Discuss about the Report of Accounting Financial Analysis Report and Australian Government.
The Australian government has publicised an inclusive review of the Australian tax system in the 2008-2009 budget. It has been examined that the current tax system has created a proper tax structure to help the Australian government and the people in dealing with the social, environmental and economical challenges. As per the opinion of Alexander (2013), the tax-transfer system of Australia evaluates an international comparative perspective that demonstrates the distributional profile of Australia transfers. Adding to this, the study attempts to investigate the efficacy of the Australian tax transfer system related to the income inequility concept. However, the tax-transfer system of Australian government provides the assistance to the poorest households (Barkoczy & Pinto, 2012). Hence, the thesis statement of the present essay reflects that the taxation policies in Autralia are relatively complicated, thus, the government experience discrepancies during its transition tenure.
Furthermore, the scheme of the tax-transfer method, public expenditure and the existing taxation strategies creates direct influence in the distribution income amongst the Australian communal. Thus, it could be inferred that the statutory and functioning platforms of the taxation systems and the efforts of the human users to deal with the succeeding complexity is overreached in the existing context (Mangioni, 2014). The primary objective of the study is to evaluate the current tax and transfer architecture of Australia, which fails to deal effectively to achieve its primary goals and demands. The scholars also provide a future taxation system of Australia to meet the current challenges by enhancing the economical and social outcomes.
The tax control system of the Australian government is very complicated by nature as the people of Australia does not support the government by paying a fair amount of tax. The Australian tax office statistics indicate that the people of the country took the advantages of the PAY E (pay as you earn) module by minimising the tax rate (Mangioni, 2014). The higher income people took the deduction in the taxable income by investing the income in the private sector. It has been speculated that the lower income earners and the middle-income earners could not make any claimed in the taxable income as the people could not invest majorly. Considering the opinion of Hewson (2014), this kind of unfair circumstances has made the entire tax architecture ineffective and overburdened to the Australian government. Hence, the government has required adopting a set of policies to increase the sense of the higher income earners. Therefore, as per the opinion of the critics the government has to keep focused on the tax structure to improve the overall taxation progression of the community by making the tax structure more simple.
It has been identified that the multinational firms of the Australia also take the advantage of the tax deduction, although, earning billion of dollars while operating in the country. Considering the words of Gordon (2014), the transfer tax system of Australia government is highly unusual as the tax distribution strategy of the country does not provide an equal opportunity both for the rich and poor people. Supporting this Freebairn (2012) added that the business industry of the country easily avoids the company tax, service tax and the good and production tax. This directly impacts on the economic efficiency of the country. The transfer tax system of the country has progressed with the basic payment of the people and the business units. According to the opinion of Alexander (2013), the government of Australia has to employ a more extensive system to increase the social support towards the government regarding the taxation issues. The Multinational Anti-Avoidance Law (MAAL) needs to be incorporated in the government rules for improving the tax collection process of the country (Barkoczy & Pinto, 2012). It is expected that the MAAL initiative would be highly beneficial for the Australian government to improve the tax and transfer system. The Australian tax and transfer systems would togetherly affect the disposable income of the individual people and the business industry for the betterment of the Australian tax policies.
In the circumference of the similar statement, Althaus et al. (2012) specified that the Australian Tax mix is marginally twisted towards the overall tax policy of the labour income and the accounting for approximately 40% of the increased revenue. It has been inferred that Taxes on capital income interprets for at least a third of revenue, however, taxes on the consumption excuse for a marginally more than the quarter. In the opinion of the Haffner & Winters (2015), it could be perceived that at the Australian Government level the tax involvement is made from the labour is about 50% greater than the offerings from the taxes on capital and consumption. However, the income margin of the labours is relatively lower that the business entity. Thus, the tax share on the monthly wages of the labours is considerably greater that the income generated from the personal venture. Conversely, Lymer & Oats (2007) asserted that at the level of state government, the tax contributions on the consumption and labour are unevenly similar, while tax on capital are approximately 50% higher. Thus, a huge fluctuation is found between the tax policies of the Australian Government and the State.
