rights, he, and all other state and territory leaders should set their eyes on the longer term solution.
PS: of course, these fundamental reforms in the federal financial relations should be considered in the overall tax reforms that may include reforms to some state taxes to make the tax system more efficient and reduce distortions.
2011-01-11
GST should be on the tax summit agenda
Comments on Siobhain Ryan “GST not on the tax summit agenda, says Julia Gillard”, 11/01/2011, http://www.theaustralian.com.au/national-affairs/gst-not-on-the-tax-summit-agenda-says-gillard/story-fn59niix-1225985226619
It was a mistake that Rudd/Swan explicitly excluded the GST from the Henry Review, as reflected in what was said about how the exclusion of the GST had reduced options for change by Australian Industry Group chief executive Heather Ridout, as a member of the Henry review committee:
"I think the business community generally is very much in favour of the GST being part of the discussion on tax. Clearly, good tax theory would support that".
It will be another mistake by Gillard if GST is excluded in the tax summit this year.
Why does Gillard adopt this stance now? Is it because of Swan, still the Treasurer, and Deputy PM now?
Gillard has not learnt from the Rudd government's failures in its terms of reference for and its response to the Henry Review after its handed to them.
Have the GST on the agenda or not is one matter, and how to deal with it if it is on the agenda is another. Clearly Gillard is doing damages to her own reputation as the PM.
Who are Gillard's political and economic advisors? What are they doing? They should be closely in touch with the public and have a common sense.
It was a mistake that Rudd/Swan explicitly excluded the GST from the Henry Review, as reflected in what was said about how the exclusion of the GST had reduced options for change by Australian Industry Group chief executive Heather Ridout, as a member of the Henry review committee:
"I think the business community generally is very much in favour of the GST being part of the discussion on tax. Clearly, good tax theory would support that".
It will be another mistake by Gillard if GST is excluded in the tax summit this year.
Why does Gillard adopt this stance now? Is it because of Swan, still the Treasurer, and Deputy PM now?
Gillard has not learnt from the Rudd government's failures in its terms of reference for and its response to the Henry Review after its handed to them.
Have the GST on the agenda or not is one matter, and how to deal with it if it is on the agenda is another. Clearly Gillard is doing damages to her own reputation as the PM.
Who are Gillard's political and economic advisors? What are they doing? They should be closely in touch with the public and have a common sense.
2010-12-16
Tax reforms should be too hard to make
Comments on Arthur Sinodinos “Anyone know the way to the promised land?” 16/12/2010, http://www.theaustralian.com.au/news/opinion/anyone-know-the-way-to-the-promised-land/story-e6frg6zo-1225971755174
While the conventional thinking for a personal tax cut is to raise indirect taxes through the GST, it is interesting but hard to understand why revenue neutral personal tax reforms can't be designed and implemented.
Why isn't it possible to have a personal tax reform in stages to gradually flatten the personal tax rates?
It is true that if some State taxes that are inefficient were to be abolished, there need increases in other taxes, and possibly it is the best option to raise the GST rate or reduce some of the GST exemptions on food.
But for personal tax reform, given that it is not to abolish it, why can't we design a path to translate the opportunities offered by tax bracket creeping into reducing the tax's progressivity?
It is really a myth in terms of tax reforms.
Let's not get unnecessarily too complicated on reforms. If a big bang can’t be achieved, then let’s have a gradual approach!
An important principle for tax reforms to get public support or the support of relevant stakeholders is the observing revenue neutrality for the government and not to use it as an opportunity for revenue grab.
While the conventional thinking for a personal tax cut is to raise indirect taxes through the GST, it is interesting but hard to understand why revenue neutral personal tax reforms can't be designed and implemented.
Why isn't it possible to have a personal tax reform in stages to gradually flatten the personal tax rates?
It is true that if some State taxes that are inefficient were to be abolished, there need increases in other taxes, and possibly it is the best option to raise the GST rate or reduce some of the GST exemptions on food.
But for personal tax reform, given that it is not to abolish it, why can't we design a path to translate the opportunities offered by tax bracket creeping into reducing the tax's progressivity?
