Comments on Miranda Stewart "Ideas for Australia: Five ideas to help fix Australia’s tax system", 11/04/2016
While many points in the post are probably valid and good, some points are debatable.Firstly, in terms of income tax, why not consider a flat or much flatter tax structure to simplify the current income tax?
This is particularly in the context where the author also argued for broadening the GST base to cover everything and to increase the rate to 12.5%. To do that with the GST is not too different to have a flat income tax.Secondly, company income tax rate, there should be a debate what is best in terms of the tax rate.
I personally have significant doubt on the often argued benefits of lowering company tax rate, notwithstanding the capital mobility argument.The argument on tax on superannuation contribution is highly questionable and dubious, particularly in terms of using individual’s marginal tax rate.
The argument on negative gearing is also questionable. So much for now and may comment further down the track.
For the universal paid parental leave of 6 months and universal childcare for those who working, what would be the pay rate for the mothers or fathers for that matter, and what level of assistance for universal childcare from the government using taxpayers' money? The rates are the key and without appropriate rates such talks are pointless.
Further, the equal share in both personal income tax and the GST between the federal and state governments may give too much revenue to the states. And yes, any increase from the current federal revenue to the states should definitely contingent on the states to abolish some the most inefficient taxes.
The states have not delivered the promise or requirement as specified in the inter-governmental agreement for the GST. As a result, the public is justified to be suspicious of promise to abolish taxes without actions undertaken.
The relative shares of income tax and the GST should be based on some objective measures in terms of services and other obligations of each levels of government and should not left to the politicians alone. There should be an independent body to decide that, or to have referendums to decide.
Income tax should be indexed to the total income level, so the the ratio of total tax revenue to the income is virtually fixed. Again, if there is a need to increase tax, let referendum, that is, the voters to decide.
PS: in reply to comments on the first part of my comments by Robert:
"Lincoln, I don’t know about you, but for the last 50 years my taxation has been calculated by a computer, and automatically deducted and passed on to the ATO - again by a computer.
I have never once been fussed by a regressive or progressive tax calculation. Computers can handle any of them. The real issue is whether you think taxes should be paid by those who can afford them, or by those who cannot.
As to the GST, yes, it is a flat tax applied to pretty much whatever you chose to spend your after-tax income - unless you are rich, of course, in which case the tax you pay is pretty much voluntary.
You need to be more specific in your comments."
Robert, please see more comments from me below that may clear some of your questions. Progressive taxes are more than for high income earners to pay more taxes, they are paying proportionately more from their income. A flat tax means the more one earns the more tax they would pay.
Showing posts with label taxation. Show all posts
Showing posts with label taxation. Show all posts
2015-07-24
An Economics professor's serious mistake
Comments on Flavio Menezes "FactCheck: is the GST as efficient but less equitable than income tax?" 24/07/2015
This "Fact Check" from Flavio Menezes is so extraordinarily wrong that it does not pass the common sense or insanity text. The first sentence in its verdict , that is I quote "The Assistant Shadow Treasurer is correct that the efficiency of the GST as a tax is similar to that of income tax", is spectacularly incorrect and wrong.
That verdict even blatantly contradicts or ignores or misunderstands the review provided by Professor John Freebairn that the so called Fact Check was presumably engaged as an expert opinion. It is a serious and appalling error or error in judgement, understanding, or simply oversight or negligence on Flavio Menezes' part. How did that happen Flavio Menezes, a Professor of Economics at The University of Queensland, is beyond comprehension.
In terms of efficiency, the GST, which is a flat with a rate of 10% as currently applied even though there are exemptions such as fresh food, health etc, is much more efficient than the Australian income tax which is very progressive in the tax rates ranging from 0 to effectively 47% if the medicare levy is included. There is virtually no argument about the relative efficiency among economists and most politicians know that also.
In terms of distributional effect, the progressive nature of the income tax is much more favourable to low income people because they are taxed proportionately at lower rates and tax the high income people much more heavily.
PS: Of course, in order to derive his erroneous conclusion, Professor Flavio Menezes used a flat income tax. We all know that is purely an assumption and is far from what the very progressive Australian income tax system is.
