Tax What? Tax Who? Why?
Focus questions for Adelaide Lunchtime
Seminar, 16 March 2019
Note: About Focus Questions: a) Please read them before you come to the meetup. Think about them so you have more than "instant opinions" to offer. b) Feel free to add more focus questions. c) THE FOCUS QUESTIONS ARE JUST A MENU TO CHOOSE FROM. From this menu we can discuss whatever seems interesting. d) Focus questions are not intended to push one viewpoint! You can adopt any position you wish. We actually like friendly disagreement - it can lead to deeper understanding.
[hmm, Benjamin Franklin noticed that the only certainties are death and taxes. People won't talk about death. Will they talk about taxes? Let's see.. ]
1. WHY IS TAXATION NEEDED, AND FOR WHOM?
Note: people will give a simple, smug answer to this in any pub. Try
to think and investigate a little more deeply.
2. WHO IS AVOIDING TAX, AND HOW
SUCCESSFULLY? For background, in 2015-16 732 Australian companies
paid no tax, yet their combined income was $500,000,000,000 . Put
this against tax revenue (2015): individual income tax at $170
billion or 39.3% of all revenue collected in Australia, income tax
on enterprises at $77 billion or 17.7% of all revenue, GST at $55.5
billion or 12.8% of all revenue, and. excise taxes at $26.4 billion
or 6.1% of all revenue.
3. DOES TAXATION CREATE A MORAL HAZARD,
TEMPTING THOSE WITH THE POWER TO REDISTRIBUTE TAXATION INTO WARS AND
AGGRESSION? What can be done about this? Historically kings and
warlords (same difference?) taxed to support their lifestyles and
wars. Has this really changed?
4. WHO SHOULD ACTUALLY DECIDE THE LEVEL OF
TAXATION? For example, would it be viable to have an independent,
non-political body decide the level of taxation?
5. WHY IS THE TAX CODE SO BIG AND
COMPLICATED? The tax code in most countries and certainly in
Australia, is huge and requires an army of lawyers to decode it, and
often to cheat it. Why does this situation exist, and what can be
done about it? Why hasn't something been done about it?
6. WHAT PROPORTION OF AUSTRALIA'S TAX INCOME
IS REDISTRIBUTED A) THROUGH SUBSIDIES, AND B) THROUGH SOCIAL SUPPORT
BENEFITS? IS THIS MIX ABOUT RIGHT, OR NOT? Note that subsidies and
social support benefits are a form of reverse taxation: they
7. WHAT ARE YOUR SUGGESTIONS FOR TACKLING
TRANS-NATIONAL TAXATION. Multinational organizations and companies
play a large and ever increasing part in our economies. However it
seems difficult or impossible to tax them in proportion to their
8. ARE ‘SIN TAXES’ ON GAMBLING, TOBACCO ETC.
A LEGITIMATE TAX ON STUPIDITY, A PUBLIC HEALTH MEASURE, OR WHAT?
9. ENVIRONMENTAL TAXES, LIKE A CARBON TAX,
HAVE BEEN HIGHLY CONTROVERSIAL. WHAT IS YOUR VIEW? (Worldwide there
are now at least 70 national and regional carbon tax schemes
covering possibly 20% of all global emissions).
10. SUGGEST A LIST OF ITEMS, AS OPPOSED TO
PEOPLE, WHICH CAN BE TAXED, AND HOW.
