Q)\MM\ RENTOI. Some Controversial Suggestions and Provocative Reflections on the Current System - a Plain English Contribution to the Current Debate

Transcription

1 RENTOI m Q)\MM\ Some Controversial Suggestions and Provocative Reflections on the Current System - a Plain English Contribution to the Current Debate Publishing

2 Content! About the Author 15 Foreword 17 Preface 19 INCONSISTENCY ABOUNDS 19 COMPLICATING FACTORS 20 TAX REFORM ACHIEVEMENTS TO DATE 20 THIS BOOK 20 Chapter 1 Considerations for an Ideal Taxation System 23 THE MEANING OF TAX REFORM 23 THE PURPOSE OF TAXATION 23 TAXATION CRITERIA 24 OTHER ASPECTS 25 NEW TAXES 26 THE ADMINISTRATIVE BURDEN 26 SHORT TERM BEHAVIOUR 28 CONSTITUTIONAL REFORM 29 Chapter 2 The Mix of Direct and Indirect Taxes 31 BACKGROUND 31 THE ALTERNATIVES 32 EFFICIENCY AND EQUITY 32 ECONOMIC MANAGEMENT 34 OTHERASPECTS 35 Chapter 3 Taxation and Inflation 37 BACKGROUND 37 PERSONAL INCOME TAX 37 SOME HISTORY 38 THE FOUR PRINCIPAL AREAS REQUIRING REFORM BRACKET CREEP 41 THE TAX ON INTEREST - THE PROBLEM 42 THE TAX ON INTEREST - A SOLUTION 43

3 RENTON'S AUSTRALIA NEEDS TAX REFORM DEPRECIATION 44 STOCK VALUES 44 CHOICE OF INDEX 45 THE TAXATION OF BUSINESSES 45 BOARDS OF DIRECTORS 46 INEQUITIES IN THE PRIVATE SECTOR 46 MORE HISTORY 46 THE OVERALL EFFECT 47 STATE TAXES 48 SOME FURTHER OBSERVATIONS 49 Chapter 4 Some Absurd Anomalies in the Income Tax Scale 51 THE TOP RATE IN THE SYSTEM 51 THE KEY MARGINAL INCOME TAX RATES FOR THE NORMAL SCALE FOR INDIVIDUALS 53 THE SCALES FOR SENIOR AUSTRALIANS 53 BRACKET CREEP 54 Chapter 5 Negative Gearing: Good or Evil? 55 TAX AVOIDANCE? 55 EFFECT ON THE REVENUE 56 DRAWING THE LINE 57 INVESTORS CAN GET BURNT 58 THE HOUSING MARKET 58 HISTORY 59 SUMMING UP 61 Chapter 6 Has Dividend Imputation Been Worth While? 63 BACKGROUND 63 TAX JUSTICE 64 ECONOMIC ASPECTS, 65 REVENUE ASPECTS 66 MEDICARE LEVY 67 Chapter 7 The Taxation of Family Trusts 69 BACKGROUND 69 ADVANTAGES OF TRUSTS 69 ROLE IN THE ECONOMY 70 THE FUTURE? 71 TAX LOSSES 72 FAMILY COMPANIES 73

4 Contents Chapter 8 Taxing Companies and Trusts the Same Way 75 BACKGROUND 75 A SIMPLE CHANGE 76 PAYG ASPECTS 77 RESOURCE ALLOCATION 77 TRUSTS 78 Chapter 9 The Medicare Levy is Quite Absurd 81 HEALTH COSTS 81 PHASING-IN 82 OVERUTILISATION 82 Chapter 10 Hypothecated Taxes 85 BACKGROUND 85 A DISTINCT LACK OF LOGIC 85 OTHER EXAMPLES 86 CONCLUSION 87 Chapter 11 Other Income Tax Issues 89 SELF-ASSESSMENT 89 COUPLES 90 PUBLIC TRUSTS 91 THE LAFFER CURVE 92 THE TOP MARGINAL RATE 92 TAX LOSSES 92 DEDUCTIONS 93 CAPITAL GAINS TAX ISSUES 93 THE CAPITAL GAINS TAX HOAX 94 Chapter 12 The Goods and Services Tax 97 BACKGROUND 97 THE QUALITY OF THE DEBATE 98 THE BLACK ECONOMY 99 BUDGET TREATMENT OF THE GST 100 GST - A VIRTUAL PAYROLL TAX 100 THE COST OF LIVING 101 RETIRED PERSONS 102 BOOKS 103 THE WHOLESALE SALES TAX 103 CONCLUSION 103

