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BFCSA: Australia's messy tax system needs bold, scary ideas

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Australia's messy tax system needs bold, scary ideas

30 April 2016

Harold Mitchell


One in 10 taxpayers get the benefits of negative gearing, nine in 10 miss out.


I'm totally confused about the tax debate. Deep down I've always thought negative gearing was wrong because it has unintended consequences. It was established to create new housing stock for young people who were not ready to purchase but in the end it worked against them by pushing up house prices. In the 2003 Andrew Olle lecture I made the point that our children would not be able to afford homes as we could and that's now true.

It seems to me that cutting out negative gearing is a good idea. One in 10 taxpayers get the benefits, nine in 10 miss out. It's plainly being used by those who have plenty of cash left after meeting their weekly commitments. The more they have the more they negatively gear. Charlie looked up the figures that have been tracking disposable income in federal electorates since 2003. Surprise surprise. Top of the list is Kooyong where 77 per cent of adults say they have money left after commitments. Kooyong is held by Liberals' rising star Josh Frydenberg. The top nine electorates on the list are held by Liberals, including Curtin (Julie Bishop); Wentworth (Malcolm Turnbull); and Warringah (Tony Abbott). The average for these three electorates is 69 per cent.

At the other end of the scale are the Queensland electorates of Wide Bay and Wright (both held by Nationals) where the average is 35 per cent. Bill Shorten in Maribyrnong is Mr Average (51 per cent) as is Barnaby Joyce in New England (52 per cent).

And on top of that, research by an ANU poll just released said that 41 per cent of voters preferred reducing negative gearing if the government had to make changes to tax. The government wants negative gearing, and any critic soon cops it. I notice the Victorian Liberal Party president Michael Kroger turned on this week's Grattan report on the matter, sniffing that it was "intellectually lazy".

Chief economics writer for Fairfax Ross Gittins said of the Grattan report that we are "very fortunate to have an independent umpire". But it seems that politicians aren't interested in independent advice.

Especially when their policies are criticised by the likes of Chris Richardson, of Deloitte Access Economics, Ross Gittins and John Daley of Grattan Institute whose founding supporters include the Australian Government and BHP.

My good friend Tony Stewart from years ago in advertising land, has some sobering facts. Of Australia's 24 million people, 9 million don't work because they are either too old, too young or unemployed. Five million are on government-funded payrolls and while they pay tax, it leaves only 10 million workers to balance our books from commercially generated income.  And the problem is, we still don't raise enough money to meet our needs, let alone our expectations.

At the moment there are more than 100 taxes: sales tax, fringe benefits tax, payroll tax and so it goes.  Without them, the cost of goods and services would reduce dramatically.  The system is a mess.

Tony's got a scary solution that no one would be game to do but it's worth airing.  He wants a two-pronged attack to raise enough money and eliminate the pain and cost of getting it.

First, no one person should pay any income tax at all. This would mean no tax returns to complete and no costly bureaucratic resources to collect it. 

Secondly, we introduce a 30 per cent GST to eliminate the deficit and create simple, cheap and stress-free income generation. Yes that's right, 30 per cent.

You only pay tax when you spend. Individuals and companies pay 30 per cent on everything they buy. A big GST would be fairer for everyone because many goods and services will be cheaper as they don't have more than 100 hidden taxes built into them.

The big-spending rich become bigger taxpayers and people with modest and low expenditure will pay less with the boosted tax revenue able to increase the pension and other essential benefits.

We need to be considering some new, big and bold ideas. Fiddling at the edges isn't going to do it. Roll on budget Tuesday. Let's hope all those people under pressure get some help and that the comfortably well-off are the ones who help them. "I think not," says Louise.


 Watch the video......Malcolm Turnbull in a muddle...


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