Furthermore, Waller (2007) claimed that the companies and the individuals are necessitated to pay that taxes to al level of governments including, state, local and federal government. The income taxed has been the considerable form of tax in Australia that is saved by the federal government from the Australian Taxation Office (ATO). In the background of the current statement, Lymer & Oats (2013) figured out that in 2014, Australian Government had experienced a budget deficit. The previous reports reflect that the spending figure of the Australian government is comparatively higher that its earnings. Thus, the regional debt percentage of the Australian governing body has increased (Haffner & Winters, 2015). The statistics of Australian Tax Office forecast that at least 75 individuals bin the Australian region earned more than $1 million in the year 2011-12 but paid no income tax at all (Woellner et al. 2012). The specific group has found the tax deductions that gradually reduced the taxable incomes to a level underneath the income tax threshold. In total, the specific population had the pre-tax income of $195 million, yet managed to reduce the taxable income to a mere $82. According to Hogan (2012), each of the individual earns a figure of one million dollars, yet, received an average taxable income of at least $ 1.09. In the context of the previous statement, Creedy (2009) mentioned that the Government had introduced the PAYE (Pay As You Earn), where an individual is charged with a taxable amount as per its income. However, to simplify the taxation system, the government has regulated the policy where an individual is charged with a tax deduction in case of its further investment in the other purposeful sector. The conclusion shows that due to the low disposable income the middle-income group fails to invest a further amount from the earnings in the other sectors. However, the high-income group receives the additional benefits of the tax deduction. Therefore, the government experiences a huge loss, which directly leads to the budget deficit.
In the similar context, Lymer & Oats (2013) determined that reducing the taxable income hardly comes cheap. The Australian Tax Office statistics represents that the group of 75 people paid, on average, $860,000 each to manage the individual tax affairs. Thus, the maximum taxes are generated from the middle and the lower income group, which does come near to the total of the high-income group.
The current analysis indicates that revenue raising in the tax and transfer system has to be concentrated by four efficient tax bases. In the opinion of Metcalf (2007), business income, personal income, private property income and the other financial rents from the regular resources and land would be the best proposal to rationalise the tax and transfer system of Australia. Supporting this Waller (2007) mentioned that other types taxes such as tobacco, alcohol and environmental costs, etc., have to be maintained by the Australian government in an efficient manner to address the social and environmental cost.
The personal income tax in Australia would be the largest source for improving the government tax revenue (Haffner & Winters, 2015). The income tax is a progressive tax that imposed that as per the income rises of people, the people would need to pay a larger percentage as a tax on the income. As per the opinion of Creedy (2009), the community from the higher income zone has invested a great amount of money to get the reduction in the tax payable amount. However, lower income community is paying the tax as per the income, since, these groups are incapable to invest a lot in the private property. Thus, the disparity in the taxation system has become fallen towards the government of Australia, which becomes as an overburdened situation. Therefore, the financial experts have suggested concentrating on the personal income statement and the personal property for the wealth tax to overcome the challenging situations. This kind of unfairness in tax system had been found by the US billionaire investor, Warren Buffett to mitigate the tax avoidance issues (Freebairn, 2012). Thus, the Buffet rule advised that the higher income earner has to pay higher income tax rationalise the tax transfer methods of Australia.
The idea of the Buffet rule is charging the minimum average rate of tax on very high-income households by the total income. This applies to the income before the individual initiates the process of making the tax deductions. Continuing the last statement, Lymer & Oats (2013) inferred that the high-income households are enabled to make huge deductions to decrease the taxable income to the low levels. Thus, the government needs to omit the tax reduction concept, which would automatically push the high-income group to pay the considerable amount of tax. According to Haffner & Winters (2015), under the policies of Buffet rule, the high-income earner’s pay are supposed to pay the best tax advisors to find the lucrative methods of tax reduction. However, the group would still be forced to pay 35% of the total income in the tax. This tends to reduce the advantage of the tax industry that is searching for the new tax loopholes and reducing the value to the high-income people from buying the knowledge of the loopholes.