This "Fact Check" from Flavio Menezes is so extraordinarily wrong that it does not pass the common sense or insanity text. The first sentence in its verdict , that is I quote "The Assistant Shadow Treasurer is correct that the efficiency of the GST as a tax is similar to that of income tax", is spectacularly incorrect and wrong.
That verdict even blatantly contradicts or ignores or misunderstands the review provided by Professor John Freebairn that the so called Fact Check was presumably engaged as an expert opinion. It is a serious and appalling error or error in judgement, understanding, or simply oversight or negligence on Flavio Menezes' part. How did that happen Flavio Menezes, a Professor of Economics at The University of Queensland, is beyond comprehension.
In terms of efficiency, the GST, which is a flat with a rate of 10% as currently applied even though there are exemptions such as fresh food, health etc, is much more efficient than the Australian income tax which is very progressive in the tax rates ranging from 0 to effectively 47% if the medicare levy is included. There is virtually no argument about the relative efficiency among economists and most politicians know that also.
In terms of distributional effect, the progressive nature of the income tax is much more favourable to low income people because they are taxed proportionately at lower rates and tax the high income people much more heavily.
PS: Of course, in order to derive his erroneous conclusion, Professor Flavio Menezes used a flat income tax. We all know that is purely an assumption and is far from what the very progressive Australian income tax system is.
2015-07-21
Politicians are simply too lazy and irresponsible on taxes and spending
Comments on Kirsten Lawson "ACT Chief Minister Andrew Barr supports calls for a higher Medicare levy", 21/07/2015
Why the politicians always talk about to raise more revenue to meet an increasing costs of health and have no mention of having the health costs under control? Further, why don't they examine whether the existing spending on health is used in the most proper and appropriate ways? Are they really well used? Isn't there any way to improve the effectiveness and efficient aspects of health spending to use less and do more?
It seems that many politicians are very lazy and irresponsible to the electorate, given that they only look at spending more and the easy way out by raising taxes.
Furthermore, rather than courageous or intelligent, Mr Baird should be see as coward and silly, given the fact that the states and territories should stand up against the commonwealth for the latter's arbitrary change to funding to the former.
Politicians should not given lazy, easy and tricky ways to raise taxes. It is time for them to be much more accountable, prudent and responsible for spending each and every dollar of taxpayers' monney.
Why the politicians always talk about to raise more revenue to meet an increasing costs of health and have no mention of having the health costs under control? Further, why don't they examine whether the existing spending on health is used in the most proper and appropriate ways? Are they really well used? Isn't there any way to improve the effectiveness and efficient aspects of health spending to use less and do more?
It seems that many politicians are very lazy and irresponsible to the electorate, given that they only look at spending more and the easy way out by raising taxes.
Furthermore, rather than courageous or intelligent, Mr Baird should be see as coward and silly, given the fact that the states and territories should stand up against the commonwealth for the latter's arbitrary change to funding to the former.
Politicians should not given lazy, easy and tricky ways to raise taxes. It is time for them to be much more accountable, prudent and responsible for spending each and every dollar of taxpayers' monney.
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.
2015-07-09
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.
2015-06-25
Land tax is no silver bullet to Australia's taxation
Comments on Mardi Dungey "The new economy - how do we get there from here?" 24/06/2015
Although land tax is more efficient than income tax thanks to the immobility of land, it is harder to address equity like the progressive income tax can.
Although land tax is more efficient than income tax thanks to the immobility of land, it is harder to address equity like the progressive income tax can.
It's not too different to GST: it may be regressive as opposed to progressive. Why have successive governments from both sides of the major political parties not wanted to change either its scope or rates serves a good reminder the fact that GST is no bullet proof for Australia's taxation issues.
he argument for efficiency of a tax, therefore, has to be balanced with distribution aspects of taxes.
he argument for efficiency of a tax, therefore, has to be balanced with distribution aspects of taxes.
2013-09-20
Change the GST or not?