11. SUGGEST A LIST OF TYPES AND CLASSES OF
PEOPLE WHO CAN BE TAXED, AND HOW
12. SUGGEST A LIST OF ORGANIZATIONS AND COMPANIES WHICH CAN BE TAXED, AND HOW.
13. SUGGEST WHAT AND WHO CAN BE EXCLUDED FROM TAXATION, AND WHY
Comments & Extra Reading
John Vidal (26 February 2019) "Concrete is tipping us into climate catastrophe. It's payback time". The Guardian @ https://www.theguardian.com/cities/2019/feb/25/concrete-is-tipping-us-into-climate-catastrophe-its-payback-time-cement-tax
Joseph Stiglitz (14 Feb 2019) "How can we tax the footloose multinationals?" The Guardian @ https://www.theguardian.com/business/2019/feb/14/how-can-we-tax-the-footloose-multinationals
Gareth Hutchensand Nick Evershed (13 Dec 2018) "Ten companies are paying 45% of all corporate tax in Australia - The federal government is heavily reliant on the fortunes of the big banks, miners and supermarket giants for its corporate tax intake". The Guardian @ https://www.theguardian.com/australia-news/2018/dec/13/ten-companies-pay-45-per-cent-of-all-corporate-tax-in-australia
Max Newnham (24 April 2018) "The myth about the way most businesses are taxed" Brisbane Times @ https://www.brisbanetimes.com.au/business/small-business/the-myth-about-the-way-most-businesses-are-taxed-20180423-p4zb6y.html
Eryk Bagshaw (11 July 2018) "$8 billion in income tax lost each year, Tax Office concedes". Brisbane Times @ https://www.brisbanetimes.com.au/politics/federal/8-billion-in-income-tax-lost-each-year-tax-office-concedes-20180711-p4zqsg.htm
Cherie Barnett - Hey Thor - there’s some interesting g stuff on The Conversation too ?
Melissa Browne (18 June 2018) "Bought Bitcoin? The Tax Office has you in its sights" Brisbane Times @ https://www.brisbanetimes.com.au/money/tax/bought-bitcoin-the-tax-office-has-you-in-its-sights-20180618-p4zm5b.html
Australian Associated Press (10 Jan 2019) "Productivity Commission report proposes major changes to super system" The Guardian @ https://www.theguardian.com/australia-news/2019/jan/10/superannuation-changes-productivity-commission-australians-retirement-savings
Robert Russell (6 November 2018) "Why is Australian economy’s having such a remarkable run?" https://www.quora.com/Why-is-Australian-economy-s-having-such-a-remarkable-run
Eryk Bagshaw (5 August 2018) "'Tipping point': One in 10 spending more than their income" https://www.brisbanetimes.com.au/business/the-economy/tipping-point-one-in-10-spending-more-than-their-income-20180805-p4zvml.html
Stephen Koukoulas (10 March 2018) "Labor v Liberal: who best runs the Australian economy? - Compare economic growth and growth relative to the US under different governments and a clear picture emerges". The Guardian @ https://www.theguardian.com/commentisfree/2018/mar/09/labor-v-liberal-who-best-runs-the-australian-economy
Agence France-Presse (5 December 2017) "Ireland forced to collect €13bn in tax from Apple that it doesn't want - Announcement comes after the European Commission in 2016 ruled that tax benefits received by the tech company were illegal under EU rules". The Guardian @ https://www.theguardian.com/technology/2017/dec/05/ireland-reaches-deal-with-apple-to-collect-13bn-in-back-taxes
Michael West (13 May 2017) "Multinationals’ brazen tax avoidance " The Saturday Paper @ https://www.thesaturdaypaper.com.au/opinion/topic/2017/05/13/multinationals-brazen-tax-avoidance/14945976004635
Jessica Irvine (11 December 2017) "One in three companies pays no tax, here's why..." Brisbane Times @ https://www.brisbanetimes.com.au/opinion/one-in-three-companies-pays-no-tax-heres-why-20171210-h01yew.html
Munza Mushtaq (December 20, 2016) "Panama Papers, tax havens and the global fight against corruption - Investigative journalists, whistleblowers, brave prosecutors and judges remain champions of the cause" Asia Times @ http://www.atimes.com/article/panama-papers-tax-havens-global-fight-corruption/
Gareth Hutchens (Tue 16 Jan 2018) "Paradise Papers revealed 'commoditisation' of tax avoidance - Australian Taxation Office says investigation of data leak has identified 731 individuals and 344 corporate entities so far". The Guardian @ https://www.theguardian.com/news/2018/jan/15/paradise-papers-revealed-commoditisation-of-tax-evasion-australia
Jessica Irvine (2 October 2017) "Scott Morrison's choice: 'If Donald Trump jumped off a cliff, would you?' - Australia's corporate tax rate is again in the spotlight thanks to US President Donald Trump's ambitious tax plan announced last week to slice the US rate from 35 to 20 per cent. ... The question is, with so many other nations engaged in a race to the bottom on corporate tax rates, can Australia afford to leave its 30 per cent rate where it is? ... The first point to remember is that Australia's company tax system is unique in the world in that domestic shareholders are actually rebated for every cent in company tax paid, so-called "franking credits". So while our 30 per cent headline rate looks high, it is less of a burden than global comparisons of headline rates imply." Brisbane Times @ https://www.brisbanetimes.com.au/business/the-economy/scott-morrisons-choice-if-donald-trump-jumped-off-a-cliff-would-you-20170930-gyrwlk.html
