OPINION: Australia's taxation system long due for review
THESE were my words last week: "The traditional view was that tax collections were to be made as taxpayers generated income. The fallibility of this thinking is self-evident as the commodities boom winds down, company profits fall as economic growth stalls and dependence on hitting individuals hard falters as unemployment increases and job availability dries up."
This week I shall expand on this hypothesis against the news that the IMF has downgraded projections for global economic growth this year to just 3.1%, a decline into deep recession for fellow commodity traders Brazil and Russia (a 3.0% and 3.8% negative growth respectively) and a decline in Australia's economic growth to 2.4% even against a reasonably satisfying maintenance of a 6.8% growth rate in our major trading partner China.
After the summit I referred to in last week's article, new treasurer Scott Morrison has been pretty active in spreading the word about a desperate need for changes to the tax system and labour market. Take this in. "Fifteen years ago, 80% of taxpayers were paying 30 cents in the dollar on tax and today that figure has fallen to around a quarter. So we've got big changes in the way the tax burden is falling on people earning an income."
And what about this comment? "In 2016-17, if you're on the average wage, you'll be in the second-highest tax bracket. That's not a good outcome for people on an average wage... they're paying too much personal income tax."
It's difficult to get entirely up-to-date figures on just how the tax take is distributed. But for my purposes these stats tell a pretty good story. Tax on income in Australia generates 74% of federal tax revenue, 24% GST, the rest bibs and bobs. If you're a wage earner, you'll be pleased to know that your contribution is some 47% of the income tax take, leaving the contribution from companies around 22%.
If you're a high income earner working your guts out in tropical heat to get ahead, you'll be extra pleased to know that 58% of the income tax generated is from just 17% of employees.
If we accept the commonly held proposition that company tax in this country is far too high to make us competitive on the world stage, what does it say about the whacking our wage earners cop?
Morrison has promised to take the country with him as he floats ideas as to how to rectify the situation. But already he's faced the barking dogs of the Labor movement with his suggestion that maybe we should free up the labour market and trade off weekend penalty rates for tax credits.
Then, of course, there's the elephant in the room - Labor and the Senate who'll fight tooth and nail against either a broadening of, or increase in the role of GST in the tax mix. And then there's the states who'll make getting universal agreement on any GST innovation well nigh impossible. The theme of last week's article was the umbilical link this country's leaders have with an increasingly irrelevant past.
Bob Lamont and Corporate Accountants have moved to Goondoon Street, opposite Hog's Breath. Bob may be contacted at email@example.com.