Comments on LAUREN WILSON "Tony Abbott dismisses fresh push to re-examine the GST", 20/09/2013, http://www.theaustralian.com.au/national-affairs/tony-abbott-dismisses-fresh-push-to-re-examine-the-gst/story-fn59niix-1226723309057
The current government prior to the federal election said GST will be included in its planned tax review and also said earlier GST won't change in this term of government and any change will need to get a mandate from the next election, although latter on it was changed to GST will not change.
My reading of the government's approach is that it will continue to say GST won't change until the review report is publically available with recommendations that the GST should be changed. There appears a case that the GST should be changed to either replace some of the inefficient state taxes, such as stamp duty on conveyances, or to reduce personal income taxes.
Any changes to the GST whether it is to broaden the base, or to increase the rate should be traded with a reduction in some taxes so to keep the level of overall taxation roughly unchanged. The aim is to increase the efficiency of taxation rather than to increase the level of taxation.
There are two other important issues related to potential changes in the GST. One is there should be a compensation to low income earners through tax reduction to minimise its impact on them and at the same time to increase the incentives to work.
Another is that if the GST is to be changed, it would present an opportunity to change the GST distribution system. Fundamentally, the federal government should consider to distribute the GST on population shares and should move the fiscal equlisation role through another general grants in a trade off with the states to support GST changes.
Since the introduction of the GST, fiscal equalisation is done through GST distribution. Given that GST is fully provided to the states and the federal government does not have any direct benefit from GST one way or another, it lacks interest in how it is distributed.
By moving fiscal equalisation into using another general grants from the federal general revenue pool, it would have an interest in the size of the redistribution, and hence how it is done. More importantly, it would provide a circuit breaker for the disagreement between the states on how GST should be distributed.
I see this as a practical way to move forward on the GST issue. And it is likely that a change to the GST will on the card in the next election.
2013-04-29
Set a revenue to GDP ratio to improve policy making and service delivery
Comments on John Freebairn "Federal Budget 2013: Why our unsustainable structural deficit must be tackled", 29/04/2013, https://theconversation.com/federal-budget-2013-why-our-unsustainable-structural-deficit-must-be-tackled-13723
I largely agree with the remark by the author that "The mix of tax increases and expenditure reductions require society to make judgements about the relative roles of government and the private sector, and about the relative merits of more or less limited income and resources allocated to government goods and services versus private sector provided goods and services."
Personally, I think there should be a ceiling of taxation revenue to GDP ratio to constrain any government irrespective to their political persuasions, otherwise, it is too easy for politicians to raise tax rates, increase new taxes and levies. Politicians' mandates should be set with a clear limit, so they can focus better on better policies and efficient service delivery.
I personally think that all government revenues to the GDP ratio should not exceed a third for the near future; that would leave two thirds to the private sector. In the longer term, 30% should be aimed for.
Within that broad parameter, the three levels of government should have an agreed shares of the different revenues according to their service responsibilities.
2013-02-09
Shameful for all involved in MRRT design
Comments on Sally Zou et al "Mining tax shortfall: the experts respond", 9/02/2013, http://theconversation.edu.au/mining-tax-shortfall-the-experts-respond-12105
When the truth comes to daylight and while we see the dreadful position and policy/taxation skills of the Treasurer and the PM, no one should forget those advisers and the economic and tax advisory institutions behind the scene who were involved in the design of the tax and its finalisation and provided the shameful and deceitful numbers to the public.
At the time, not many reporters, analysts and commentators questioned the numbers provided to the public, even though when both the tax bases and the rate had decreased as well as more generous deductions while the projected total tax didn't change much from the original Henry design.
An incompetent government is generally accompanied by equally incompetent advisers and related institutions.
A further shame is that is is equally likely that those advisers and key persons with the related institutions would have got their promotion similar to the way that the Treasurer became the deputy PM.
When the truth comes to daylight and while we see the dreadful position and policy/taxation skills of the Treasurer and the PM, no one should forget those advisers and the economic and tax advisory institutions behind the scene who were involved in the design of the tax and its finalisation and provided the shameful and deceitful numbers to the public.
At the time, not many reporters, analysts and commentators questioned the numbers provided to the public, even though when both the tax bases and the rate had decreased as well as more generous deductions while the projected total tax didn't change much from the original Henry design.