Peter Hartcher (10 November 2017) "Why it has never been more important to tax the rich - Communism was history's mightiest, deadliest protest against inequality. The Paradise Papers draws attention worldwide to the fact that trillions of dollars sit in bank accounts in offshore tax havens protected by secrecy laws.How many trillions? The former chief economist for the McKinsey consultancy, James Henry, for instance, estimated the total at $US21 trillion ($27 trillion) to $US36 trillion. And that was rich individuals only, not counting corporations. And that was five years ago. For perspective, that would be the equivalent of about a half to a third of the annual GDP for the entire planet." Brisbane Times @ https://www.brisbanetimes.com.au/world/north-america/why-it-has-never-been-more-important-to-tax-the-rich-20171110-gzijdb.html [Thor, comment: to get some idea of scale on this, Australia's current annual GDP is about $1.2 trillion. GDP or Gross Domestic Product, is (supposedly) the total value of goods and services produced in a country]
Christian Reiermann (November 10, 2017) "Wolfgang Kubicki on Tax Havens 'We Can Solve the Problem Unilaterally' - Wolfgang Kubicki of the business-friendly Free Democrats could end up being Germany's next finance minister. He spoke with DER SPIEGEL about what should be done about tax havens in the EU and further afield." Spiegel News Magazine (Germany) @ http://www.spiegel.de/international/germany/wolfgang-kubicki-potential-german-fin-min-on-tax-havens-a-1177480.html
Dan Oakes (28 November 2018) 'False' documents submitted for 457 visas as part of alleged multi-million-dollar tax fraud scheme". Australian Broadcasting Commission @ https://www.abc.net.au/news/2018-11-28/457-visa-documents-fudged-in-alleged-tax-fraud-rort/10559908
Roger Arnold (Dec 14, 2016) "Tax Schemes: Pragmatism vs. Moral Hazard - In essence, Congress is telling Trump he's going to have to lie to them if he wants them to pass his budget". Real Money website @ https://realmoney.thestreet.com/articles/12/14/2016/tax-schemes-pragmatism-vs.-moral-hazard
Michael R. Duff (June 01, 1994) "The Moral Hazard of Government" Foundation for Economic Education @ https://fee.org/articles/the-moral-hazard-of-government/
Financial Times (India) "Definition of 'Moral Hazard' - Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It arises when both the parties have incomplete information about each other". @ https://economictimes.indiatimes.com/definition/moral-hazard?from=mdr [comment, Thor: Government revenue creates a classic situation of moral hazard on many levels. Whatever a government spends I, the taxpayer, incur the cost or enjoy the benefit, not the parliamentarians and administrators who determine that expenditure. It goes further than that. Spending other people's money is painless and anaesthetises caution. Also, the marginal value of a dollar varies greatly for the affected parties. My own income as a retired person is low, so each dollar has high value. For someone on a high income, let alone a parliamentarian, each dollar has little value. Thus the incentives for me and the relatively rich are quite different. ]
Wikipedia (2019) "Energy policy of Australia" @ https://en.wikipedia.org/wiki/Energy_policy_of_Australia [ Is coal subsidized in Australia? Quote: "82% of subsidies is concentrated in the Australian Government's 'Clean Coal Technology', with the remaining 18% of funds allocated to the renewable energy 'Project Solar Systems Australia' $75 million. The LETDF is a new subsidy scheme aimed at fossil fuel energy production started in 2007."]
ABC News (3 Mar 2014) "Malcolm Turnbull correct: Australian farmers among world's least subsidised" @ https://www.abc.net.au/news/2014-02-14/malcolm-turnbull-correct-on-farmers-subsidies/5252596 [Australia's average farm subsidy is 3% of income. The OECD average is 19% ]
Public Transport Users Association (5 February, 2019) "Myth: Motorists pay more in taxes and fees than is spent on roads" @ https://www.ptua.org.au/myths/petroltax/ [The article claims that "total cost of the road system in Australia is $69 billion a year, of which $45 billion a year is collected in taxes and charges on motorists, leaving a ‘road deficit’ of at least $24 billion a year"]
Sue Lannin (11 Nov 2014) "Australian coal, oil and gas companies receive $4b in subsidies: A new report finds exploration by coal and energy companies is subsidised by Australian taxpayers by as much as $US3.5 billion ($4 billion) every year in the form of direct spending and tax breaks". ABC News @ https://www.abc.net.au/news/2014-11-11/coal-oil-and-gas-companies-receive-4-billion-dollar-in-subsidie/5881814
Richard Denniss (June 30, 2018) "The real question on subsidies is, what do we want less of?" Sydney Morning Herald @ https://www.smh.com.au/national/the-real-question-on-subsidies-is-what-do-we-want-less-of-20180629-p4zoma.html [quote: "One thing that unites the Australian Parliament is that subsidies are a great idea. Whether it’s the Liberals’ enthusiasm for subsidising weapons exports, the Nationals’ love of subsidising coal mines, Labor’s love of subsidising manufacturing or the Greens passion for subsidising renewables, there is broad consensus that subsidies are an important, legitimate and popular tool of policy."]