It is really a myth in terms of tax reforms.
Let's not get unnecessarily too complicated on reforms. If a big bang can’t be achieved, then let’s have a gradual approach!
An important principle for tax reforms to get public support or the support of relevant stakeholders is the observing revenue neutrality for the government and not to use it as an opportunity for revenue grab.
2010-09-18
Tax refomrs should take the right approach
Comments on Michael Stutchbury “Complacent country under fire”, 18/09/2010, http://www.theaustralian.com.au/news/opinion/complacent-country-under-fire/story-e6frg6zo-1225925578140
The idea to use carbon tax to fund the other tax reforms is poor and is unlikely to gain public support.
It is important for a carbon tax to be revenue neutral and should act purely as a price signal to change consumer and business behaviour in energy use to lower emissions.
To reform personal income tax to flatter tax with $25,000 tax free threshold should be considered with other welfare reforms. Alternatively it should be staged or phased in with a clear future path.
Other reforms to state taxes should be considered with revenue reallocation between the federal and state levels of government, and possibly service responsibilities.
The idea to use carbon tax to fund the other tax reforms is poor and is unlikely to gain public support.
It is important for a carbon tax to be revenue neutral and should act purely as a price signal to change consumer and business behaviour in energy use to lower emissions.
To reform personal income tax to flatter tax with $25,000 tax free threshold should be considered with other welfare reforms. Alternatively it should be staged or phased in with a clear future path.
Other reforms to state taxes should be considered with revenue reallocation between the federal and state levels of government, and possibly service responsibilities.
2010-05-24
Swan needs more independent advice on RSPT
Comments on Wayne Swan “A tax that will boost growth”, 24/05/2010, http://www.theaustralian.com.au/news/opinion/a-tax-that-will-boost-growth/story-e6frg6zo-1225870279541
Mr Treasurer, it is good to see you try to explain the tax to the public. It has become absolutely necessary, hasn’t it?
However, it seems very likely that the Treasury modelling was problematic, either with wrong assumptions used, such as the differential impacts of the marginal effects on less profitable mines versus the industry effects of the tax proposed, (the results of the two effects are obviously dependent on the assumptions used) or with the wrong internal model logic, including but not limited to the international effects.
The international effects include capital mobility, demand and supply of mineral products and the outlook of international prices for a longer period, different impacts of the tax on international supply from different regions.
If you and the government believe the tax is important for the economy and a significant tax and economic reform, you should support and provide more independent studies to get the modelling absolutely right and correct.
Only independent studies can have the credibility for the public to support the tax reform. It is not too late for the government to do it.
By the way, if the purpose of the tax is to get a fair share of the resource rent taking into account of risks involved in mining, there is no need at all for the government to be involved in undertaking the risks imposed by any businesses.
In the same logic with the same purpose, the current State royalty regime may not be as bad as most people currently think it is. It gets at least some rent value for the finite resources even when a mine is not very profitable as long as it produces and sells minerals. Why should the owner of an asset give it away for free if the renter of the asset can’t make much money? Further, when prices go up, the mineral rents also go up accordingly, so does company tax.
In hindsight, it would have been better to release the Henry tax report when the government received it, but stating that the government was considering all the recommendations but having made no decisions to rule in or rule out any.
Mr Treasurer, it is good to see you try to explain the tax to the public. It has become absolutely necessary, hasn’t it?
However, it seems very likely that the Treasury modelling was problematic, either with wrong assumptions used, such as the differential impacts of the marginal effects on less profitable mines versus the industry effects of the tax proposed, (the results of the two effects are obviously dependent on the assumptions used) or with the wrong internal model logic, including but not limited to the international effects.
The international effects include capital mobility, demand and supply of mineral products and the outlook of international prices for a longer period, different impacts of the tax on international supply from different regions.
If you and the government believe the tax is important for the economy and a significant tax and economic reform, you should support and provide more independent studies to get the modelling absolutely right and correct.
Only independent studies can have the credibility for the public to support the tax reform. It is not too late for the government to do it.