An incompetent government is generally accompanied by equally incompetent advisers and related institutions.
A further shame is that is is equally likely that those advisers and key persons with the related institutions would have got their promotion similar to the way that the Treasurer became the deputy PM.
2012-08-02
A better alternative to the NDIS
Comments on Gary Johns "Middle-class welfare must be squeezed to help the disabled" 2/08/2012 http://www.theaustralian.com.au/news/opinion/middle-class-welfare-must-be-squeezed-to-help-the-disabled/story-fn8v83qk-1226440702411
While the NDIS has its merits, I think it would be even better to introduce a national, voluntary and tiered scheme similar in spirit to the proposed NDIS.
Such a scheme should have a standard contribution rates similar to a levy, but whether a person pays or not is voluntary. Besides the standard rates, one can also be allowed to choose a lower rate for a lower level insurance. If a person pays, then he/she and his/her family are covered by such an insurance.
With this voluntary scheme, there is a national register which shows the records of people's "insurance" that will be used for "claims". Low/no income people are also covered, as their taxation records can be matched with to show whether they have paid their voluntary premier or not.
Such a scheme should be better than the current proposed NDIS. It would be a real insurance as opposed to a general taxation/levy, which blurs incentives and responsibilities at may levels including politicians and bureaucrats.
2012-01-09
Swan unreasonable on MRRT and GST link again
Comments on NEWS - Economy "Swan pressures states on GST", 9/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/Swan-pressures-states-on-GST-pd20120109-QBQZS?OpenDocument&src=hp4
The RSPT and MRRT, from their design, is a revenue grab by the Federal ALP government, not as what recommended in the Henry Taxation Review to replace the current mineral Royalties with a more efficient rent type tax on minerals.
As a replacement of state mineral royalties, any new tax on mineral rent should leave that to the states.
Should that be the case, it would address not only efficiency of mineral taxation, but also mitigate the current huge vertical fiscal imbalance between the federal and states levels of government in Australia.
That would be hugely beneficial to not only the current fiscal management but future generations.
Haven't we been told by the federal ALP government that the states will not have enough revenue to provide the predicted level of medical services partially related to population aging in the coming decades, as its excuse to ask the states for part of their GST to be given to the federal government to be counted as its contribution to government funding?
Isn't it a fundamental principle that there should be clear accountability for any government for its expenditures and taxes?
Why the federal Treasurer does not follow basic economic principles in his dealing with the states?
2011-10-06
Commenting 'Death and taxes'
Comments on Jack The Insider “Death and taxes”, 6/10/2011, http://blogs.theaustralian.news.com.au/jacktheinsider/index.php/theaustralian/comments/death_and_taxes/
I suspect there is some contradiction in your argument somewhere.
If on the one hand, no tax on superannuation after 60 benefits the oldies, it should arguably reduce the burden on the social pension system and hence the burden for the young.
Further, if the non tax of superannuation can encourage people to put aside more of their own money into superannuation, that can work as alternative to increasing superannuation guarantee!
You seem to be as greedy as the government to only see the potential revenue from taxes, but to have forgot the beneficial side of no tax on superannuation after 60!
One needs to be consistent after all!
2011-05-25
Discord over WA increase in royalties and the Review of GST Distribution
Comments on Julie Bishop “Swan conjures up a Black Swan from the West”, 25/05/2011, http://www.smh.com.au/opinion/blogs/the-bishops-gambit/swan-conjures-up-a-black-swan-from-the-west-20110525-1f2y4.html
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.
2011-05-17
Taxes, welfare and the middle-class
Comments on Gerard Henderson “Middle-class welfare tag insults the noble art of raising children”, 17/05/2011, http://www.smh.com.au/opinion/politics/middleclass-welfare-tag-insults-the-noble-art-of-raising-children-20110516-1eps8.html
There are excellent and pointed points in the article.
The quote of tax relief is worth noting.
Although unconventional, people should also realise that people who are middle class but on a bit higher income also pay more taxes, not just in terms of per person or per dollar, but proportionately more per dollar of income. That is the nature of progressive tax, as compared to a flat tax rate regime.
On per person basis, higher income people pay much more taxes than they could receive back from government services.
