Saturday, January 24, 2015

Highly taxed? ACOSS says middle income Australians pay 11 cents in the dollar

Australians pay far less tax than they believe, a new report finds, and certainly far less tax than the Treasurer thinks they do.

Mr Hockey told Fairfax radio on Monday that Australians paid nearly half their income in tax.

"When Australians spend the first six months of the year working for the government with tax rates nearly 50 cents in the dollar it is a disincentive," he said. "You're working July, August, September, October, November, December just for the government and then you start working for yourself and your own household income after that for another six months - it is a disincentive."

A report released on Saturday by the Australian Council of Social Service finds that personal tax as a proportion of a middle-earning household's income is just 11 per cent - a good deal less than other calculations and far less less than the Treasurer's.

High-earning households pay 20 per cent of their household income.

ACOSS arrives at the figures by including all household income in its total, including untaxed or lightly taxed of lightly taxed income washed through superannuation, family trusts and negatively geared properties.

"To get a true picture you need to look at total income rather than just taxable income," ACOSS chief executive Cassandra Goldie said.

The personal tax scale prepared by ACOSS is quite progressive. The bottom one-fifth of households pay 3 per cent of their income in personal tax, the next group pays 7 per cent, middle group 11 per cent, the second-top group 15 per cent and the top group 20 per cent...

But the progressivity vanishes when other forms of tax are included. Including the goods and services tax and other consumption taxes such as petrol and tobacco excise, the lowest earning household pays 24 per cent of its income in tax and the highest earning household only a little more at 28 per cent.

Dr Goldie said the goods and services tax hit low earners far harder than high earners meaning they paid much more in consumption tax than income tax while high earners paid much more in income tax than consumption tax.

"It shows how skewed the tax debate is becoming. We seem to be only talking about the GST, yet our modelling shows that lifting the GST would hit hit the lowest earners far more than the highest earners," she said.

Superannuation tax concessions and those for trusts, negative gearing and capital gains were far more likely to raise money from well off households than the GST

ACOSS has prepared the research paper as part of its contribution to the governments tax review which Mr Hockey will launched early next month.

"We are about to be embroiled in a very contested debate and we have the treasurer suggesting people are contributing half their income to tax which is simply not accurate," she said.  "How can we possibly get responsible debate about reform when we don't even have good transparency about the facts?"

"We are releasing this paper to demonstrate that based on the Bureau of Statistics data and appropriate modelling people on higher incomes are contributing around 28 per cent. They are able to pay more."

In The Age and Sydney Morning Herald

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