By the way, if the purpose of the tax is to get a fair share of the resource rent taking into account of risks involved in mining, there is no need at all for the government to be involved in undertaking the risks imposed by any businesses.
In the same logic with the same purpose, the current State royalty regime may not be as bad as most people currently think it is. It gets at least some rent value for the finite resources even when a mine is not very profitable as long as it produces and sells minerals. Why should the owner of an asset give it away for free if the renter of the asset can’t make much money? Further, when prices go up, the mineral rents also go up accordingly, so does company tax.
In hindsight, it would have been better to release the Henry tax report when the government received it, but stating that the government was considering all the recommendations but having made no decisions to rule in or rule out any.
2010-05-09
Can Australia regulate global mining boom?
On today's ABC Insiders program, George Me. said the government's super profit resource tax is trying to moderate and slow down mining boom.
The question is that whether the idea or assumption that the Australian government can moderate mining boom is reasonable and realistic or not.
The fact is that Australia is only one part of the global mining industry to supply/export minerals and petroleum, and that global mining boom is largely driven by demand factor, though Australia has a very large mining industry and is well located geographically close to the boom areas of the world economy, namely Asia.
But mineral and petroleum deposits are not monopoly located in Australia, no matter how much Australia has.
In that global environment of global mining boom as a result of demand driven by industrialisation and urbanisation in Asia especially China, one has to ask the above question.
The very idea that through tax the Australian mining industry more heavily can regulate global mining boom is likely to be naive and lack of rationality.
I hope people don't confuse a legitimate tax reform of mining royalty with unrealistic goal of regulating global economy in which Australia does not have much control. International trade switch means that Australia will bear a significant loss if it attempts to do a silly thing as that.
The question is that whether the idea or assumption that the Australian government can moderate mining boom is reasonable and realistic or not.
The fact is that Australia is only one part of the global mining industry to supply/export minerals and petroleum, and that global mining boom is largely driven by demand factor, though Australia has a very large mining industry and is well located geographically close to the boom areas of the world economy, namely Asia.
But mineral and petroleum deposits are not monopoly located in Australia, no matter how much Australia has.
In that global environment of global mining boom as a result of demand driven by industrialisation and urbanisation in Asia especially China, one has to ask the above question.
The very idea that through tax the Australian mining industry more heavily can regulate global mining boom is likely to be naive and lack of rationality.
I hope people don't confuse a legitimate tax reform of mining royalty with unrealistic goal of regulating global economy in which Australia does not have much control. International trade switch means that Australia will bear a significant loss if it attempts to do a silly thing as that.
2010-05-06
ALP state Treasurer: Rudd proposed tax on mining profits 'flawed'
Comments on ABC report "Rudd proposed tax on mining profits 'flawed': Fraser", 6/05/2010, http://www.abc.net.au/news/stories/2010/05/06/2892069.htm?section=justin
I have earlier commented the difficulties of defining super profits for mining companies in modern times.
Now the Queensland Labour government Treasurer, Andrew Fraser has said the super mining profit tax proposal has flaws, although he also said that "But I think if we work closely with industry as governments then you can get a design that protects investment and promotes jobs."
Note that the federal government is ALP.
I have earlier commented the difficulties of defining super profits for mining companies in modern times.
Now the Queensland Labour government Treasurer, Andrew Fraser has said the super mining profit tax proposal has flaws, although he also said that "But I think if we work closely with industry as governments then you can get a design that protects investment and promotes jobs."
Note that the federal government is ALP.
2010-05-05
Does mining super profit exist?
Comments on Paul Kelly “Modest tax reform with an eye to election”, 5/05/2010, http://www.theaustralian.com.au/news/opinion/modest-tax-reform-with-an-eye-to-election/story-e6frg6zo-1225862266146
The concept of super profit and super profit tax is questionable.
If ownership of the investors of mining companies is the same from start to now, then the concept seems fine.
But modern mining is generally characterised by public companies such as BHP and Rio, so their shares are traded and some investors would have paid more than the book values of those companies. To those latter investors, there is hardly any super profit for them, because if there is, other investors will buy the stocks and push the share price higher until there is no super profit after adjusting for differences in risks with other industries.