That is an important feature of the modern tax system to note.
There are excellent and pointed points in the article.
The quote of tax relief is worth noting.
Although unconventional, people should also realise that people who are middle class but on a bit higher income also pay more taxes, not just in terms of per person or per dollar, but proportionately more per dollar of income. That is the nature of progressive tax, as compared to a flat tax rate regime.
On per person basis, higher income people pay much more taxes than they could receive back from government services.
That is an important feature of the modern tax system to note.
2011-05-16
Should we index tax threshold?
Comments on Peter Anderson “Bracket creep is the budget's real inequity”, 16/05/2011, http://www.theaustralian.com.au/national-affairs/budgets/bracket-creep-is-the-budgets-real-inequity/story-fn8gf1nz-1226056354689
Most of Anderson said is fair and rational in cold comfort.
The point about indexation of the tax free threshold to avoid bracket creeping and preventing over taxation is excellent, though it may benefit from more careful analysis and considerations.
For example, it could be introduced with a partial indexation and a periodical adjustment mechanism to make sure there is enough taxation revenue for government to carry out its basic duties. Maybe it should be a yearly 2/3 indexation with the CPI, and a 3-5 yearly adjustment.
However, one point about equity between family welfares and small business welfares is that if small businesses have low income, their owners are entitled to family welfares if their family income is low as Anderson said to be. Small business owners have dual roles, business and family, and could benefit from both welfares.
Most of Anderson said is fair and rational in cold comfort.
The point about indexation of the tax free threshold to avoid bracket creeping and preventing over taxation is excellent, though it may benefit from more careful analysis and considerations.
For example, it could be introduced with a partial indexation and a periodical adjustment mechanism to make sure there is enough taxation revenue for government to carry out its basic duties. Maybe it should be a yearly 2/3 indexation with the CPI, and a 3-5 yearly adjustment.
However, one point about equity between family welfares and small business welfares is that if small businesses have low income, their owners are entitled to family welfares if their family income is low as Anderson said to be. Small business owners have dual roles, business and family, and could benefit from both welfares.
2011-04-05
Congestion tax is fanciful
Comments on John Stanley “Congestion tax – the great traffic jam breaker”, 5/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Traffic-congestion-roads-infrastructure-tax-pd20110405-FM3Y9?OpenDocument&src=sph
It is fanciful to have a congestion tax in cities.
While some people talk about such a concept, it is a flawed and impractical approach. It is never clear whether it is the fault of those people who use the road, or it is the failures of government due to poor planning and/or management, that cause or result in congestions.
Congestion itself is already a cost or tax on those people who are caught in congestion.
In the unlikely event such a tax is introduced, it can be perceived not only as a government revenue measure and tax grab but also as government’s disguise or finding an excuse for its poor management. Further, government may deliberately create more congestions or more areas of congestion to simply raise more revenue.
Once that becomes clear, isn't it the case that the fanciful idea of congestion tax dead in the water already?
In summary, congestion tax might be a good theoretic and economic concept, it is a naïve thinking and nonsensical idea after all.
It is fanciful to have a congestion tax in cities.
While some people talk about such a concept, it is a flawed and impractical approach. It is never clear whether it is the fault of those people who use the road, or it is the failures of government due to poor planning and/or management, that cause or result in congestions.
Congestion itself is already a cost or tax on those people who are caught in congestion.
In the unlikely event such a tax is introduced, it can be perceived not only as a government revenue measure and tax grab but also as government’s disguise or finding an excuse for its poor management. Further, government may deliberately create more congestions or more areas of congestion to simply raise more revenue.
Once that becomes clear, isn't it the case that the fanciful idea of congestion tax dead in the water already?
In summary, congestion tax might be a good theoretic and economic concept, it is a naïve thinking and nonsensical idea after all.
2011-03-30
MRRT, company tax cuts and personal taxpayers
Comments on Rob Burgess “We need better taxes, not bigger taxes”, 30/03/2011, http://www.businessspectator.com.au/bs.nsf/Article/tax-reform-Bob-Brown-revenue-MRRT-mining-tax-pd20110330-FES3V?OpenDocument&src=rot
This article seems like a confused argument that may cause more confusions.
