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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. (0)

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Time for a House Un-Australian Activities Committee?
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Make Gina Rinehart work for her dole

Sick kids and paying upfront


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Me on Razor Sharp this morning
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Want a budget surplus? Abolish tax breaks for the one percent

Want a budget surplus? Looking for billions in savings?  Easy. Tax the rich. Cut their subsidies.

 The tax system is a disguised spending program, worth, according to Treasury, $113 billion last year.  This is equivalent to 30 percent of all Federal Government spending and receives no attention when the Labor and Liberal neoliberals talk about cutting spending.

Attacking the $113 billion in annual tax expenditures – the tax lurks where income isn’t taxed or where extra tax deductions are given – could focus on the largesse to business and raise many tens of billions. Cutting capital gains tax concessions to business alone would raise up to $10 billion.

A wealth tax, gift and inheritance taxes, taxing the profit on the sale of the homes of the super rich – these too could raise billions from the big end of town. Not to mention raising income tax rates on the rich and big business and reducing dividend imputation.

What about abolishing the fossil fuel subsidies to business? An extra $10 billion there.

Now all of these would have consequences. Business would try to raise prices and/or sack staff.

But that could be met with strict price controls on the profit bludgers, mandated job retention and creation and wage policies that reverse the flow of wealth to the rich from the poor and working class. And if there is a threat of  a capital strike nationalise the company or industry under workers’ control.

So maybe taxing big business might produce enough money to wipe out the budget deficit, improve our public health, education and transport systems and have enough left over for addressing climate change. So let’s do it.

There goes another porcine parachute.

The reason the neoliberals don’t raise this disguised spending program in the tax system is simple. It is spending on the rich and powerful. It is disguised spending on the one percent.

Treasury estimates are that direct spending through the tax system on business totals about $8 billion. On top of that the capital gains tax concessions give billions each year to business and the rich.

And the superannuation concessions, which overwhelmingly favour the rich, are actually a disguised spending program worth more than the pension.

Why doesn’t Labor tax big business and stop spending tens of billions on the rich through the tax system. Labor?

So here we have a Government and Opposition intending to attack the poor and ordinary workers to save a few billion when a few simple tax measures – like taxing the family homes of the rich, and abolishing the superannuation tax lurks for the millionaires, and getting rid of the tax concessions for capital gains – would raise tens of billions.

Funny, I don’t hear either side of conservative politics actually suggesting attacking the tax rorts for the rich.

Both like to keep these dirty little details of spending on the rich quiet because that is who they rule for.

It gets worse. In a speech in February last year Deputy Commissioner of Taxation Jim Killaly said that 40 percent of big business (those with a turnover greater than $250 million) had paid no income tax in the three income years between 2006 and 2008. He also said twenty percent of those companies were actually making accounting profits.

The global financial crisis is likely to have increased the number of big businesses not paying income tax to perhaps 50 percent or more. The latest ATO statistics show that for 2008/09 60 percent of all business (not just big business) paid no income tax.

Analysis by Adele Ferguson and Stuart Washington in the Sydney Morning Herald showed that most industries actually pay much less than the headline 30 percent company tax rate. For the finance sector for example they found the figure was 20 percent. For mining companies it is between 13 and 17 percent.

In other words almost half of all big business pays no income tax and those that do mostly pay much less than the notional 30 percent headline rate.

What is to be done?

Some of this nonpayment of tax is a result of tax ‘planning’. For example Australian and foreign multinationals in Australia can transfer money around the world to pay tax in the least taxed countries. Part of the response to this must be more funding for the Australian Tax Office to increase the number of staff and further improve their capabilities and tools for detecting and dealing with business avoidance and evasion. 

Another would be to strengthen the anti-avoidance provisions – the general anti-avoidance provision in Part IVA and the transfer pricing regime in Division 13 – to impose stricter standards and catch tax avoidance.

Some of the loopholes that big business exploit are structural. In other words they are design features of the tax system, written into the law.

