First speaker in the mature debate
Dear Mr Abbott,
I welcome your call for a mature debate on taxation. I too deplored
the “screaming match” that surrounded the introduction of carbon pricing
and am pleased you realise how counterproductive that sort of approach
is to constructive governance.
As a concerned citizen I would like to make a few suggestions to get the ball rolling.
Your opening gambit is to increase the GST. This is a regressive tax
which will, once again, disproportionately hit lower income earners.
Treasury modelling done for the previous government showed that even a
modest increase in the rate to 12.5 per cent – along with removal of
exempted items such as food, health, childcare, and school fees – could
hit a two income two-child family by as much as $205 per fortnight.
Perhaps there is a better way. For example:
Fossil fuel subsidies
The Australian Government is set to spend over $40 billion in the
form of tax rebates and concessions, foregone revenue and expedited
write downs of assets per year from 2013/14 to 2016/17. This assessment
only includes tax measures, and does not include direct grants or State
Government measures, which could add billions more to the annual totals.
The proposed replacement climate policy, the Emissions Reduction
Fund, relies on paying companies as an incentive to reduce their
emissions. A fundamental contradiction exists between such a policy and
the continuation of a range of existing fossil fuel subsidies. Many
subsidies significantly reduce the economic signal for companies to
identify efficiency opportunities.
Polluter handouts are also highly inequitable. For instance, the
mining industry receives a 32c per litre discount on fuels such as
petrol and diesel for off‐road use. So while most Australians are paying
full price for their fuel at the bowser, their taxes also cover the
cost of a huge discount to the mining industry. In all, this handout
costs Australian taxpayers $2 billion each year.
Australia, along with all other G20 nations, committed in 2009 to
phase out inefficient fossil fuel subsidies over the medium term. In his
recent State of the Union address, US President Barack Obama reiterated
the need to phase out tax‐based fossil fuel subsidies. Other
organisations like the International Monetary Fund, the World Bank, the
United Nations and the International Energy Agency are also calling for
nations to end fossil fuel subsidies.
In 2009, the Commonwealth Treasury identified $8 billion in annual
savings that could be made if Australia fulfilled this commitment. This
money could be used to fund a wide range of nation‐building projects,
yet to date we continue to use these funds to line the pockets of
polluting, and in many cases highly profitable, industries.
Prime Minister Abbott has said that there is to be an end to
corporate welfare. Statements by Treasurer Joe Hockey have warned that
“the age of entitlement is over,” and that “everyone in Australia must
do the heavy lifting now.” It is critical that this rhetoric, if
applied, is applied consistently.
Superannuation tax concessions
A study by the Australia Institute found the rate of growth of super
tax concessions is greater than that of the pension despite the ageing
population, meaning the cost of the tax concession will soon overtake
the pension to become ”the single largest area of government
expenditure,” by 2016-17.
”’The age pension currently costs $39 billion and superannuation tax
concessions will cost the budget around $35 billion in 2013-14,” the
study found.
It notes that the Commonwealth bill for these concessions is
projected to rise at a staggering 12 per cent annually to be $50.7
billion in 2016-17.
”The overwhelming majority of this assistance flows to high-income earners,” the report finds.
”Low-income earners receive virtually no benefit. The combined cost of these two policies will be $74 billion in 2014 alone.”
Negative gearing
The Grattan Institute’s report, Balancing budgets: tough choices we need, included
a section on abolishing negative gearing, which it claims would save
the Budget around $4 billion per year initially, falling to a saving of
around $2 billion per year over the longer term.
Grattan highlights a number of non-budget (social) benefits from reforming negative gearing, namely:
1.increasing home ownership rates by reducing returns at the margin for landlords relative to first homebuyers; and
2.increasing investment in other more productive assets.
The report also debunks claims that reforming negative gearing would
raise rents, since “for every landlord that sells, there would be a
renter that buys and becomes a home-owner. The supply of rental
properties would fall at the same rate as the number of renters”. It
also does not believe that the construction of dwellings would be
materially affected, since “almost all of investment property loans are
now for existing dwellings”.
Tax avoidance
A report by the Tax Justice Network – an international group focused
on investigating tax avoidance – and the United Voice union says almost a
third of companies listed on the ASX 200 pay 10 per cent or less in
corporate tax.
This is substantially less than the statutory 30 per cent corporate tax rate.
Some companies, such as James Hardie and Westfield Retail Trust, pay zero tax.
Rupert Murdoch’s 21st Century Fox pays 1 per cent tax and casino group Echo Entertainment pays 5 per cent tax.
The report says the government is losing out on at least $8.4 billion
in tax each year, which is substantial but may be the tip of the
iceberg.
According to the research, 57 per cent of all ASX 200 companies have subsidiaries in tax havens.
Several big-name companies,
such as 21st Century Fox, Westfield, Toll Holdings and Telstra, have
more than 40 entities in well-known tax havens such as the Cayman
Islands, Luxembourg, the British Virgin Islands and Bermuda.
Fourteen in the 20 top companies, including two of the country’s big
banks, also hold entities in these locations, according to the report.
“Secrecy jurisdictions play a key role in multinational tax dodging
and undermine the ability of democratically elected governments to levy
taxes in a just and fair way,” the report’s authors say. “Corporate tax
avoidance must be addressed.”
Financial transaction tax
Introduce a Financial Transactions Tax on various categories of
financial transactions including: stocks, bonds and currency. If
implemented on a global basis, its projected revenue could be as much as
US$400 billion a year, depending on the size of the levy imposed, the
size of the reduction in trading (if any), and the number of
implementing countries/jurisdictions. In the US alone it has been
estimated that annually, between US$177 and $353 billion could be
raised.
A flat rate of 0.05% has been proposed on all financial market
transactions, many experts actually advise vary rates (of between 0.01
and 0.5%) depending on the transaction (stocks, bonds, currency,
commodities, swaps, derivatives, etc). The UK stock exchange, one of the
largest in the world, already has a 0.5% tax on share transactions.
(1) An FTT will reduce the instability in the global financial system
by reducing the volume of trading in financial markets, especially the
sort of trading that increases market instability and has led to the
turbulence in the financial markets over the last decade.
(2) An FTT will provide an effective way of raising revenues for both
domestic purposes, such as assisting governments help pay for the costs
of post-financial crisis bailouts, as well as for spending for
international public goods, such as the funds needed for climate change
adaptation, and to assist countries in meeting the Millennium
Development Goals.
The tax is specifically designed to target high frequency traders,
especially of securities, where the average holding period is often
minutes or seconds. High-frequency traders currently account for 70% of
US equity market trading and 30-40% of the volume of trading on the
London Stock Exchange.
The tax will only affect financial institutions and funds to the
extent that they are involved in this type of high-frequency trading.
Australia is a leading player in global finance in its own right: the
Australian Securities Exchange (ASX) is the ninth largest stock
exchange in the world. Australian support of the FTT would be a
significant boost to the cause of the global campaign. Moreover,
Australia is a G20 country and plays a significant role in the group
whose endorsement would effectively make the FTT a reality.
You could always keep the mining tax and close the rorting of FBT car
leases and…dare I say, bring back the carbon tax…if you are mature
enough to admit when you are wrong.
So let’s have some mature debate on these issues Mr Abbott before we
jump to charging pensioners more for their bread and single parents more
for childcare and sick people more for their medicine.
Over to you……
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