The implementation of the Diverted Profit Tax (DPT) would help to ensure that the multinational brands are investing the a considerable figure of tax on the individual profits earned in the Australian region. It could be inferred that The Diverted Profits Tax would be commenced on 1 July 2017 and the purpose of the action is to enforce multinational organisations expending the artificial arrangements to limit the tax by averting the profits offshore (budget.gov.au, 2016). The DPT will automatically extend the scope of ATO’s to recognise the popular multinationals looking forward to evade the tax by switching its profits out of the Australian region. Similarly, the tax rate of 40% will be charged by the MNCs especially on the transactions that would be caught with a penalty.
Conclusion:
The current study tends to evaluate on the discrepancies in the taxation policy that has lead the government to experience a sudden saturation in the budget based planning. However, lower income community is paying the tax as per the income, since, these groups are incapable of investing a lot in the private property. Thus, the disparity in the taxation system has become fallen towards the government of Australia, which becomes as an overburdened situation. It has been speculated that the lower income earners and the middle-income earners could not make any claimed in the taxable income as the people could not invest majorly. The study reflects that the Australian Government has introduced certain tax reduction policies for the betterment of the standard population. However, the higher income groups have utilised the advantage to a certain extent. Therefore, the government is looking forward to introducing the practical measures to resolve the existing tax related issues.
References:
Alexander, R. M. (2013). Tax transparency. Business Horizons, 56(5), 543–549.
Althaus, C., Bridgman, P., & Davis, G. (2012). The Australian policy handbook. Australia: Independent Pub Group.
Budget 2016-17 – making our tax system more sustainable (continued). Retrieved August 3, 2016, from https://budget.gov.au/2016-17/content/glossies/tax_super/html/tax_super-01.htm
Cervi, B. (2013). Buisness focus: Corporate split-up leads to new union. Engineering & Technology, 8(8), 20–22.
Creedy, J. (2009). Personal income taxation: From theory to policy. Australian Economic Review, 42(4), 496–506.
Freebairn, J. (2012). Personal income taxation. Economic Papers: A journal of applied economics and policy, 31(1), 18–23.
Gordon, R. N. (2014). Making hedge funds more tax-efficient. The Journal of Wealth Management, 7(1), 75–80.
Haffner, M., & Winters, S. (2015). Homeownership taxation in Flanders: Moving towards “optimal taxation”? International Journal of Housing Policy, 159-168(4), 1–18.
Hewson, J. (2014). The politics of tax reform in Australia. Asia and the Pacific Policy Studies, 1(3), 590–599.
Hogan, L. (2012). Non-renewable resource taxation: Policy reform in Australia*. Australian Journal of Agricultural and Resource Economics, 56(2), 244–259.
Lymer, A., & Oats, L. (2007). Taxation – policy and practice 2007-2008: 2007-2008 (14th ed.). Birmingham: Fiscal Publications.
Lymer, A., & Oats, L. (2013). Taxation: Policy and practice: 2013/14 (20th ed.). Birmingham: Fiscal Publications.
Mangioni, V. (2014). Emerging trends of state land tax and local government rate revenue in Australia. Pacific Rim Property Research Journal, 20(2), 145–160.
Metcalf, G. E. (2007). Federal tax policy towards energy. Tax Policy and the Economy, 21(4), 145–184.
Waller, V. (2007). The challenge of institutional integrity in responsive regulation: Field inspections by the Australian taxation office. Law & Policy, 29(1), 67–83.
Woellner, Woellner, R., Barkoczy, S., & Pinto, D. (2012). Australian taxation law 2012 (23rd ed.). Australia: CCH Australia.
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