Tax Fairness ‘in the Eye of the Beholder’ - Hockey

Australia’s tax system must be redesigned and strengthened so that people contribute to the cost of services according to their ability to pay, claims welfare peak body, the Australian Council of Social Service.

In hosting Federal Treasurer Joe Hockey as he launched a new discussion paper on tax reform, ACOSS CEO Cassandra Goldie said she recognised that there was a public budget problem but she wanted to see solutions that don’t impose the greatest burden on the least well off.

“Instead of searching for Budget savings in community services, charging more for doctor’s visits, denying young people income support for six months, or reducing the future value of pensions, Governments should clean out the ‘hollow logs’ in our tax system,” Goldie said.

“It is too easy for people with high incomes to avoid paying their fair share of tax through devices such as negative gearing and private trusts, for some international companies to artificially shift their profits elsewhere, and for retired people with substantial assets to churn their income through their super accounts to reduce tax.

“If too many people play the tax avoidance ‘game’ then either tax rates will have to rise or essential services will wither on the vine.”

But Treasurer, Joe Hockey said at the launch of the White Paper, entitled Re:think, Better tax, Better Australia, that a small percentage of wealthy Australians were already carrying a disproportionate tax burden.

“Two per cent of taxpayers pay 26 per cent of personal income tax. Two per cent. I’m not saying they should be taxed more or less but I tell you what, I bet they think should be paying less tax,” Hockey said.

“Fairness is about ensuring that we have a well funded safety net, not just today but into the future. The trajectory of spending was to well over a third of GDP but the tax collected only ever equated to around a quarter of GDP. So clearly we were never going to get the point where we lived within our means.  

“We have to accept responsibility at some point and if you want to have a well funded national disability insurance scheme, which is not fully funded at the moment, if you want to have a welfare system that is sustainable, which is not fully funded at the moment, if you want to have an education system that is going to give people the best opportunity to prepare for work, and it’s not fully funded at the moment, then the question is how do we fully fund it.

“Fairness is in the eye of the beholder and this is where I want people to think a bit more deeply about things.”

The White Paper found that Australia has a relatively low tax burden compared to other wealthy countries with it ranking as the seventh-lowest taxing country in the OECD.

But despite this Hockey said that the Government should lower taxes to make Australia more competitive.

“Australia can’t risk falling behind. Many of Australia’s international competitors are changing their tax systems to make them more competitive,” he said.

“The Government must build a tax system that delivers taxes that are lower, simpler and fairer.

“The community’s responses will inform the Government’s tax options Green Paper, due to be released in the second half of 2015. The Government will seek further feedback on those options before putting forward policy proposals for consideration by the Australian people in 2016.”

Anglicare Australia Executive Director, Kasy Chambers, said discussion should be around the shape of the society we are trying to build, which is about fairness, opportunity and inclusion.

“We should be looking for the best way to fund public investment to make our society stronger and healthier,” Chambers said.

“It is too easy for this debate to sink to the level of competing self-interests motivated only by the desire to pay less tax.

“It seems we are demonising the most disadvantaged and vulnerable people rather than looking for ways to give them a stake in a more vital and inclusive society.

“Anglicare Australia sees the Government’s Re:think process as an opportunity to have public debate about what is important to us. A fair and simple tax system, which it calls for, is simply a means to an end.”

Cassandra Goldie said the starting point for tax reform should be to strengthen the fairest taxes, especially taxes on income, and to make them more efficient.

“Too many investment decisions are made for tax reasons and that’s one of the reasons we have over-investment in housing that drives costs up for everyone,” she said.

“Tax reform must not be reduced to a narrow argument over increasing taxes on consumption such as the GST. This would concentrate the risks of reform on those least able to bear them: people on low incomes. A tax on bank deposits is a consumption tax since it will be passed on to consumers, just as the former State Government bank deposit taxes were. We should not start the process by ruling things out.”

Submissions and suggestions on the discussion paper can be made at the website bettertax.gov.au until 1 June 2015.