Thursday, April 23, 2009

"I've set up this inquiry see, but I'm ruling out its ideas right now"

- Wayne Swan to Ken Henry

What? Less than edifying. Set up the Henry Review, ask it to come up with ideas, then as it prepares to report take one of its best ideas and say - over my dead body.

David Uren:

"WAYNE Swan has poured cold water on the Henry tax review's ambition to reform dividend imputation, declaring himself a supporter of the system.

Following threats of a backlash from lobby group National Seniors if the imputation system were tampered with, the Treasurer said yesterday he was puzzled by reports it was under threat.

"I personally think dividend imputation has delivered an enormous benefit to the Australian economy," he said.

"It, like all other issues in the tax system, is being reviewed by Dr Henry in his review. But from my perspective it has played a very important role in our economy and I think it's a very worthwhile initiative."

Treasury secretary Ken Henry has made dividend imputation one of the central issues his review is tackling."

In related tax news...

Many of Australia's biggest businesses aren't certain how much tax they pay, according to a survey of 79 of Australia's biggest corporations.

The companies between them reported tax payments amounting to almost 10 per cent of Australian taxes paid, but the survey's director, PriceWaterhouseCoopers tax partner Tim Cox says their uncertainty means they probably accounted for more.

"In many cases they found taxes such as excises that are embedded in the cost of products and transaction taxes such as stamp duty difficult to identify. Our survey most likely understates the taxes they pay," he said.

The typical number of taxing points per corporation was 24, but one identified as many as 67.

A mere 5 taxes accounted for 87 per cent of all the money raised from the businesses. In contrast, more than 40 taxes raised the rest.

"The complexity of the system is out of conrol for the size of our economy," said Mr Cox. "We've got as complex a system as anywhere in the world except the United States and yet we are a relatively small economy - it's blown out of proportion."

He called on the Henry Tax Review to recommend axing many of the smaller nuisance taxes, but he was worried that it would recommend replacing them with extra consumption taxes.

"The last thinkg we need are new consumption taxes that create new sets of complience costs," he said. The best thing to do was to gradually increase the Goods and Services Tax, "but to be honest the government doesn't want to hear".

"Whether there is a way of changing the government's mind remains to be seen, but you wouldn't be optimistic."

As well as between them paying almost one tenth of all the Australian tax collected, the companies surveyed acted as collection agents for another tenth. The cost of complying with the the tax laws amounted to an average surtax of 2.9 per cent on top of the taxes actually paid, with the smaller firms paying disproportionately more.

Payroll tax, often seen as the scourge of Australian business, isn't particularly high by overseas standards.

"People go on about payroll tax but, if you look at what's paid and compare it to other countries, direct labour taxes are quite low," said Mr Cox.

"Direct tax in the form of company tax is far more important and out of proportion to what's paid overseas."

"It's a problem because it means right now government revenues are plummeting with corporate income, and it is also a problem because corporate tax is front of mind - companies pay attention to it when deciding whether to set up here."

Corporate income tax accounted for 65 per cent of the tax paid by the corporates surveyed, far more than the global average of 37 per cent, and more than in any other country surveyed by PwC with the exception of India.

The total corporate tax take was broadly similar to that in other countries.