In such a context, the super profit hardly exists and impossible to define.
If the government is to go ahead with that super mining profit tax, then it will result in investment flight out of mining stocks to other stocks, lower their share prices and reduce investment in mining in Australia.
Australians will be worse off as mining production is affected, and the perceived super profit dissipates and little super profit tax revenue collected.
While the naive and static analysis by some Treasury officials and economists apparently appears fine, but it in reality hardly works.
We will see another tax design failure on a grand scale, just as the Reagan's policy design of lower tax rate to increase total tax revenue in the US based on the concept of the Laffer tax curve.
The concept of super profit and super profit tax is questionable.
If ownership of the investors of mining companies is the same from start to now, then the concept seems fine.
But modern mining is generally characterised by public companies such as BHP and Rio, so their shares are traded and some investors would have paid more than the book values of those companies. To those latter investors, there is hardly any super profit for them, because if there is, other investors will buy the stocks and push the share price higher until there is no super profit after adjusting for differences in risks with other industries.
In such a context, the super profit hardly exists and impossible to define.
If the government is to go ahead with that super mining profit tax, then it will result in investment flight out of mining stocks to other stocks, lower their share prices and reduce investment in mining in Australia.
Australians will be worse off as mining production is affected, and the perceived super profit dissipates and little super profit tax revenue collected.
While the naive and static analysis by some Treasury officials and economists apparently appears fine, but it in reality hardly works.
We will see another tax design failure on a grand scale, just as the Reagan's policy design of lower tax rate to increase total tax revenue in the US based on the concept of the Laffer tax curve.
2010-05-04
First comment on Henry tax review recommendations
Comments on Alan Kohler “HENRY TAX REVIEW: It's politics, not reform”, 4/05/2010, http://www.businessspectator.com.au/bs.nsf/Article/HENRY-TAX-REVIEW-Its-politics-not-reform-pd20100502-537EG?OpenDocument&src=sph
While it is lamentable that the Rudd government just pick up less than 2% or the 138 recommendations by its commissioned Henry review team, it is not the case that no recommendations of the review can be questionable and they all should be implemented in full.
The proposal of an 1% land tax on all land is such an example. It the taxation authority is prepared to not tax income for up to $25,000, that is, presumably for the benefit of low income earners, why should those low income earners be taxed on their own owned dwellings?
At least there should be a similar tax free threshold for land values, shouldn’t it? Otherwise, there is a fundamental inconsistency in the core consideration of the tax design or reform proposals.
I have not read the Henry review report, but it is clear that even the ideas from the best tax minds of the land can be improved.
While it is lamentable that the Rudd government just pick up less than 2% or the 138 recommendations by its commissioned Henry review team, it is not the case that no recommendations of the review can be questionable and they all should be implemented in full.
The proposal of an 1% land tax on all land is such an example. It the taxation authority is prepared to not tax income for up to $25,000, that is, presumably for the benefit of low income earners, why should those low income earners be taxed on their own owned dwellings?
At least there should be a similar tax free threshold for land values, shouldn’t it? Otherwise, there is a fundamental inconsistency in the core consideration of the tax design or reform proposals.
I have not read the Henry review report, but it is clear that even the ideas from the best tax minds of the land can be improved.
2010-05-02
First reading of government headline report on tax reforms
The government released the Henry Taxation Review report, together with its responses at 2.30 pm today.
By now there are limited reports. I have read one from the Sydney Morning Herald. So I turned to the Treasury website and found some headlines with very brief introduction on each of them. See http://www.futuretax.gov.au/pages/default.aspx
The main headlines are:
Cutting company tax rate from 30 to 28% by 2014-15, but small businesses will benefit earlier.
Tax relief and less red tapes for small businesses, mainly reflected by a tax deduction for assets up to $5000 a year, then 30% depreciation for other assets into a pool.
Fairer superannuation, increase the employer compulsory super contribution from 9% to 12%, phased in a decade, a $500 government payment for low income workers.
