The OECD (Organisation for Economic Co-operation and Development) has reported on its annual economic survey of Australia, and in it has made several recommendations.
Three important ones are:
- Increase the GST
- Do more to reduce greenhouse emissions
- Adopt ambitious social housing targets
The rationale for increasing GST is to reduce the dependence on income tax, instead, increase dependence on a consumption tax. The estimated contribution an increase in GST would make is about 1.6% in a decade. Implied in the statement is that dependence on income tax should be reduced.
The people writing the report are supposedly quite intelligent. The OECD, of which Mathias Cormann is the Secretary General, is an:
”… intergovernmental organisation with 38 member countries… committed to democracy and the market economy, providing a platform to compare policy experiences, seek answers to common problems, identify good practices, and coordinate domestic and international policies of its members.”
A number of interesting ironies occured to me, both regarding the Secretary General and his role in Australia’s government as Minister for Finance from 2013 till 2020 and the member countries to which the Australian economy is compared in determining the recommendations cited above.
GST, the goods and services tax is a tax on consumption, a tax which impacts most on those who need to spend all their income, living pay day to pay day, to feed and clothe families, while those on larger incomes, perhaps more settled in their lives are not as financially stressed, and manage to save, to invest parts of their incomes. That the OECD recommends an increase in the GST rate is an encouragement to tax the least well off, yet the income tax system is stilted towards higher income earners.
While in the Senate, Mr Cormann consistently voted against bills which would have made it harder for individuals as well as corporations to aggressively minimise their tax obligations. The GST cannot be easily avoided, it is paid at the supermarket checkout, each time a bill is paid, each time a meal is bought, each time the family car is filled with petrol.
Changing the GST rate, while unpopular, would be an easier to achieve option than increasing income tax rates for the highest income earners, easier to achieve than changing the rate at which superannuation earnings are taxed for the highest superannuation accounts, changing the tax deduction allowances on the annual tax return is harder to achieve than increasing the GST rate.
When, as we get to see every now and again, the taxation department reports on taxes paid, we see instances of people with incomes of over $1,000,000 in the tax year paid no income tax. The last report I could find was for the financial year 2022-23, where 91 people earning over $1,000,000 paid ZERO income tax. Those wage and salary earners would feel that they were quite entitled to claim all those deductions to minimise their tax liability to zero. But for someone on the average wage, even using an accountant or taxation specialist to prepare their tax return would have a hard time getting to pay no income tax.
Is the system stacked? Just a little. I recall a chat with a CPA who worked for one of the large multinational accounting firms, where they were set the challenge to find an extra $10 in deductions to ensure that the client paid no tax that year. The client was prepared to pay the hourly rate for however long to took to avoid paying tax.
The Secretary General of the OECD, when a Senator, and as Finance Minister from 2013 till 2020 voted consistently against a fairer tax system.
The second irony is when considering how to reduce greenhouse gas emissions, and again we can look at the role the Secretary General had when in government, and the support he gave to minimising the impact of climate change and the reduction of greenhouse gas emissions.
When the Gillard government introduced a carbon pricing scheme, a fixed price mechanism starting at $23 per tonne for major emitters, Australia’s national emissions reduced by about 2% in its first year, and according to The Australian Institute, if the scheme had continued, over 72 million tonnes of emissions would have been saved. On that estimate, the revenue forgone by the government is around $1.6 billion, and the reduction of greenhouse gasses and other markers in achieving emissions targets would be a lot more achievable.
The mining industry fought tooth and nail against the carbon pricing legislation, spending millions on advertising to try to stop the laws passing.
The legislation was repealed by the Abbott government in 2014.
A further irony is that while the LNP claim to be better financial managers than the ALP, the introduction of the carbon pricing scheme saw the income level at which tax was to be paid lifted from (and I am guessing here, but close to the mark) $7,200 to around $19,000. This was not repealed by the fiscally responsible Abbott government, forgoing both the $23 per tonne of carbon price ($1.6 billion) and the taxation reduction which was to offset any consumer price increases caused by the carbon pricing. Mathias Cormann was Finance Minister at the time.
The social housing issue, which is the third recommendation proposed by the OECD is probably the most difficult to deal with, and much of the responsibility lies with state governments. In discussing this topic, people are quick to mention ‘immigration’, but an interesting fact to consider is that Australia is not alone in having and housing crisis, both for social housing and affordability, could be related to population growth, not just here, but globally.
