‘Root and branch’ tax review – minus some branches

Two years ago I did a series of posts on possible options for tax reform. There was quite a deal of debate around the country in the lead up to the 2006 Budget about ways we could improve the fairness and efficiency of our tax system – all of which basically went nowhere. The major parties instead shrunk the issue down into the usual pre-election tax cut auction.

It was a promising sign that the weekend’s 2020 summit appeared to reignite the possibility of comprehensively reviewing our entire tax system. However, not long after the Prime Minister said he supported a ‘root and branch’ examination of the entire tax system, both he and the Coalition ruled out any increase to the GST beyond its current ten per cent level.

I know this just reflects the reality of politics and the way the media covers it, but it is still unfortunate that there is already a scramble to rule out various changes to the tax system before the examination of it even starts.

If I’d had my way, there wouldn’t be a GST at all, but now that it is a central part of our tax system, it rather defeats the purpose to have a ‘root and branch’ review of our tax system while ruling out a major aspect before the review even starts. Of course, the prospect of reducing the overall GST level to below 10 per cent should also be considered, as well as whether existing exemptions should be expanded or contracted.

The GST should be part of any tax review, along with all the other political ‘untouchables’ like negative gearing, captial gains tax exemptions, the special tax treatment for family trusts and all the existing tax deductions, offsets and credits. 

I can understand having a starting point that any change should be considered within the context of an overall aim of not increasing the overall tax take, but ruling things out beyond that seems to be self-defeating.

Worth reading: Tim Colebatch from The Age outlines some the basic arguments and issues.

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20 Comments

  1. Andrew

    A good set of ideas.

    It is about time Australia’s tax system reflected the progressive theory it is supposed to be based on rather than dulling down the hopes and aspirations of the next generation through its on-going regressiveness. With $50B given back in tax deductions and tax credits (last year) it appears that nothing would be amiss if the Labor & Liberal parties joined forces and named themselves the Regressive Party.

    My chief bug-bear, due to it negative impact on the social fabric, is Negative Gearing for Residential property.

    NG should only be allowed for new construction and then only claimed against income from that particular property and then means-tested or benefit-capped.

    Dr.Putland has as good a description of NG as I have seen –
    http://www.prosper.org.au/2007/11/01/negative-gearing-incompetence-or-conspiracy/

    This selfish notion that the rest of the community pick up the tab for running the country while property investors are given unlimited access to loan deductions has gone past its use-by-date. The wider community deserves better.

    Loan interest deductions should also be available for FHO and home-owners.

    Your comment re captial gains tax exemptions and family trusts is also valid.

    I think a good place to look for social models that would not be too hard to get to from where Australia is now are the Nordic countries – Sweden, Norway etc.

    Thanks for standing up for fairness in this regressive climate.

  2. The GST is a very strange tax,where you can buy a number of ,say, screws in a blow plastic thing,and ,the payment of GST is on the completed package as a translation of the law..guiding its imposition at the cash register,of whatever type.As an analogy in these days of digital instant communication..we should be able as a nation using clusters or numbers of a particular item…to drive the buying power further,and top the tax receipt requirements by using any cyclical and seasonal advantage,domestic markets international market imports ,money value and shares.And translate this into the burgeoning problems that need addressing.Plebersek is going berserk about housing problems now.What a light weight if there ever was one.Sydney has had eleven days of rain,and ,she discovers the housing affordability problem.Labor is as a party a borrowed singlet in retrospect.They reach out to the world like we are supposed to protect them from themselves…absolute dingbat ideas like importing 50,000 construction workers for welfare and non market driven housing..doesnt make any sense at all,and where is the bloody land!?Talks up the import of skills side without any reference to the buyers and their relationship to work.And this stuff is economic hocus pocus at its grimmest.SETTLE down saviours of this country,just make sure people remain sane and warm and well feed over cold months with hygiene and sleeping time a comfort to themselves.Use empty or partially built larger spaces to build part of the smaller places which are houses.Close a road tunnel down,if no-one wants it and build houses in it in halves and put on trucks.Trust me,I am stupid enough to know the homeless,blah blah mental disease allows people to help themselves.Pay someone who is supposed to look after homeless earning$67.00o a year and well, they maybe worth it,accept I think it is cloud cuckoo land without a well built clock.Let both professional and client use some tools,or look at bloody lined sheds!Tax!?

  3. I totally agree; making the claim that one will investigate “root and branch” while leaving certain branches untouched is a bit silly to say the least.

    The GST (and other consumption taxes and their associated exemptions) have a positive role to play in changing our behaviour and priorities in order to allow us to deal with such problems as climate change.

  4. I hope people will visit here Senator,and get going about what the ALP is up to about Supermarkets,I think business entity competition is just about saturated.Its below this level that consumers,farmers and disadvantage income streams should and could be organised,but, I suppose this would mean some of the symbolic nature of Ruddisms class consciousness ,would have a bit of shit rubbed in its face.Personally ,I think we can have class consciousness,as long as the teaching of it is not left to the ALP to rediscover it needs, to be aware it has lost its singlet brigades a long time ago.Essentially I am extreme Left,so much so,as you know,I cannot stomach to vote,for any bastards,who earn more than me,and I am not an earner,and not considered or deemed,by the insulting ALP as a worker,because the payroll is in fact,Centrelink.Shame on Hartcher for getting me worked up.I intend to scuttle this nostalgia,I hope others will join in.

  5. Last night, a close friend of mine criticised the Democrats for voting against the GST.

    So I told him that people who are on incomes so low that they don’t generally have to pay tax, still have to pay GST on nearly all purchases and services, including food.

    I also cited the tradesmen and other service providers who end up paying no tax at all, by offering people cheaper services without a receipt being given – i.e. no personal income tax being paid, and no GST being collected either.

