Are you in favour of an Aussie Taxation System that improves your quality of life?

Finally some ideas which don't rely on working class, and lower middle class to foot the bill. The people and corporations who are earning the most, should be paying the most.

There has been no tax reform in Australia since 1998, when the Howard Government introduced the GST. Tax rates have been fiddled with, but that is not reform. Since the Henry Tax Review in 2010, nothing has happened.

Everyone is agreed that taxing income and work is not a good way of collecting revenue. It penalises working and earning. If expenditure and land could be taxed more, income and work could be taxed less. The Henry Tax Review outlined the case for less personal income tax and more broad-based tax on consumption and land.

The trouble was, it didn’t offer sufficient protections for low and middle income earners. This made it too electorally risky for our politicians. As a result, the Henry Tax Review sat on the shelves in a thousand offices of politicians, public servants and journalists, gathering dust. It is a reminder of the failure of Australia’s political class to act in the public interest and think in terms of medium-long term objectives.

The lesson is clear. Career politicians cannot drive tax reform. Citizens have to take the initiative and drive the agenda.

This is our proposed tax reform agenda. It is revenue-neutral. It is designed to support workers and families, increase business productivity, ensure fairness, drive decentralisation of our population, and stem the leakage of profits offshore. We invite your comments.

Tax Policy Agenda

1. Raise the tax-free threshold from $18,200 to $40,000, funded by budget savings.

2. Make the first $25,000 earned in a superannuation account tax-free, with no restrictions on contributions or withdrawals, enabling young people to save for a house and retirees to combine two tax-free income streams. The measure provides a strong incentive for tax splitting for couples.

All other super tax concessions should be abolished.

3. Raise the withholding tax rate on profits transferred overseas to tax treaty countries to 15% and on interest income paid to non-treaty countries to 30%. This will require a change in our treaty arrangements, but Australia must take a stand against base erosion and profit shifting of its wealth. Additionally, an operating profit ratio test will be introduced to further strengthen transfer pricing rules and prevent the leakage of profits abroad.

4. Reduce the default corporate tax rate to 25%. In place of franking credits, we will introduce a non-refundable rebate of 15% for all taxpayers, or a refundable rebate of up to $10,000 for low-income earners. We expect this measure to be revenue neutral.

Estimates vary, but Australia’s net company tax rate is closer to 15 per cent and is expected to decrease further. This is because when the decision was made to refund franking credits, superannuation had $500 billion in funds under management. Today it has $3.5 trillion in funds under management and is expected to reach $10 trillion before 2050. Paying 30 cents at the company level, only to refund half of that, creates unnecessary paperwork for the company and shareholders and is eroding the company tax base.

4.1. Make earnings from exports of valued-added resources, processed agricultural products and manufactured goods tax free to encourage export-oriented growth.

4.2 Introduce a 15% social inclusion corporate tax rate for companies in which:

a. 20% or more of employees are people with disabilities, mental illnesses, ex-offenders and/or have a history of long-term exclusion from the labour market, and/or

b. employees own at least 50% of equity and/or exercise at least a 50% share in governance.

5. Replace the 50% discount on Capital Gains Tax (CGT) with indexation of cost base to fund a reduction in the rate of income tax from 30% to 20%, up to $65,000.

The discount on capital gains tax has helped contribute to asset price increases much higher than the increase in wages and has resulted in more Australians being unable to own their own home. This change to an indexation of cost base method will ensure greater equity between passive and active income and will help fund a reduction in the income tax rate from 30% to 20% for incomes up to $65,000.

This reform will also discourage speculative investment in assets and help stabilise property prices, making homeownership more attainable for Australians.

6. Abolish Payroll tax (in agreement with the states – no state will be worse off), to be replaced by a 1.5% stamp duty on share purchases, share lending and unhedged derivates, including short selling. This change will reduce the tax burden on businesses while discouraging unnecessary speculation.

7. Abolish business taxes for firms employing less than 20 people including ASIC levies and energy surcharges.

8. Broaden the GST to remove the exemptions for health, education and child care (while retaining the exemption for food) to restore the original GST revenue goals.

The current rate of GST is 10%, low by OECD standards. It applies to roughly half the spending of Australians, a drop from the two-thirds that applied back in 1998 because Australians are tending to spend less on goods and more on services.

9. Introduce a broad-based land tax with a tax-free threshhold that excludes most agricultural land and most rural properties. It would heavily tax land in the inner city regions of our cities and treat the outer suburbs lightly. It would tax close proximity to transport and other services, and favour locations in which low and middle-income Australians live.

For a political movement of outer suburban and regional Australians, a broad-based land tax is the most efficient mechanism available for addressing the widening locational disadvantages on the fringes of our burgeoning metropolitan areas.

It would turbocharge a decentralisation of our population.

10. Close existing loopholes and ensure fair tax contributions by:

10.1 Eliminating the withholding tax exemption on interest paid to foreign bondholders purchased by public offer (S128F 1936 ITAA). This change will ensure that interest payments to foreign investors are subject to withholding tax, ensuring that foreign bondholders contribute their fair share.

10.2 Abolish the deductions given to Australian corporations on interest incurred against foreign income that is not assessed in Australia (S25-90 1997 ITAA). This loophole has enabled companies to reduce their tax liabilities on earnings that are not taxed domestically.

10.3 Introduce?a levy on university fees or visas paid by foreign students.

10.4 Abolish Capital Gains Tax (CGT) exemptions for foreign investors holding portfolio interests in non-real assets (S855 1997 ITAA). With over $3 trillion in superannuation, Australia does not need to provide tax exemptions to foreign interests to “attract capital.”

Send your comments to

[email protected]

Tax Reform www.democracyfirst.org.au/taxreform/