In 1955 the population of Australia was about 9 million, today about 27 million. In other words, in the last 70 years the population has multiplied by a factor of 3. World population in 1955 was about 2.7 billion, today about 8.2 billion, a multiplication by a factor of 3.
Essentially, we have the same situation in dealing with homelessness and housing affordability as most of the developed world.
It is interesting to consider what is being done, and when I look at the initiatives taken by the Cooke government in Western Australia, an allocation of $5.8 billion housing diversity pipeline has been established to boost supply and improving existing housing stock across building new homes, refurbish thousands of existing homes and open state land for affordable projects. Included is the conversion of a hotel in East Perth into over 200 units for essential workers, seniors and singles.
A quick search shows that each state has plans along similar lines and the Commonwealth Government is supportive with additional funding. In other words, all governments are working toward resolving the housing crisis. How useful would that $1.6 billion in forgone revenue be?
Again, I find it interesting, ironic, that the OECD comes up with the recommendations it has produced when the General Secretary, as Finance Minister in the Abbott/Turnbull/Morrison Governments did so little to further the recommendations they make.
The aims of the OECD include low tax, small government, business friendly, anti-working people, such responsible budget managers, sounding very much like LNP policy.
When in government, as Finance Minister, Cormann was part of a government which tried to balance the budget by stealing from the lest powerful through Robodebt, effectively froze the wages of working people, and bragged how the budget was ‘back in black’ when that was just a pipe dream.
I would love it if the OECD could be a little more creative when making suggestions on what we should be doing.
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Some of the financial decisions made in the past have been appalling. Costello selling Australia’s gold reserve at bargain basement prices. Keating’s privatisation not what you would expect from a Labor Treasurer. And they cleared the Murdoch’s to buy the Herald and Weekly Times Group giving them media dominance. Now we get told what the most wealthy want us to believe.
The hypocrisy of delusion, illusion and mental gymnastics that passes for taxation policy brought to you by PWC, KPMG, Deloitte’s, Ernst & Young, RBA, CPAs, Economists and other assorted lobbyists and sacred cows.
No need to increase the GST, just make it apply to everything, no exemptions.
Forget “Green house gas emissions’ nothing Australia does will have any noticeable impact.
Yes, put more time and energy into public housing.
Why tax the voters?? Better to tax the corporations, especially the foreign owned multinational mining corporations by having deeming tax of 10% of gross income to be paid to the Australian voters.
Another alternative is to cut the numerous government handouts, subsidies, low privileged rate loans, rebates and all other ”subsidies” to corporations and thus follow the capitalist philosophy of ”only efficient corporations survive by creating profits”.
These innovations would be difficult in Australia because the management class lacks imagination, and the necessary ability to do anything except sell-out profitable businesses to foreign owned corporations, thus exporting the profits and reducing national gross turnover.
Sadly, too many years of COALition misgovernment of Australia has made Australia a third world export economy only benefiting the billionaires club members that already greatly benefit from the deliberately structured Australian taxation laws.
Let’s start by admitting our taxation system is scrambled egg. Year after year we raise this and lower that and the egg becomes even more scrambled!!
Let’s scrap it and start afresh, replace all taxes bar the GST, with a Financial Debits Tax (FDT), where every time a person or company account is drawn down a percentage is taxed.
The simple fact is, the more people who pay tax, the less each of us has to pay, to reach the same bottom line.
Jonangel, let’s NOT forget about greenhouse emissions. The LNP…. the dysfunctional opposition fights regularly on this, mocking the government for trying to achieve targets set, and agreed on in commitments we as a nation have made. They have undermined efforts at achieving the targets at every turn.
Yes, we continue to export gas and coal, but the importing countries too are going through a transition to reduce emissions. And yes, we can and do make a difference, climate change is a problem, a huge problem, with floods in the north of the country, fires blazing in the south and record temperatures being recorded.
Pacific Island nations are facing existential crisis as sea levels rise, adding to our ‘immigration problems’. We need to address global warming, even though we are a small nation, and our contribution is minor, it is still a contribution, despite the negativity of the Nationals, One Nation and the right of the Libs.
Small contributions make a difference, just look at the election process as an example… in our system the winner needs to have a vote which is 50% PLUS ONE VOTE.
One vote makes a difference. Many other examples can be found where a small contributions make a difference.
jonangel:
Or, instead of increasing taxation on the poorest and most vulnerable, we could eliminate all the loopholes and exemptions and special cases etc that make it so easy for wealthier people and corporations to avoid paying tax.