In terms of the relative position of Australian company tax rate, the article appears self defeating but refused to concede that it might be a case that it does not need to be lowered at present.
In terms of impact of mining and higher $A on the tax revenue from other businesses, the article lacks a coherent and consistent logic too.
If the tax revenue from other businesses were to fall by mining boom and high $A, then further lower the company tax rate will do nothing to keep the government budget unaffected or neutral or its integrity.
Even from equity point of view between business and labour, the argument for reducing the company tax rate only stacks up if businesses are indeed have to provide higher superannuation for employees without effectively lower employees wages or slowing the growth of them, so all taxpayers benefit from a lower company tax rate. There is no guarantee that employees will not be negatively affected or worse off in that process.
If it is to consider the future, then there is a strong point not to lower the company tax rate and instead to put the MRRT into a future fund.
To conclude, while it has been taken as a faith to lower company tax rate, the arguments in this article are not convincing.
Having said that, I find some attraction from its title.
This article seems like a confused argument that may cause more confusions.
In terms of the relative position of Australian company tax rate, the article appears self defeating but refused to concede that it might be a case that it does not need to be lowered at present.
In terms of impact of mining and higher $A on the tax revenue from other businesses, the article lacks a coherent and consistent logic too.
If the tax revenue from other businesses were to fall by mining boom and high $A, then further lower the company tax rate will do nothing to keep the government budget unaffected or neutral or its integrity.
Even from equity point of view between business and labour, the argument for reducing the company tax rate only stacks up if businesses are indeed have to provide higher superannuation for employees without effectively lower employees wages or slowing the growth of them, so all taxpayers benefit from a lower company tax rate. There is no guarantee that employees will not be negatively affected or worse off in that process.
If it is to consider the future, then there is a strong point not to lower the company tax rate and instead to put the MRRT into a future fund.
To conclude, while it has been taken as a faith to lower company tax rate, the arguments in this article are not convincing.
Having said that, I find some attraction from its title.
2011-03-29
A potential structural deficit in using MRRT to fund company tax cuts
Comments on Joe Kelly “Industry attacks Greens vow to oppose company tax cuts”, 29/03/2011, http://www.theaustralian.com.au/national-affairs/industry-attacks-greens-vow-to-oppose-company-tax-cuts/story-fn59niix-1226029856403
Leaving aside whether the Australian company tax is international competitive or not, the tax cuts to company tax rates MAY ACTUALLY COST more than the MRRT would collect.
Remember that there are reports that the big three mining that did the deal MRRT with Gillard might not believe the MRRT would collect as much as Treasury study forecast? They are big companies and it's their money at stake, so they were unlikely to have made a mistake in their calculation. I'd bet they were/are correct.
Further, remember Treasury's number changes in the tax revenue estimates between Rudd's SPRT and Gillard's MRRT? It was suspicious then and it is still suspicious now. It looked like a joke and it has been one.
If an independent audit was done for the Treasury estimates, it would shed some light on the issue.
All they suggest is that the MRRT will not collect the amount of revenue that the Gillard government has been saying.
Leaving aside whether the Australian company tax is international competitive or not, the tax cuts to company tax rates MAY ACTUALLY COST more than the MRRT would collect.
Remember that there are reports that the big three mining that did the deal MRRT with Gillard might not believe the MRRT would collect as much as Treasury study forecast? They are big companies and it's their money at stake, so they were unlikely to have made a mistake in their calculation. I'd bet they were/are correct.
Further, remember Treasury's number changes in the tax revenue estimates between Rudd's SPRT and Gillard's MRRT? It was suspicious then and it is still suspicious now. It looked like a joke and it has been one.
If an independent audit was done for the Treasury estimates, it would shed some light on the issue.
All they suggest is that the MRRT will not collect the amount of revenue that the Gillard government has been saying.
2011-03-25
Potential carbon poison to tax reform and to emissions reduction
Comments on Henry Ergas “Carbon is poison to tax reform”, 25/03/2011, http://www.theaustralian.com.au/national-affairs/commentary/carbon-is-poison-to-tax-reform/story-e6frgd0x-1226027671416
It is extraordinary that Professor Garnaut, the government's key climate change adviser, has taken such a step to link the carbon tax with tax cuts.