5 RENTON'S AUSTRALIA NEEDS TAX REFORM Chapter 13 The GST and the Cash Economy 105 BACKGROUND 105 ANALYSIS 106 OTHER ASPECTS 107 Chapter 14 The Abolition of Payroll Tax 109 BACKGROUND 109 HISTORICAL ASPECTS 109 PHANTOM EMPLOYEES 110 THRESHOLDS 110 INFLATION AND UNEMPLOYMENT Ill INTERNATIONAL TRADE Ill LOSS SITUATIONS 112 EFFECT ON THE COMMONWEALTH 113 THE GST 114 A NEGATIVE PAYROLL TAX? 114 OTHER ASPECTS 114 Chapter 15 Time to Rethink Other State Taxes 117 BACKGROUND 117 LAND TAX ANOMALIES 118 MAKING GREATER USE OF LAND TAX 118 LAND TAX CANNOT BE EVADED 119 FIRE BRIGADE LEVIES 119 STAMP DUTIES 120 COSTS OF COLLECTION 121 SOCIAL ASPECTS CONSTITUTIONAL LIMITATIONS 121 REDUCING THE NUMBER OF HEADS OF TAXATION CONCLUSION 123 Chapter 16 State Levies on Income Tax 125 BACKGROUND 125 CONSTITUTIONAL LIMITS ON STATE TAXATION AN ALTERNATIVE APPROACH 127 Chapter 17 A Negative Income Tax Would Help 129 BACKGROUND 129 ADVANTAGES

6 Contents Chapter 18 A Wealth Tax is Worth Considering 133 A RATIONAL TAX SYSTEM 133 TAXES ON CAPITAL 134 EFFICIENCY ASPECTS 136 CAPITAL GAINS TAX 136 OVERSEAS PRECEDENTS 137 LAND TAX 138 ABILITY TO PAY 139 ADMINISTRATIVE ASPECTS 140 COMPANIES AND TRUSTS 140 LISTED COMPANIES 141 VALUATION DIFFICULTIES 141 RELATIONSHIP WITH INCOME TAX 142 FAMILIES 142 ADVANTAGES OVER DEATH DUTIES 143 UNEARNED INCOME 143 PHASING-IN 143 CONCLUSION 144 Chapter 19 Should Australia Have a Flat Rate Tax? 147 BACKGROUND 147 THE PROBLEM 148 POSSIBLE SOLUTIONS 150 THE FLAT RATE SYSTEM 151 PRACTICAL APPLICATION 153 CONCLUSION 155 Chapter 20 Taxation and Housing 157 HOUSING AND IMPUTED RENT 157 EXCHANGING HOUSES 158 HOUSING AND SUPERANNUATION 159 THE FIRST HOME OWNER GRANT SCHEME 160 THE SPECIAL PRIVILEGES 161 Chapter 21 Taxation Issues Affecting Major Projects 163 INFRASTRUCTURE 163 INFLATION ASPECTS 164 PUBLIC PRIVATE PARTNERSHIPS 164 PUBLIC TRANSPORT 165 TOLL ROADS.166 THE FUTURE FUND 167 OTHER SPECIAL FUNDS 168 TAX-FREE BONDS

7 RENTON'S AUSTRALIA NEEDS TAX REFORM Chapter 22 Government Charges 171 BACKGROUND 171 COST 172 THE RETURN ON ASSETS 172 "USER PAYS" ASPECTS 172 CASH REQUIREMENTS 173 OTHER ASPECTS 174 Chapter 23 Taxation and Religion 175 BACKGROUND 175 SCIENTOLOGY 176 TAXES ACROSS THE BOARD 177 COMMERCIAL OPERATIONS 178 GRANTS 178 CONCLUSION 179 Chapter 24 A Negative Payroll Tax 181 BACKGROUND 181 A SOLUTION 182 FURTHER BENEFITS 184 COST 184 THE MARKET 185 Chapter 25 Fringe Benefits Tax Rationale Needs Rethink 187 THE RALPH COMMITTEE 187 THE TREASURER 187 EQUITY 188 EFFICIENCY 189 THE LABOR GOVERNMENT 190 Chapter 26 Is Tax Simplification Feasible? 191 BACKGROUND 191 AN INTOLERABLE SITUATION 192 THE COURTS 193 ROLE OF THE PARLIAMENT 193 TAX LAW 194 OTHER ASPECTS 194 Chapter 27 Miscellaneous 197 WHERE IS THE NATION HEADED?

8 13 Contents THE 2007 SUPERANNUATION CHANGES 198 MULTIPLE IMPOSTS 199 SOCIAL SECURITY 199 SUDDEN DEATH PROVISIONS 200 REWARDING INEFFICIENCY 201 TAX AND CORPORATE GOVERNANCE 201 THE MARKETING OF TAX CHANGES 203 Appendix Case Study: Media Coverage of a Tax Story IRRELEVANT TRIVIA 206 AMBIT 207 OTHER ASPECTS 208 MORALITY 209 Glossary 211 Tailpiece 227 AN ATO AUDIT 227 DONATIONS TO CHARITY 227 TWO QUESTIONS 228 PHOTOS 228 LITERATURE 228 DINNER 228 MAGNACARTA 229 REPORT 229 TAX REFORM 229 SLEEP 229 LIGHT BULB 229 INVESTMENT ADVICE 230 FOI 230 Index 231