    I think the world would be a better place if people thought outside of their own 4 walls a little more often.

    Phil:

    Thanks for giving us something more to think about.

  6. Goodbye Democrats:

    A lot of my friends used to be Democrats voters. Some are quite well heeled. They universally hated Meg Lees and Cheryl Kernot, but regretted the demise of Janine Haines.

    If the Democrats want their voters to return, they will need to come up with a more conservative set of policies.

  7. That’s strange Lorikeet. It seems to me that most people criticised the Democrats for voting FOR the GST.

    And I wouldn’t hold ouor breath on the Democrats becoming more conservative. They were talking about the environment, no nuclear power, rights for women and gays back in 1977 when very few people were interested. They were always ahead of the crowd rather than behind it.

  8. Muzz:

    It depends on what you consider to be progressive and regressive, I suppose.

    I think there was a lot of division in the ranks as to who was for the GST and who was against. (Against would have kept more voters.)

    Check out links at post #6.

    I thought Andrew was against the GST.

    That’s the problem with belonging to a party. You have to tow the party line, even if you disagree with it.

  9. There are any number of ways to be unfair to the Democrats.Why anyone here would visit and just kick is their own problem.In the time Howard was in government,committees were ignored,that had been given encouragement that tax revenues would go their way.They werent all that is mentioned here.. to kick again.And many people were ashamed of that as Australians,who volunteered their time and own money.So it would seem its a bit off subject,and I doubt Senator Andrew wants to repeat himself,for another person just having a free kick.Which is really pointless,if at all concerned about the GST now.An exercise in powerlessness,as well as smart arse cheap shottery rather than a paver of ways to,what ever the individual in late defiance conceives the way forward.The Senator here,even if people have dismissed the Democrats,they have only done so politically.There is hardly any moral superiority in that.After all,the GST was first brought up by Keating,the man who loved clocks and Napoleonic history.The Democrats were a State Rights and Overview Party…I feel very sorry for Meg Lees caught in that trap of the cowardice of the ALP stand,who were unwilling to test out for an election on the issue…and if Meg had of rejected…what then!?The Democrats actually proved themselves as decent people by the divisions within their party,both for and against…they were bound to lose as they didnt have the choice,the ALP and the Greens and others had.Its a shock to me,sometimes,how this stuff is unseen as a brutalising personal problem,but got tarred with a very sustained brush.Some of it with Green streaks!You can pick it up sometimes from Andrew here,the hurt,which wasnt about loss of power through division,but decent people then having a problem with each other,and, not created by themselves.In fact,I think ,Andrew has overcome some of the harm to him,by harmlessness…Vegan style…and a Public Figure to boot!Um!Not quite Ug boots! I feel like a feed of molasses and pumpkin seed!

  10. Can we get past who voted of this or that. it like conscription. The GST i shere and wont disappear – any review should also inlcude how it acn contribute alongside all the other tax rules that apply.

  11. You seem to have missed one of the points about the Democrat Senators voting on the GST. Some voted for it and others (Andrew and Natasha) voted against it.

    The Democrats never required their elected Parliamentarians to follow a party line, but stressed the importance of a vote of conscience. That’s what make them different to all other parties.

    But Ken is right. The past is irrelevant to this post. Unfortunately I have a take-home exam to do and don’t really have time to think about taxation at the moment.

  12. But don’t forget that the majority had the say – not Andrew and Natasha. They were, in the end, still bound by the party line.

    I think the GST should go, in favour of tightening up the loopholes through which the rich escape paying their fair share of the tax.

    Negative gearing should be applied to all property purchasers or no one.

    Or perhaps the possibility of negative gearing should DECREASE according to the number of properties owned.

    I wasn’t criticising Andrew. I stuck up for him when my friend became critical.

  13. How can they possibly have been bound by party line if they voted differently? If they were bound, it means bound to vote with the party.

  14. If more Democrats voted for the GST, surely the other Democrats were bound by their vote in an indirect sense i.e. stuck with the general (unwanted) outcome.

  15. I think the point you are most proabaly correctly making Lorikkeet would be more clearly expressed as – irrespective of how they voted they were “tarred with the same brush.”

  16. “Tarred with the same brush” is certainly NOT the way I would put it, Ken.

    That’s the sort of comment I would apply to John Howard and some of his colleagues.

    I think it’s an insult to Andrew in this instance.

    Meg Lees is the person most people I know would have liked to “tar and feather”.

  17. Sorry misunderstadning of a colloquialism, dont take things so literally Lorikeet, surprisng for a braod thinker like you, just meaning they would all be cosndiered by the general populace “in the same boat’ irrespective of how they individually voted.

  18. Thank you for rising to my defence, Lorikeet, but I didn’t take it as a personal insult. If I wanted to take things personally, I have the reality of the entire electorate of Queensland choosing to vote me out of office to ponder, so general comments left on my website are no great concern to me.

    Besides, in the day to day meaning of the term, Ken is right – not just the Senators of the time but the party as a whole has clearly been permanently tarred by the decision, regardless of anyone’s individuals views on the merits of the issue.

    How a party is perceived about an issue is really a separate issue to whether or not politicians should always be required to follow the ‘party line’ even in cases where they strongly disagree with it, (or to be more accurate in this case, always be required to follow the decision of a majority of the party’s parliamentarians).

    None of which negates my original point that – whether you supported or opposed the GST, it is (a) now a core part of our tax system, and (b) its workings and potential changes to it should be fully taken into account in any proper examination of our tax system.

  19. Yes, that’s right, except for losing your seat.

    Most of the people I know wanted Howard out very badly. That may be the primary reason you lost your seat.

    If you push for a change to some of the policies, you may win your seat back again. Even some of the well-heeled voters will return.

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