Meanwhile the Albanese government that promised transparency and inclusion for all, have been flat out making it more difficult to get information,harder for the average punter to make progress,cutting the NDIS,screwing the Independents with cuts to staffing,and through the’fixer’ Murray Watt, approving fossil fuel projects like there’s no tomorrow.
Limp wristed reaction to almost everything, except the Zionist lobby,never mind the greatest sell out of all..AUKUS.
One has to conclude that they are an integral part of the problem we have.The Opposition might be on life support, but we are no better off.There are no more excuses..they(Labor) are not up to the task.There are dozens of other failures that we all know about,and we also know they are flat out cementing their grip on power,stifling dissent etc.
The question is, where do we go from here?
Any and all recommendations from “Conman” would, in the real world, be on the “do not do list”.
What we should be doing in actually making all these gigantic multi-national corporations pay a fair amount of tax. Allowing all of our resources to be taken offshore without companies paying any taxes, basically taking them for free, is absolutely abhorrent. That money collected would be more than enough for what the government needs without robbing the poor like they always do.
I have advocated an increase in the GST for years, most recently here during an economic discussion re MMT.
1. The government has outsourced inflation control to the Reserve Bank.
2. It needs to accept greater responsibility for inflation control, and be less reliant on the blunt and inequitable instrument of interest rates
3. An increase in the GST will have the effect of bearing down on inflation by suppressing/reducing aggregate demand (in a similar way to increasing interest rates)
4. The revenue raised can be deployed to alleviating the cost pressure on low income groups as necessary.
5. The economy should accept variable GST in the same way as we deal with variable interest rates
6. There is no easy solution to taxation policy but GST reform is capable of addressing both revenue and economic performance
So you are suggesting even more tinkering with a taxation system that has failed us?
So lets reduce the tax on them and increase it on us!! Come on, governments have been doing that for years, the old rip off Paul, to pay John. Why won’t you wake up? Out taxation system is fucked.
Just what has “greenhouse gas missions” got to do with taxation?
Australia could stop exporting coal, iron ore, uranium and even wool, believe me, the world would not stop spinning.
I think Australia’s taxation system needs overhaul, and that’s unlikely to happen in a single action. The short parliamentary term is a limitation.
It needs a series of actions, starting with the GST, and the ALP government has enough political capital to make a start.
Overall, an increase in the GST (with far fewer exemptions- perhaps nil) would mitigate a range of the most annoying economic issues.
But generally, I think the economy remains in pretty good condition
leefe, if you read and thought about what I have suggested, you would see that is well covered. I want us all to pay our fair share of tax.
jnonangel:
A higher GST is increasing the tax on us. The poorest pay a proportionately higher part of their meagre income for essentials; if those items are taxed at a higher rate, the load falls even more heavily on their shoulders.
leefe, I don’t know where you are coming from, but I have never suggested “increasing” the GST. Please re-read what I’ve posted and think on it.
I’ve referred in the past to the adverse effect of a reliance on the dot-point format for conveying information.
The format is useful when complementary to an argument.
When it IS the argument, it conceals information.
Consider AC’s first comment above.
His dot-point 3 — An increase in the GST will have the effect of bearing down on inflation by suppressing/reducing aggregate demand — is probably correct, but it conceals the fact that a GST increase will have an IMMEDIATE dire effect on living standards for those on low incomes.
His dot-point 4 —The revenue raised can be deployed to alleviating the cost pressure on low income groups as necessary — is possible but doubtful.
It overlooks the fact that a distance has been put between the low income earner and the relief from the higher cost of living.
A third party is now involved.
Possibly a fourth or fifth party.
Possibly an intolerable level of applications and other paperwork.
Who knows?
But we do know that putting distance between the sufferer and the relief ensures that the intended relief will not be enjoyed in full.
His dot-point 5 — The economy should accept variable GST in the same way as we deal with variable interest rates — is a flight of fancy that would be an administrative nightmare for business.
It would keep low income earners in a constant state of debilitating apprehension.
Do they not have enough to deal with already?
His dot-point 6 — There is no easy solution to taxation policy.
???
Taxation problems can be fixed with one piece of legislation.
And there’s a couple to choose from.
We could tax wealth.
Or we could ensure that corporations pay tax.
jonangel:
IF GST applies to everything (including currently exempt food items), it is an effective increase and a larger burden for the poorest.
leefe, if the rate of taxation remains as is, it is not an “increase”, where in the world do you get that idea?
But as stated, the introduction of a FDT would reduce individual and company tax, I repeat, the more people/companies that pay tax, the less each one has to pay. Think on it.