A fair share of our natural resources: a resources super profit tax of 40%, after investment deduction. State royalties will stay and will be credited to companies.
An infrastructure fund contributed by government from resources tax, used for resources rich States.
FIRST REACTION:
State may increase their royalties to benefit first and knowing they will be credited to mining companies.
No immediate effects of reforms with the earliest effects likely to be seen in 2012-13. So the government is only talking at this stage.
Small businesses are seemingly the main beneficiaries, but likely to be offset by increases in superannuation contributions for workers.
Super changes are significant.
Does not appear to have personal income tax relief.
By now there are limited reports. I have read one from the Sydney Morning Herald. So I turned to the Treasury website and found some headlines with very brief introduction on each of them. See http://www.futuretax.gov.au/pages/default.aspx
The main headlines are:
Cutting company tax rate from 30 to 28% by 2014-15, but small businesses will benefit earlier.
Tax relief and less red tapes for small businesses, mainly reflected by a tax deduction for assets up to $5000 a year, then 30% depreciation for other assets into a pool.
Fairer superannuation, increase the employer compulsory super contribution from 9% to 12%, phased in a decade, a $500 government payment for low income workers.
A fair share of our natural resources: a resources super profit tax of 40%, after investment deduction. State royalties will stay and will be credited to companies.
An infrastructure fund contributed by government from resources tax, used for resources rich States.
FIRST REACTION:
State may increase their royalties to benefit first and knowing they will be credited to mining companies.
No immediate effects of reforms with the earliest effects likely to be seen in 2012-13. So the government is only talking at this stage.
Small businesses are seemingly the main beneficiaries, but likely to be offset by increases in superannuation contributions for workers.
Super changes are significant.
Does not appear to have personal income tax relief.
2010-03-11
Need different thinking on cutting top marginal tax rate
Comments on Robert Carling “Tax reform should include cuts to marginal rates”, 11/03/2010, http://www.theaustralian.com.au/news/opinion/tax-reform-should-include-cuts-to-marginal-rates/story-e6frg6zo-1225839327651
While Carling uses conventional economic wisdom to argue for cuts to the marginal rates of personal income tax, there are two serious issues that just make the argument too hollow.
The first one is a practical one that the GST was quarantined from the Henry review, so there is little room for tradeoffs between income taxes and consumption taxes. Given that most State taxes are more inefficient than the federal income taxes, one has to wonder how any government can design a reduction in the marginal rates of personal income tax, unless it is tradeoffs between higher and low rates that are politically not feasible.
The second one is theoretical. Conventional economic wisdom states the harmful or disincentive of higher top marginal rates on work that is logical thinking. But that logic thinking may also have some practical holes. For example, the top marginal rate may only apply to a small number of people; the so called harmful effects are minimal. More importantly, high income earners are more likely to be intellectual and entrepreneurial, so the conventional labor and disincentive to work of using labor may not necessarily hold.
Taking into account of issues of social equity, the case for arguing a reduction in top marginal personal income tax rate is neither sound nor convincing.
So it seems Carling is too theoretical and surreal.
While Carling uses conventional economic wisdom to argue for cuts to the marginal rates of personal income tax, there are two serious issues that just make the argument too hollow.
The first one is a practical one that the GST was quarantined from the Henry review, so there is little room for tradeoffs between income taxes and consumption taxes. Given that most State taxes are more inefficient than the federal income taxes, one has to wonder how any government can design a reduction in the marginal rates of personal income tax, unless it is tradeoffs between higher and low rates that are politically not feasible.
The second one is theoretical. Conventional economic wisdom states the harmful or disincentive of higher top marginal rates on work that is logical thinking. But that logic thinking may also have some practical holes. For example, the top marginal rate may only apply to a small number of people; the so called harmful effects are minimal. More importantly, high income earners are more likely to be intellectual and entrepreneurial, so the conventional labor and disincentive to work of using labor may not necessarily hold.
Taking into account of issues of social equity, the case for arguing a reduction in top marginal personal income tax rate is neither sound nor convincing.
So it seems Carling is too theoretical and surreal.
