Australia's taxation system is seen by some as being extremely complicated. It promotes tax evasion and limited understanding of the overall taxation process in Australia. Brinsden found that "Our system is ranked highest in 'complexity' and second lowest in 'fairness' when compared to the UK, USA, Canada, Singapore and Hong Kong." (1-2)
Rather than providing people with a more simplified tax system, the present day taxation policies have increased in complexity prompting some to believe Australia is headed towards an economic downturn. Businesses and the upper class are already using the complex tax policies to evade or seek further tax breaks as the middle class, immigrants, and working class suffer from the unfair policies.
One of the biggest hurdles faced by Australia's government is tax avoidance or evasion leading to a need for more revenue. Brinsden writes: "He said rather than the Australian Tax Office launching costly, large-scale taskforces, making the tax system simpler could lead to a reduction in tax avoidance and tax evasion." (1-2) 1 If people see taxes as less of an obstacle, the high level of avoidance and evasion would be reduced. Citizens and residents of Australia have to see that taxes are necessary and easy to prepare in order to want to prepare and pay their taxes.
In the past Australia passed tax cuts. Although this helped some with working class incomes, it still had issues. Malone states: "Mr. Keating said the Government had cut the top marginal tax rate in 1986 and had also reduced the rate of tax for those below $20,000" (1-2)5 One of those issues was that not that many people qualified. The amount necessary to qualify was before taxes. Other avenues were also approached that year.
Findings and Analysis
One such allowance was the Family Allowance Supplement. Malone explains that "The Family Allowance Supplemen thad also been introduced for people under $20,000 and that had meant about another $100 a week for someone on $16,000 a year with three children." (1-2)5 Again that seemed like a decent adjustment, but not many qualified. People under those circumstances would be receiving public assistance. The people that needed the tax cuts usually tended to be people earning over $20,000 in nuclear families with two children or less.
Where tax cuts or tax breaks appeared the most were in corporations. "The statutory corporate tax rate was lowered this year from 49% to 39%" 8. (1-2)8 Businesses benefitted greatly from the lowered corporate tax rate. Not only that but businesses felt more incentive to evade paying even more taxes due to the Tax Office policy of handling cases. "The Tax Office did not take cases to court unless it had an arguable, tenable position ready to use." (1-2)8
It was mentioned earlier how complex the tax system is Australia is. A part of this complex system are ways people can save taxes. This newpaper article states: "THE Australian tax system permits major tax savings by the judicious use of the avenues available for splitting income with other taxpayers."(1-2)3 Not only is splitting incomes possible but it allows for more savings. The issue then being how this kind of tax saving further complicates an already intricate tax system.
The article also mentions the rules behind the splitting of wages. "Tax rules prohibit the splitting of wage and personal exertion income with other taxpayers, and the only opportunities that arise are for income from investments which can be readily transferred, quite legally, between married partners or to other taxpayers."(1-2)3 These rules allow for this opportunity to be severely restricted. Restriction as will be mentioned later on in this essay, appears often in the Australian tax system. Presently issues like this generate problems that some say will lead to economic upheaval.
Tax evasion and avoidance is a major issue when it comes to the Australian tax system. As Colebatch states: "A sharp slump in revenue has left the federal budget looking at a potential shortfall of $17.5 billion, raising fears in business circles that the Gillard government will shut down a range of business tax breaks in the May budget to help fill the hole." (1-2)2 Regular Australian citizens wish to avoid taxes altogether. The tax cuts of the past that helped businesses and corporations are now facing evaluation. The government needs to increase revenue and its starting to realize where it went wrong.
Unfortunately because there are so many rules and write offs available to big businesses and corporations, companies such as in the mining industry have the chance to reduce their tax payment. "Senior officials say mining companies will be able to reduce their tax payments for years ahead as they write off their record $285 billion investments over the past decade."(1-2)2 This means that even with the government adding taxes or reducing tax breaks, the revenue might still suffer a decrease or no increase. If this were to happen people will have to be taxed more. Of the population, the ones hardest hit will be non-citizens. America has tax policies set up similarly where non-citizens pay higher taxes than citizens.
In order for Australia to determine whether or not a person is a resident, they determine it by length of stay. Newnham states that "There is a difference between the Department of Immigration's and the Australian Taxation Office's tests that determine whether a person is a resident of Australia." (1-2)6 Unlike immigration policy that determine residence status within a specific time frame of at least several years, tax policies refer to only six months as a means to identify a person as a resident. This means that more people will be classified residents under tax law.
The article mentions the specific time period for people to qualify as residents for the case of taxation. "In addition to the 'days of residency test', which classifies a person as a tax resident if they spend more than 183 days in Australia, other facts are taken into account, such as where the family home is, when determining whether someone is a resident of this country " (1-2)6 Some might see this as unfair. Others might see this as a way to keep immigration to a minimum. Personally to me this is just an attempt for the government to gain revenue from an easily exploitable source.
The Australian government needs sources of revenue. Although some might say their attempts at gaining revenue are furthering the problems of Australia's economy. A newpaper article explains "From the mining tax, tampering with superannuation, punishing single mothers, university funding cuts, open warfare with the states, talent languishing on the backbench, the broadband network, and now the implosion of the carbon tax." (1-2)7 This could be true in the sense that more and more people are disheartened by the government and its taxation policies. Some may feel these polcies favor the rich and powerful and punish the poor and disadvantaged.
To complicate things further, the carbon tax appears to have become a hundrance rather than a supplement. "THE collapse in the European carbon price means Australian businesses, especially exporters, are at a huge disadvantage. It also represents a significant tax loss for future budgets." (1-2)7 The mining tax as well as the carbon tax seem to provide little to no positive effect on revenue gains. The negative effect being the reduction of price for carbon and the tax write offs of mining companies. Loopholes found within the weak tax structure allow for these kinds of issues to surface
Recommendations and Conclusions
One of those issues is tax breaks for the wealthy. People from all classes must pay taxes. Tax breaks become available for those who wish to save. But Australia's tax system allows people of wealthy means to still receive those tax breaks even if they do not need to save money. Clancy says "However, he conceded that tax breaks should cut out once members attained a certain level of wealth at which they no longer needed incentives to save." (1-2)10
Realizing the wealthy and big business has paid less than their fair share of taxes, the Australian government began or at least, is in the process, of cracking down on illegal activity. This article states: "We will crack down on businesses using cash transactions to hide income and evade tax, using benchmarks for more than 100 industries and reviewing or auditing the activities of more than 26,000 micro businesses," Mr. D'Ascenzo said in a statement." (1-2)9 The government knows there is a need for implementation of the identified issues. But why is it the government has truly shown signs of action? Other newspaper articles I've read have shown time and time again businesses getting away with tax evasion and in some cases not paying their taxes at all. Why is it that regular people are forced to pay unfair taxes and people with means don't?
While some debate this issue, others debate the issue of the mining tax. Forrest writes: "It seems the thinking behind this massive $10.5 billion new mining tax has…