Department of Jobs & Small Business (2019) "Wage subsidies - Wage subsidies are a financial incentive to encourage employers to hire eligible participants in ongoing jobs by contributing to the initial costs of hiring a new employee". Australian Government @ https://www.jobs.gov.au/wage-subsidies
Michael Klapdor and Don Arthur (2018) "Welfare—what does it cost?" Parliament of Australia @ https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/BriefingBook45p/WelfareCost [Quote: "Social security and welfare represents 35 per cent of the Australian Government’s expenses ... n 2016–17, the Australian Government estimates that it will spend around $158.6 billion on social security and welfare, and around $191.8 billion in 2019–20. This category of expenditure includes a broad range of payments and services ..."]
Franz-Stefan Gady (May 11, 2017) "Australia to Increase Defense Budget - The roughly 6 percent increase will help bring defense spending to two percent of GDP by 2021.. Australia’s defense budget is set to increase by approximately 6 percent in real terms in fiscal year 2017-18, rising to A$34.7 billion (US$25.6 billion)". The Diplomat @ https://thediplomat.com/2017/05/australia-to-increase-defense-budget/
Melissa Davey (6 Oct 2017) "Australia's healthcare spending rises above 10% of GDP for first time" The Guardian @ https://www.theguardian.com/australia-news/2017/oct/06/australias-healthcare-spending-rises-above-10-of-gdp-for-first-time [Quote: " Last year, $170.4bn was spent on health, $6bn (3.6%) more in real terms than in 2014–15, the figures from the Australian Institute of Health and Welfare show. It was the fourth consecutive year growth was below the 10-year average of 4.7%"]
Australian Bureau of Statistics "Taxation Revenue in Australia" @ http://www.abs.gov.au/ausstats/abs@.nsf/mf/5506.0 [Quote: "Total taxation revenue collected in Australia increased $23,283m (5.0%) from $465,216m in 2015-16 to $488,499m in 2016-17. This was driven by a $16,030m (6.0%) increase in taxes on income and a $2,971m (2.7%) increase in taxes on provision of goods and services. In 2016-17, taxes on income represented 57.6% of total taxation revenue for all levels of government and taxes on provision of goods and services, including the goods and services tax (GST), represented 23.2%. A feature of the Australian federal system is that the Commonwealth Government levies and collects all income tax, from individuals as well as from enterprises. It also collects a portion of other taxes, including taxes on the provision of goods and services. The revenue base of state governments consists of taxes on property, on employers' payroll, and on the provision and use of goods and services. The sole source of taxation revenue for local governments is taxes on property."
Daniel Weight (2014) "Commonwealth payments to the states - Budget Review" Parliament of Australia @ https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/rp/BudgetReview201314/ComPayments [Quote: "In 2013–14, the Australian Government is estimated to provide $95.3 billion in payments to the states and territories (states). Of these payments, $11.5 billion is designated for local government. .. Two types of payments are made to states: specific purpose payments (SPPs) and general revenue assistance (GRA). SPPs are made according to agreements between the Australian Government and the various states. The total amount of SPPs to be paid to the states in 2013‑14 is estimated to be $44.1 billion. The largest categories of SPPs in 2013–14 relate to health ($16.1 billion) and education ($14.5 billion)."]