One way to address the lack of tax that big business pay as compared to the contribution to society they should be making is to impose a minimum company tax. This is, depending on the approach taken, for example a tax on the gross profits of a company (that is before accounting for costs and expenses) or accounting income in those cases where they don’t pay tax or pay tax at a  rate below a certain minimum amount. 

In addition it is not beyond the wit of tax legislators to devise a CGT exemption for workers’ homes which still catches those who sell their homes on the foreshores of Sydney harbour. 

A tax on the value of homes worth more than $2 million is one possibility. According to The Australian, in 2008 such a  tax would have applied to only 4000 family homes sold that year. This was 2 percent of total sales. The combined worth of these homes was around $10 billion.

Defence Personnel and Army reserve volunteers receive various exemptions – for killing foreigners, from the medicare levy and their pay for being in the reserve -that total almost $200 million. Abolish grants to the professional killers for Australian imperialism and the wannabes. 

Small businesses that have an annual turnover of $50,000 or less are eligible for a tax offset of 25 per cent of the income tax liability attributable to their business income. This costs an estimated $215 million and has no justification whatsoever, other than the nonsense that small business is the backbone of the economy. It isn’t. About the only potential backbone small business forms is to reaction.

Retirement benefit concessions to employers, employees and funds total almost $30 billion a year.  The pension costs the revenue only slightly more. Abolishing these concessions and using the money to increase the pension substantially and extend its scope to all workers is affordable, feasible and viable, instead of ploughing billions each year into the superannuation industry.

Negative gearing is where the expenses on a rental property (interest, depreciation, repairs and the like) are greater than the rent itself. It allows the investor to offset the rental lost against other income.

About 2 million Australians – mostly those well off but with growing numbers of average wage workers- own negatively geared rental properties. The losses total over $8 billion  year. Abolishing negative gearing, or even just quarantine the losses to be offset only against future rental income, would save the revenue – you and me – $2 billion a year.

Taxing all economic rent of business would raise many tens of billion dollars. Economic rents are superprofits businesses make from monopoly or oligopoly or by exploiting finite and in-demand resources. The abandoned Resource Super Profits Tax is an economic rent tax and would for example have raised perhaps $12 billion a year according to the government. 

Much more than this could be done.  In addition to what I have talked about already, we could abolish the private health insurance rebate, introduce death duties, tax  family trusts as companies, increasing company tax from 30 percent to 33 percent and introducing a new top marginal tax rate of 50 per cent on incomes of $1 million or over.

The Minerals Resource Rent Tax applies only to certain minerals and will raise on latest non-Government estimates only $5 billion.

Under neoliberal Labor taxing the rich and business in a systemic and thoroughgoing way as anathema. Instead Labor and Julia Gillard will cut spending on health and education. We will pay while those who live off our labour get a free tax ride.

It is time to tax the one percent and to end their tax massive tax subsidies.



Pingback from Want a budget surplus? Abolish #tax breaks for the 1% | En Passant « The Left Hack
Time November 8, 2011 at 8:25 am

[…] Want a budget surplus? Abolish #tax breaks for the 1% | En Passant In Main page on November 8, 2011 at 8:22 am via […]

Comment from peter williams
Time November 8, 2011 at 10:36 am

Total agreement here. Labor has given up on a true socialist agenda and simply tries to avoid offending anyone that can cause a problem – except of course those who have little voice. The carbon tax is of course a disguised attempt to redistribute at least some of the wealth and is being fought by the rich for that reason. The tragedy is that many low income earners are also against this disguised reform – out of ignorance rather than a genuinly considered position. The school spending program is – or was – another such example where those who stand to benefit are among the most vociferous opponents.
A long time family labor supporter once tiold me that ‘a socialist reform government can win office, but the money will not let it govern’. He was right except that now the people benefiting most from reform add their voices to opposition.

Comment from Ross
Time November 8, 2011 at 8:28 pm

There is a very simple solution.The banking system through the fractional reserve system creates $100 billion pa from nothing to equal our increases in productivity + inflation.Just tax the non productive sector and reward those who actually produce.Currently we are doing the opposite.