While it has some merits to link the two, it violates some sound economic principles, makes the carbon tax case even more complex to the public and clouds the emissions reduction issue unnecessarily.
Some commentators have been quick to applaud such an idea as politically ingenious, whether to link the two is politically clever or not is yet to be seen. Once the revenue from the carbon tax is used to address other issues which are unrelated to the objective emissions reduction, many normal political issues arise.
For example, the issue of fairness associated with any equity, efficiency and incentives of any income redistribution emerge and it is likely that the majority will perceive they will be disadvantaged one way or another out of uncertainty of the outcome.
It will be much easier if the proceeds from the carbon tax are allocated to the public on an equal basis to recognise both the rights to the environment belong to them and the fact that they will have to bear the higher energy costs associated with such a carbon tax. Politically it will be an easy job to sell such a carbon tax package as a pure price mechanism.
That will have another advantage in that it will not cause structural damage to the underlying budget in the future when the tax proceeds may decline when emissions are reduced.
Of course, such a simple solution will also address the various issues Henry Ergas has identified in this article.
It is extraordinary that Professor Garnaut, the government's key climate change adviser, has taken such a step to link the carbon tax with tax cuts.
While it has some merits to link the two, it violates some sound economic principles, makes the carbon tax case even more complex to the public and clouds the emissions reduction issue unnecessarily.
Some commentators have been quick to applaud such an idea as politically ingenious, whether to link the two is politically clever or not is yet to be seen. Once the revenue from the carbon tax is used to address other issues which are unrelated to the objective emissions reduction, many normal political issues arise.
For example, the issue of fairness associated with any equity, efficiency and incentives of any income redistribution emerge and it is likely that the majority will perceive they will be disadvantaged one way or another out of uncertainty of the outcome.
It will be much easier if the proceeds from the carbon tax are allocated to the public on an equal basis to recognise both the rights to the environment belong to them and the fact that they will have to bear the higher energy costs associated with such a carbon tax. Politically it will be an easy job to sell such a carbon tax package as a pure price mechanism.
That will have another advantage in that it will not cause structural damage to the underlying budget in the future when the tax proceeds may decline when emissions are reduced.
Of course, such a simple solution will also address the various issues Henry Ergas has identified in this article.
2011-02-04
Gillard needs a change of soul
Comments on Dennis Shanahan “Back to work junking two-speed economy”, 4/02/2011, http://www.theaustralian.com.au/news/opinion/back-to-work-junking-two-speed-economy/story-e6frg6zo-1225999763767
The key to achieving those policy objectives is to have a flexible and efficient workforce that is appropriately incentivised and rewarded through a low and flat tax, together with some regional and sectoral reorganization.
Government should create the most conducive environment for people to learn, re-skill, work in and move to most reward sectors and locations.
To complement that, if there is a real labour shortage, with temporary working visa with no permanent residency attached.
If the record is a guide, the current government is not well positioned for achieving those goals. It has the class warfare mentality - to tax the rich (high and middle incomes) and to provide high welfare to others. That mentality and approach to governance is unlikely to be compatible with Gillard’s recent apparent policy shift.
The flood levy, for example, clearly and unambiguously demonstrates this point.
Unfortunately, Gillard is captive to this outdated Labor ideology.
The key to achieving those policy objectives is to have a flexible and efficient workforce that is appropriately incentivised and rewarded through a low and flat tax, together with some regional and sectoral reorganization.
Government should create the most conducive environment for people to learn, re-skill, work in and move to most reward sectors and locations.
To complement that, if there is a real labour shortage, with temporary working visa with no permanent residency attached.
If the record is a guide, the current government is not well positioned for achieving those goals. It has the class warfare mentality - to tax the rich (high and middle incomes) and to provide high welfare to others. That mentality and approach to governance is unlikely to be compatible with Gillard’s recent apparent policy shift.
The flood levy, for example, clearly and unambiguously demonstrates this point.
Unfortunately, Gillard is captive to this outdated Labor ideology.
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