You really can’t understand this? – if I currently don’t pay GST on fresh food, and fresh food then becomes subject to GST, I would then be paying more GST, which means my tax burden would be increased. You can grasp that much, surely?
Eliminating loopholes for personal and corporate taxes is a no-brainer; it has to be the first step. But – as this article has explained – consumption taxes are regressive; they place proportionately more of the burden on the poorest, who have to spend all their income on essentials.
leefe, what is the difference between “Eliminating loopholes for personal and corporate taxes and eliminating the loophole regarding foodstuffs?”
Don’t you believe in every one paying their fare share of tax?
Because.
You’re.
Making.
The.
Poorest.
People.
Pay.
More.
When you’re on your knees, you don’t need a further kick in the guts.
ps: Stop moving the goalposts.
Nice work leefe.
The GST was introduced as a con.
It was supposed to eliminate tax loopholes.
It did not.
Exemptions for food etc were part of the package.
So leefe, you just want tp preserve this mishmash of a taxation system, where some pay tax and some don’t? I don’t want to move the “goal posts”< I just want a fair playing field.
The underlying intent of AC pushing for a GST increase can be seen in his second comment.
There, he dropped the dot-point format that had so far concealed his motivation, and this slipped out — But generally, I think the economy remains in pretty good condition
He should have stuck to the dot-points.
Because that view of a satisfactory economy is the view of the smug, complacent, elite class.
Or the petit-bourgeoisie — those who serve the 10%.
Those who do not have to worry about petty distractions such as cost of living details.
Or uncertainty of employment.
Or homelessness.
Or a public health system that has holes you could drive a truck through.
Beware those who seek to preserve privileges for the few while presenting a persona of empathy and class solidarity.
Steve, there’s an anecdote that relates to George Gurdjieff’s endeavour to provide a profitable environment for spiritual / psychological growth in Fontainebleau-Avon, France, in the 1920s – early 1930s.
It goes like this. One of the Russians who’d accompanied Gurdjieff in his arduous trek west from Russia after the Bolshevik revolution was considered by all who were in residence at the château to be a thorough pain in the arse. Bad-tempered, irritable, critical, unlikeable.
At some point, he announced his intention to quit the program and relocate himself to Paris. Shortly after, Gurdjieff sent one of his people to Paris to lure him back to Fontainebleau. In fact, he bribed him… paid him to return. Gurdjieff, of course, was the master, the man who knew everything, and he knew that the irascible Russki served a powerful role among the community of aspirants… that of ‘treading on other people’s corns,’ … that vital function of being so annoying that it provided a golden opportunity for others to see just where their weaknesses lay, in terms of relationships and coexistence in a communal fashion.
It’s a bit of a stretch, but all power to your pen… keep it up.
Kanga, you had me worried for a while — I had no clue where you were heading.
In the end, a little sigh of relief.
“that vital function of being so annoying…”
That’s pretty close to my intention, actually.
The PR machine that keeps the System functioning is so pervasive that I even have to check my own thinking, continually.
Ongoing self-examination is necessary in the political sphere, as is Self-examination in the spiritual, as I know you are aware.
Many thanks for your interest. 🙂
I don’t wish to be disrespectful about Steve’s comment/reply to me… oh wait… yes I do.
Steve is typical of the wordy economic ignoramuses that critique without understanding, feel compelled to reply without the ability to intelligently debate and write without offering possible solutions.
FFS, jonangel, you really can’t debate honestly, can you?
I’ve said that certain things need to be sorted out, but when I reject one aspect of your cunning plan, it’s you just want to preserve this mishmash of a taxation system, where some pay tax and some don’t?
I’ve said eliminate loopholes and remove exceptions, especially for corporate tax. But no, that’s wanting to preserve the current system in its entirety, according to you.
And that, btw, is part of what I mean by moving goalposts. Don’t claim I’ve said something I didn’t, or that I mean something I didn’t say. This applies particularly when I have specifically said the opposite.
leefe, people can only respond to what you write and you have indicated you would remove exemptions for some and not others!!
You just want to tinker with the current mishmash of taxation, I just want a taxation system that treats us all fairly, see the difference?
So respond to what I actually said, not what you want it to mean.
I wouldn’t mind if the whole system was burnt to the ground and rebuilt. I do, however, disagree with one major aspect of your prefered reconstruction because, as I have said so many times, it places an extra burden on the poorest and most vulnerable people in our society.
leefe, what I have proposed will disadvantage no one.it would in fact reduce the taxation demands on all of us.
I have given you a proposal, tell me what is wrong with it, or better still, give us a better one.