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John Passant

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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (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. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. http://sharonfirebrace.files.wordpress.com/2014/02/4-2-14-john-passant-aust-national-university-canberra-end-of-the-age-of-entitlement-for-the-needy-but-pandering-to-the-lusts-of-the-greedy.mp3 (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole
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Sick kids and paying upfront

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Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. http://sharonfirebrace.com/2013/12/03/john-passant-australian-national-university-8/ (0)

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Progressive taxes nationally and in the A.C.T.

I submitted this back in May to the Canberra Times after I had spoken at the National Law Reform Conference at the ANU on a whole range of national and local progressive tax reforms. They did not publish it. In light of the Australian Capital Territory election on Saturday, I thought I would publish it today to stimulate some sort of discussion about tax reform in the A.C.T.

John

 

Tax, inequality and challenges for the future

In a speech in 2013 Barack Obama labelled inequality “the defining challenge of our time”.

Oxfam has argued that 85 people own as much of the world’s wealth as the bottom 50%, i.e. about 3.5 billion people. In Australia, according to ACOSS, there are about 2.5 million Australians living in poverty, including over 660,000 children.

Australia’s inequality is above the OECD average and has been growing above average over time.  Two processes are in play. One is the growing income disparity between the top and the rest of us.  The increases in real wages and other income for example have gone disproportionately to those in the top ten percent of income earners, and even more so to those in the top 1%.

Our tax system has also become less progressive. This is because of reductions in top marginal rates, legislated tax havens for the rich like superannuation tax concessions and capital gains tax discount and our focus on regressive consumption taxes.

The revenue forgone from tax concessions such as superannuation and capital gains tax and the losses from negative gearing is about $40 billion a year. About $17 bn of that goes to the top ten percent.

So one task of tax reform would be to restrict these benefits to those in need, or to abolish them and use the extra revenue for socially useful purposes.

Another task should be to reverse the reductions in income tax progressivity by increasing income tax rates on higher income earners, those for example earning more than $130,000.

The top 10% of wealth holders in Australia own 45% of all the wealth, or about $3 trillion. A one percent annual wealth tax on them would raise by my back of the envelope calculations about $30 billion annually from them.

An alternative would be for the Commonwealth to tax net wealth transfers, for example, by reintroducing estate and gift duties.

The Panama Papers have re-ignited debate about the tax avoidance activities of high wealth individuals and big business.  In two recent ATO tax transparency reports on big business, the Commissioner of Taxation revealed that 36% of those entities did not pay any income tax in 2013-2014.  On top of that one third of ASX 200 companies have an effective tax rate of less than ten percent. More than half those ASX companies also have subsidiaries in tax havens.

Maybe the time has come to consider criminalising tax avoidance and making Boards and senior officers liable for prison sentences for any tax avoidance their companies undertake.

More prosaically it might be time to consider a minimum company tax, based not on actual taxable income but gross revenue. A tax of three percent on the $454 billion gross untaxed revenue of big public businesses alone would yield more than $13 billion. That is before we tax those companies whose effective tax rates are well below the company tax rate of 30%.

There are many other taxes we could consider that could reintroduce equity to the tax debates. Levying rent taxes on the monopolists and oligopolists making super profits, taxing the big greenhouse gas emitters, (while denying them the ability to pass on the costs to consumers,) investigating financial transaction taxes, considering land taxes, and urging the A.C.T. Labor/Greens government to do a Colorado and legalise the personal use of marijuana and tax the cultivation and sale, are but a few other options we could debate.

That no serious systemic progressive tax options are on the agenda is indicative of a wider political problem. The ruling elite and their major parties are keen to make the tax system less progressive. This is part of the wider 33 years to date neoliberal program in Australia of shifting wealth from labour to capital to address what Marx identified many years ago as the tendency inbuilt into capitalism of the rate of profit to fall.

That further regressive tax proposals such as increasing the GST are now off the table is a response to an untapped underlying anger with politics as usual that ordinary working people feel.  Therein lies our hope. It is time to put progressive tax reform back on the agenda. Growing inequality threatens our democracy. It is time to tax the rich.

 

John Passant is a former Assistant Commissioner of Taxation, former tax academic and is currently a PhD candidate in the School of Politics and International Relations at the ANU. This is an edited version of a talk he gave at the National Law Reform Conference at the ANU in April.

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Comments

Comment from Chris Warren
Time October 16, 2016 at 3:51 pm

Is it the case that the Commonwealth could introduce estate taxation – surely the States can do this?

The concept “super profits” needs to be defined. Is it the profit created by lack of competition? or is it profit over a benchmark rate (RBA interest rate)? is it determined by excess over GDP or per capita GDP? Or is it any profit over costs (including opportunity costs)?

Comment from SingletonEngineer
Time October 17, 2016 at 9:14 am

Excellent mix of suggestions. Of course,not all will be realised, but I certainly hope that some are.

Estate duties were essentially smashed by Joh in Queensland. He reduced the rate, eventually to zero, thus encouraging flight of capital from “down south”, with accompanying impacts on those states’ income. And so the race to the bottom was started.

There is no possibility that future state taxes would fare any better – the race to the bottom would be on, as competing states engage in a process of snitching larger slices of an ever-decreasing pie from each other.

Besides which, the states handed their entitlement to levy taxes to the Commonwealth back in the 1940’s. Only a super-optimist would expect reversal of this any time soon.

The future is essentially in the hands of the Commonwealth, perhaps to the eventual demise of states entirely.

Comment from John
Time October 17, 2016 at 7:37 pm

True. The Uniform Tax Case confirmed the Commonwealth’s ability to dominate the income tax field. Fraser had legislation in place for States to set their own income tax (not sure how much leeway they could have doing this) but it was never used and the legislation was abolished a few years ago. The Commonwealth could levy a gift and estate duty. Yes it was Joh who set the repeal of those taxes in motion. Older people began moving to Qld.

Comment from John
Time October 17, 2016 at 7:40 pm

Both States and Territories could introduce gift and estate duties. As Singleton Engineer says Joh began its demise. The Commonwealth could levy it. I suggested that on an ABC interview when discussing alternatives to the GST, and wow did that produce a response.

Comment from Chris Warren
Time October 19, 2016 at 2:03 pm

My only concern is how the revenue raising capacity of a jurisdiction is reflected in Commonwealth Grants guidelines.

An argument against Territory estate duties could be that the extra Territory tax revenue may result in less share of Commonwealth funds.

Comment from John
Time October 19, 2016 at 7:42 pm

Yes, I do not know the exact details.