2010-03-04
Henry Review's congestion tax is a flawed concept
Comments on Samantha Maiden “Rudd steers conversation away from tax”, 4/03/2010, http://www.theaustralian.com.au/politics/rudd-steers-conversation-away-from-tax/story-e6frgczf-1225836880878
While I am by no means in disrespect to Dr Henry and his tax review committee, I would say that some of the proposals from leaked information seem illogical and irrational.
For example, the so called congestion tax sounds nice and reasonable at first thought, but if one thinks through that carefully, one would find it a stupid idea.
Why? Because it is the government's responsibility to plan and build good transport system and reduce people's unnecessary waste of time and costs on travelling everyday to and from work, isn't it?
Then why should the victims of poor government planning and policies be punished instead of the government?
That is just one example from the Henry tax review.
It is not too dissimilar to a prostitute’s demand for prosecution of those who use it.
The only difference is now it is the government who is proposaing to do such a thing!
While I am by no means in disrespect to Dr Henry and his tax review committee, I would say that some of the proposals from leaked information seem illogical and irrational.
For example, the so called congestion tax sounds nice and reasonable at first thought, but if one thinks through that carefully, one would find it a stupid idea.
Why? Because it is the government's responsibility to plan and build good transport system and reduce people's unnecessary waste of time and costs on travelling everyday to and from work, isn't it?
Then why should the victims of poor government planning and policies be punished instead of the government?
That is just one example from the Henry tax review.
It is not too dissimilar to a prostitute’s demand for prosecution of those who use it.
The only difference is now it is the government who is proposaing to do such a thing!
2010-03-03
It is not just personal tax, but also GST as a missing key
Comments on “Henry review 'hollow' with no income tax rejig: CIS”, by AAP, 3/03/2010, http://www.businessspectator.com.au/bs.nsf/Article/Review-hollow-with-no-income-tax-rejig-36JPH?OpenDocument&src=hp7
While it is clearly correct that any serious tax reforms should inevitably include personal income tax, the exclusion of GST from the Henry review has already sowed the seed for big disappointments.
With a constraint not to touch the GST and reduce the room for trade-off of different revenue sources, it is not possible to consider best options for personal income tax reforms.
So that is an indication that Rudd/Henry are too ideological and not serious about real tax reforms.
They were too weak to make serious decisions on taxation reforms, because they don’t have a strong base within the ALP.
While it is clearly correct that any serious tax reforms should inevitably include personal income tax, the exclusion of GST from the Henry review has already sowed the seed for big disappointments.
With a constraint not to touch the GST and reduce the room for trade-off of different revenue sources, it is not possible to consider best options for personal income tax reforms.
So that is an indication that Rudd/Henry are too ideological and not serious about real tax reforms.
They were too weak to make serious decisions on taxation reforms, because they don’t have a strong base within the ALP.
2010-02-19
What is Rudd government hiding of the Henry Review report from the public?
Comments on Dennis Shanahan “Indiana Swan and the Chamber of Doom”, 20/02/2010, http://www.theaustralian.com.au/politics/opinion/indiana-swan-and-the-chamber-of-doom/story-e6frgd0x-1225831948370
The Rudd government has been particularly tricky on the Henry Review report.
It is not good enough for the government to act this way: to keep the public and the opposition guessing while the government has the full of government resources, like so many departments of bureaucrats to serve them and design spins for another round of empty promises.
It is a shame that the government can't be truthful to the public by releasing the report and saying to the public that the government is considering it and will come up with its positions in the due course.
Why can’t the government be fair with the public?
This demonstrates Rudd government's trickiness and untrusting of the public.
The Rudd government has been particularly tricky on the Henry Review report.
It is not good enough for the government to act this way: to keep the public and the opposition guessing while the government has the full of government resources, like so many departments of bureaucrats to serve them and design spins for another round of empty promises.
It is a shame that the government can't be truthful to the public by releasing the report and saying to the public that the government is considering it and will come up with its positions in the due course.
Why can’t the government be fair with the public?
This demonstrates Rudd government's trickiness and untrusting of the public.
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