Australia\'s Recent History Is Tied

Australia's recent history is tied to that of the United States. After being populated for 40,000 years by native people called Aborigines, Europeans began exploration of the continent in the late 17th Century. Captain James Cook claimed possession of the island continent in 1770. The continent soon got Great Britain's attention after the successful American Revolution because once the United States separated from England, That country needed a new site for exiling selected prisoners. They founded a penal colony on Australia. Eventually six colonies were formed, and in 1901 these colonies joined together in a federation and became the Commonwealth of Australia (CIA, 2004). The new country also included some areas classified as territories.

GOVERNMENT

Australia's government is strongly influenced by the policies of Great Britain. The government is a federal democracy, with some responsibilities allotted to the federal government in the Constitution, which was modeled after the United States Constitution (USDOE, 2004). Anything not assigned to the federal government is by default the responsibility of the individual states. The country recognizes the British monarch as the head of state, and an attempt to change the country from this commonwealth to a fully independent republic failed in 1999 (CIA, 2004). The legal system is based on the English system of common law (CIA, 2004).

Because Australia is a Commonwealth country, the Chief of State is Queen Elizabeth, called in Australia "Queen of Australia Elizabeth II." Her representative is the Governor General. The Head of Government is the Prime Minister. John Winston Howard has held that post since 1996 (CIA, 2004). The Prime Minister is the leader of whatever political party or party coalition that holds the majority in Parliament. In turn, the Governor General is appointed by the monarch based on the recommendation of the Prime Minister (CIA, 2004). Thus, party control is a major factor in Australia government. The majority party currently is a coalition made up of the Liberal and National Parties (CIA, 2004).

Australia's parliament is made up of two houses: senate (76 seats -- 12 each from the six states, and 2 each from the two mainland territories) and House of Representatives, elected based on population but each state having at least five representatives.

TAX LAW

Australian tax law dates back to 1788, when the first Governor of New South Wales (NSW) acted for the King in imposing taxes as needed.

NSW's first taxes were used to build the colony's first jail and to provide support for orphans. These taxes were followed by import duties, especially on alcoholic beverages and things classified as "luxury goods" (Commonwealth of Australia, 2004). By 1824, other customs duties and excise taxes were added to various products including tobacco. Taxes varied from colony to colony (Commonwealth of Australia, 2004). Most colonies imposed taxes on wills and other legal documents, and used "stamp duties," where certain products had to have a tax stamp on it showing that the tax had been paid (Commonwealth of Australia, 2004).

Australia's first income tax was imposed in 1880 by the Colony of Tasmania. The tax applied to the profits of public companies. South Australia followed with an income tax in 1884, and in 1895, in NSW. In NSW, the tax rate was six pence per pound.

By 1900, just before Australia became an independent nation, all colonies had established an income tax. Each colony had different rules regarding its income tax. In 1901, the colonies organized into the country of Australia and established a federal government with powers to tax. The Commonwealth government kept 25% of the taxes it collected and redistributed the rest to the states. The new government added new taxes over time: in 1910 the government established the Land Tax. This tax was designed to pay both for national defense and to cover expenses caused by expected large waves of immigrants. This tax encouraged individuals who owned large tracts of land to make it available for settlers. Much of this land was held by residents of England who rarely used their land. The goal was to see the land used more productively (Commonwealth of Australia, 2004).

In 1915 the federal government instituted its own income tax as well. This federal tax rapidly swelled the country's income, and by 1918, income taxes made up one third of the federal government income and up to half of the states' incomes (Commonwealth of Australia, 2004).

This tax system was refined in 1942, with much of the federally-collected revenue being returned to the Territories and States. Currently, Australia uses a "pay-as-You-Earn" (PAYE) system for wages and salary, and a support "provisional tax" pay method for income other than wages or salary (Commonwealth of Australia, 2004).

Australia also passed a sales tax in 1930. This tax is applied to imports and is paid at the wholesale level. The wholesaler builds the cost of that tax into retail pricing plans (Commonwealth of Australia, 2004).

Australia embarked on a major restructuring of its economy in the 1980's (USDOE, 2004) after experience severe inflation (Stevens, 2003). As part of this restructuring, the country shifted its economic emphasis from domestic emphasis to a country that competes on the world market. They reduced high tariffs and other barriers to world trade, floated the exchange rate for the Australian dolor, deregulated banks, loosened rules for foreign banking, reorganized labor relations, privatized many public utilities, and overhauled their tax system. This overhaul included the establishment of a Goods and Services tax (USDOE, 2004).

FINANCIAL STATISTICS

Australia has a variety of natural resources including bauxite, coal, iron ore, copper, tin, silver, uranium, nickel, tungsten, mineral sands, lead, zinc, diamonds, natural gas, petroleum (CIA, 2004). Industries include mining, manufacture of industrial and transportation equipment, chemicals, steel, and tourism (CIA, 2004). Agriculture makes up a small amount of the country's GNP, as only about 6 1/2% of the country is arable (CIA, 2004). Australia's economy is based on a capitalist system, and its gross domestic product (GDP) is on a par with major European countries. It grew by about 3% in 2003 (CIA, 2004).