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Thursday, August 07, 2008

It's probably not like you think - Australia's tax system

Read it here.

Australia has far more taxes than is commonly realised – 125 at a conservative count, many of them extremely obscure.

The queen bee levy is singled out as Australia’s smallest tax in the in the discussion paper that will guide the 18-month review of Australia’s tax system.

In 2006/07 the levy raised just $8,000 from bee keepers exporting queen bees, levied at the rate of 10 cents for each bee sold for over $20 and 0.5 per cent of the price of bees sold more cheaply. But, like many of Australia’s smaller taxes, it cost a lot to collect. The discussion paper says that out of every $100 collected, $21 dollars was eaten up by the cost of collection.

The Nashi Pear Levy and Export Charge is the most expensive tax to collect, the costs eating up $30 of every $100 collected.

Many of these taxes, among them the Buffalo Slaughter Levy and the Lychee Levy have been introduced at the request of the producers being taxed...

The discussion paper makes the point that would rather trust the government to collect their money and hand it to their industry than they would trust each other.

Most of the $2602.5 billion raised in tax in 2006/07 came from just ten taxes, the biggest being personal tax, company tax, the Goods and Services Tax and fuel excise.

For many of us, paying tax is neither complicated nor particularly painful. Our tax take is the eighth lowest in the OECD. And contrary to widespread belief the system isn’t getting more complex.

The discussion paper says that on almost every measure – pages of the income tax law, the use of tax agents, the time spent preparing business activity statements, the tax system is becoming simpler.

Launching the 343-page discussion paper in Melbourne the Treasurer Wayne Swan said its observations would challenge many people.

“I don’t necessarily find that everything in this paper gels with everything that I have said on tax in the past, and that is as it should be. This is a Treasury discussion paper which is out there to promote discussion.”

The Treasury Secretary Ken Henry who is heading the inquiry said he had “no doubt some people will find some of the observations a little uncomfortable”.

The paper suggests that the taxation of the returns from saving is blatantly unfair. Interest on money in the bank is taxed at a real rate approaching 80 per cent. Money earned from borrowing to buy shares is taxed at a real rate of around 5 per cent, and the returns from employer-provided superannuation are taxed at a real rate of minus 180 per cent.

It raises the prospect of imposing a resources rent tax on coal and iron ore miners making the point that “these natural resources are owned by all Australians”. It says their profits have increased by far more than have state government mining royalties.

The members of the tax and transfer system review will meet for the first time today. They have been asked to report by the end of 2009.