Robin Davies (January 31, 2017) "FactCheck: What are the facts on Australia’s foreign aid spending?". The Conversation @ https://theconversation.com/factcheck-what-are-the-facts-on-australias-foreign-aid-spending-71146 [Quote: "Australian aid generosity is a fraction of what it once was. Australia’s share of aid to GNI is projected to decline to 0.22% in 2016-17, its lowest level ever. Generosity under Menzies (1967-68) was twice as high as it is now, even though GNI per capita was less than half of its present level in real terms. ... How has Australia's foreign aid spend changed over time? Australia's overseas aid spending has had unprecedented reductions since the Coalition came to office in 2013. Australia's aid budget for 2016-17, at $3.8 billion, is around one-third less in real terms than the $5.1 billion spent in 2012-13"
Adi Robertson (Mar 10, 2019) Alexandria Ocasio-Cortez says ‘we should be excited about automation’ - Robots aren’t the problem, she says — economics are". The Verge @ https://www.theverge.com/2019/3/10/18258134/alexandria-ocasio-cortez-automation-sxsw-2019 [Thor, comment: She is referencing a proposal by Bill Gates to tax robots. Ocasio-Cortez is a current poster child for the left wing of America's Democratic Party)
David Goldman (14 March 2019) "Boeing misstep a strategic opportunity for US - President Trump should use the full power of his office to hold Boeing accountable and stand up to industry corruption" Asia Times @ https://www.asiatimes.com/2019/03/article/boeing-misstep-a-strategic-opportunity-for-us/ [ This article is linked because its discussion starkly illustrates the moral hazard of misallocating revenue in an enormous economy like that of the United States. The level of corruption in the American military-industrial complex (Boeing and Lockheed Martin are pivotal players) may be beyond fixing. It is precisely this nexus of misallocating resources to militaries which has destroyed almost every empire in history. ]
James Fernyhough (6 August 2018) "Revealed: How much Australians really earn". The New Daily @ https://thenewdaily.com.au/money/finance-news/2018/06/08/average-australian-wages-revealed/
Wikipedia (2019) "Henry Tax Review" @ https://en.wikipedia.org/wiki/Henry_Tax_Review [Quote: "The Australia's
Future Tax System Review, informally known as the Henry Tax Review was commissioned by the Rudd Government in 2008 and published in 2010. The review was intended to guide tax system reforms over the next 10 to 20 years. The report made 138 specific recommendations, grouped under nine broad themes.
1. Concentrating revenue raising on four efficient tax bases: personal income, business income, private consumption, and economic rents from natural resources and land. Other taxes may be retained if they serve a specific policy purpose such as discouraging smoking or traffic congestion. Taxes fitting into none of these categories should eventually be abolished.
2. Configuring taxes and transfers to support productivity, participation and growth.
3. An equitable, transparent and simplified personal income tax: a much higher tax-free threshold (around AUD 25,000), only two tax brackets, and a simplification of superannuation, deductions and offsets.
4. A fair, adequate, and work supportive transfer system.
5. Integrating consumption tax compliance with business systems.
6. Efficient land and resource taxation.
7. Completing retirement income reform and securing aged care.
8. Toward more affordable housing: substantially increase rent assistance, gradually move to a uniform land tax and remove transfer taxes (stamp duty), and gradually move to a neutral treatment of rental and owner-occupied housing.
9. A more open, understandable and responsive tax system."]
Australian Government (2010) "Australia's Future Tax System" Australian Treasury @ http://taxreview.treasury.gov.au/Content/Content.aspx?doc=html/home.htm [Thor, comment: This (acknowledged to be excellent) report, also known as The Henry Report, has never been implemented by either major party in government for want of political courage and deference to vested financial interests]
The Economist "Is modern monetary theory nutty or essential?" @ https://www.economist.com/finance-and-economics/2019/03/14/is-modern-monetary-theory-nutty-or-essential [ This reference is for those a bit deeper into economic theory, a wild environment. Tax is one way to control inflation, and MMT argues that should be its only function. The MMT aproach is that governments can and do print money at will. They can therefore fund both governmental functions and development without taxation. Tax, they argue, is just a useful brake on the machine. This sounds a bit crazy to the general public (and conventional economists). However the world was rescued, sort of, after the 2008 crash with so-called 'quantitative easing', irreverently christened free 'helicopter money' printed and given to the US banks, and supposedly underwritten by American government bonds (iou's) owned by China, Japan, Saudi Arabia etc. So funny-money is not new. Australia's guru for MMT is Professor Bill Mitchell @ http://e1.newcastle.edu.au/mmt/ ]
Thor's own websites:
1. articles at http://independent.academia.edu/ThorMay ;
2. legacy site: http://thormay.net .
Tax What? Tax Who? Why? (c) Thor May 2019 return to Ddiscussion