I have long believed in small government and small taxation.
In Australia, this has seemed like a pipe dream due to the lack of control of the Senate and state governments by a truly liberal force.
However, now it seems there is a liberal force in Australian Parliament. Two relatively new members of Parliament, Sophie Panopoulos and Mitch Fifield, have brought about an informal policy group which is pushing for real tax reform in Australia.
Better than tax relief
The GST package was a good start, but not good enough. Australia is still heavily taxed and still has an extraordinary number of taxes and taxes by another name: levies, charges, surcharge, fees etc., all of which contribute to distortions, inequities and reams of paperwork for people and businesses in Australia.
Taxation reform is necessary on the most basic levels because, when choosing whether or not to work, you trade spare time with the ability to earn. Most of us don’t have a choice – we work to support our lives and families. But others, namely retirees and part time workers, are essentially punished if they choose to work. The incentive is not there.
Further, Australia is facing a skills shortage as the population gets older. Part of this problem is that older people don’t want to work too late, but also because, as the Aussie tradition goes, many bright young things piss off overseas as soon as they can plug themselves into the global job market. Whether it’s London, Singpore or elsewhere, many of the most talented and high profile Aussies have no interest in staying in a country which takes close to half of everything they earn in tax.
What makes a lot more sense is a simple progression of the GST system. Firstly, take away every single tax that exists apart from the GST and income tax – stamp duty, bank levies, blah blah blah – there are literally hundreds.
Then take away deductions. People shouldn’t be able to deduct anything from tax. It causes inefficiencies. If people such as plumbers feel hard done by, then they should charge more – the effective market rate for their services.
Then, take away the weird scale rates of income taxation. Make it simple: No tax payable up to $20,000. 10% up to $40,000. 15% payable up to $60,000. 20% up to $80,000. 25% up to $100,000 30% payable on everything over that.
Then boost the GST by maybe 5% – so that it’s a 15% GST. (Mind you these figures may not add up in terms of a decent revenue base but you never know…)
So – Aussies pay a maximum 30% of their wages to tax (matching the corporate tax rate and doing away with the stupid and wasteful 17% shelf company industry) and 15% on consumption with no deductions for food or any other distortions.
A simple piece of tax legislation which would eliminate the need for thousands of jobs at the ATO, thousands of pages of boring and complicated tax legislation, complicated and hassled tax returns. All these tax minimisation schemes and arrangements would be useless and money would be directed to effective, growth fulfilling investments instead of the most tax effective ones.
The bigger picture: attracting back the skills and talents of the over 1 million Aussies who live overseas. Growing Australia’s skill base. Making this country the most progressive, modern tax regime in the world.