This is a Centre party movement policy discussion paper only. It is not official policy. It is designed to raise points of discussion leading to a policy that would be voted into existence by party members.
Australia’s taxation system is extremely complex. This is a barrier to attempts to simplify it and to ensure it is balanced and fair. The job is well beyond me, even for the sake of framing a policy paper for discussion. It is beyond the capabilities or willingness of politicians from our major parties, with their multifarious internal and external resources.
Changes are not uncommon. They take the nature of a fix-up, a patch job or a tweak – all Band-Aid solutions. Our politicians might prefer it that way. Taxation is a political football that can be taken out during an election campaign and kicked back and forth, with the game ending in another promise or two.
The Rudd Labor government commissioned a comprehensive review of taxation in 20081. The Henry Tax Review identified 125 taxes imposed by various forms of government. Of those, 10 taxes raised 90 per cent of tax revenue.
The Henry report recommended concentrating taxation in four key areas2 and eliminating much of the remainder. The review’s recommendation for a mining tax (see RSPT below) became the Minerals Resource Rent Tax (MRRT), passed by parliament in July 2012. The Abbott LNP Coalition government had it repealed, on the second attempt, in September 2014.
The history of the MRRT alone testifies to the futility and chaos of the two-party system. Mineral resources are the property of the people, vested in the various States, and are finite. Once gone, they are gone for good. They should be thoroughly taxed to return a benefit to the people, preferably to pay for infrastructure (which lasts) rather than welfare (which doesn’t).
Part of the problem with the MRRT was that resources were already taxed, in a variety of ways. Even worse was the Rudd/Swan/Henry proposal for a Resource Super Profit Tax (RSPT), a 30 per cent tax on profits above $75 million (original proposal was above $50 million) from mining iron ore and coal. No wonder the mining companies spent $22 million (an AEC calculation) fighting the proposal in a bitter campaign that almost brought down Rudd’s government and contributed to his overthrow.
Taxation must be sensible and it must be fair. It must be limited and it must be adequate to provide for a nation’s needs. Anything less or more creates a grievance, resentment and avoidance. These are the reasons why tax becomes a political football.
The need for government revenue will not diminish or go away in the future. It will increase as populations increase. As long as governments take the easy path and fail to tax the most lucrative areas of economic activity the tendency to add taxes to every activity, and to increase them, will continue. The bewildering complexity will continue.
A range of forces that we may refer to as Conservative see a solution to revenue problems in small government. The Liberal Party of Australia believes services are best provided by private industry, so all publicly-owned government services should be sold to private industry. This is allied to the 1980s economic dries’ principle of “user pays”. If you put it all together it means the wealthy will be even better off and the less privileged will become even worse off. They are paying for everything they use now anyway, and with money (their wages) that has already been taxed.
Small government is supposed to lead to lower taxes. Lower taxes mean more private ownership of infrastructure and services and less welfare. That future is not referred to or described by the Liberal party, to my knowledge. Party members and ministers simply repeat the mantras: Small government. Lower taxes.
There is unfairness throughout the taxation system. A good example is housing, or housing affordability. Negative gearing (writing off a loss on investment rentals to reduce other taxable income) should be abolished.
The Hawke Labor government changed the linkage between rental income and other taxable income twice in 1985, ostensibly to stimulate dwelling construction and therefore availability and affordability. Changes and attempted change have had little effect on availability or affordability, but negative gearing has had an effect on tax revenue. In the current crisis of affordability, as recently as February 2017, various LNP government ministers have said the housing problem is caused by availability – a shortage of dwellings for sale or rent. Clearly, negative gearing has failed to stimulate supply.3
The practice of big foreign companies avoiding paying tax in Australia by registering their business elsewhere must be stopped. The practice goes by various names and is legal because past Australian governments have signed on for it.
This discussion paper recommends that a policy of all who do business in Australia pay tax in Australia be adopted and enforced.4
This discussion paper further recommends that the Australian Tax Office (ATO) be ordered to cease its policies of self-assessment and of negotiating a lower payment than that originally owed to the ATO. These policies are costing governments revenue and transferring that revenue burden elsewhere.
This discussion paper also recommends that the Henry Tax Review be revisited in view of the fact that one major recommendation was adopted and most of the report was discarded despite the effort that went into it.
Payroll tax should be abolished. Payroll tax is a tax on employers who provide jobs for the workforce. Abolishing it will have a revenue cost. This could be alleviated by abolishing payroll tax for employers who provide an equivalent in employee benefits, say in childcare allowance or maternity leave.
Constructive comments, corrections and additions are welcomed.
1Australia’s Future Tax System Review (Henry Tax Review) was commissioned by the Rudd Government in 2008 and published in May 2010: https://www.google.com.au/?gfe_rd=cr&ei=MWSpWPCCFfPc8weqsb7oAw#q=henry+taxation+review
2 Revenue raising should be concentrated on four robust and efficient tax bases:
- personal income, assessed on a more comprehensive base;
- business income, with more growth-oriented rates and base;
- private consumption, through broad, simple taxes; and
- economic rents from natural resources and land, on comprehensive bases, noting that revenue from rent taxes will likely be more volatile than from the existing resource royalties it will replace.
Other taxes should be maintained only if they efficiently address social or economic costs — such as taxes on tobacco, alcohol, gambling and environmental costs, and efficient road user taxes or charges.
3 Why negative gearing is Australia’s biggest policy failure. Callam Pickering, The Australian Business Spectator, July 9, 2014. http://www.theaustralian.com.au/business/business-spectator/why-negative-gearing-is-australias-biggest-policy-failure/news-story/41abb3daec3e46697ce52e8295912f2d
A personal viewpoint on negative gearing by Nick Holden, of Smart Property Investment: http://www.smartpropertyinvestment.com.au/opinion/15361-a-short-history-of-negative-gearing
4 The Tax Justice Network Australia is part of an international movement to uncover and end tax avoidance by large multinational corporations. Further information on website, Facebook and Twitter accounts.