“Australia has too many taxes and too many complicated ways of delivering multiple policy objectives through the tax and transfer systems. The capacity of the legislative and operating platforms of these systems, and their human users, to deal with the resulting complexity has been overreached. The tax and transfer architecture is overburdened and beginning to fail in dealing efficiently and effectively with multiplying policy goals and demands. Rationalisation of the tax and transfer architecture should now be a strategic priority.”
Discuss. What are some of these multiple policy objects the Australian tax and transfer system tries to achieve? How does the system overreach and is hence overburdened currently? How do you propose to rationalise the tax and transfer system of Australia to overcome these shortcomings?
Australia is said to have too many taxation problems and ways are way more complicated and the objective delivered are very much intricate. The legislative capacity and other governing bodies and the users to deal the intricacy has been reached to an ultimate level where it is impossible to handle. TheTax system was being handled badly and is overburdened and is not able to achieve the goals and the demands desired by the society. More the system is complex or intricate; it leads to higher operating costs. In this regard one can easily conclude that the intricacy of tax policies are just because for the intricacy in the market because of the production goods and services. Thedefensemechanism of the tax system set up would be of utmost important to have a tension free society and its better economically mentally for the society.
The tax systems does not have motives .Their goal or motives play a great part in influencing in how business control their system. The system sometimes delivers non tax objectives and acts as a helping hand in other environmental problems. The tax transfer system has effect on both on business and individual. (TaxReview.treasury.gov, 2016)
The Australia’s government role in the system is huge than compared to other country. When it comes to Australian Government side the people deal with the four important parts of system that is income tax of indiviuals, taxes which are applicable on services and the transfers which includes payments in cash.On the other way the people deal with a more tight system and other taxation matters. All the national, state local levels of government are interconnected with each other and are considered as single tax transfer system that consists of several interconnected components. The matters which are concerned to taxes are being controlled with different levels of people. It can also be said that any business in Australia needs to interact with the government at different levels of the different states applicable alongside with the national tax transfer systems. (Conersation.com, 2016)
The tax transfer system not only does it affectthe individuals but also the business. There are innumerable numbers of taxes that are present in Australia in all the national state local levels of the government. The example that the tax transfer system affects business is that the company or the business has to pay benefits tax (FBT) and make guarantee payments for their employees. Businesses also deal with the transfer systems in theown way the company needs to register with the applicable state tax, the company needs to apply with the payroll tax, GSTapplicability, they need to pay excise duty and register with the Excise Department and all other taxes charged on business inputs .Businesses which operate in more than one State, they need to operate andinteract with multiple Australian and state governments taxation system. (Humphery, 2016)
It is very important to have a objective and set standards and the Australian tax transfer system is trying to achieve in the years ahead so that they can give a positive social economic results .Some of the objectives are :- (Pc.gov.au, 2016)
To stress on affording their own shelters that owes their own houses and more inclination towards having an urban lifestyle
To act or develop a good understanding between the ecosystems globally and locally
To act as a strong growth and act as a diversification tool in respect to education, good social infrastructure spending.
To stress on affording their own shelters that owes their own houses and more inclination towards having an urban lifestyle
Frankly speaking, the end duty is to make the transfer system so strong that it sees and react to those expectations and fulfill what they desire to. With time the tax system has become more complex and very complicated .Risk is just added with cost in running daily activities. The effect is larger when it comes to work consumption and savings. With time it has been noticed that tax system is becoming tougher and complex and the cost in managing or the administrative costs are rising and no transparency is been seen in the taxation system. It has been seen that lots of money has been wasted in the tax transparency system it could have been spent on something good and which would be productive for the society. It s very necessary to have a sustainable system which has a good economic growth. It is very important to have such a tax transfer system that not only distribute all the income that is redistribute the income earned but also increases the growth of income in every stages which includes investing in infrastructure of the nation. With time the tax system has become more complex and very complicated .Risk is just added with cost in running daily activities This will lead to more workforces more labour more capita per worker and also higher creativity and skills. (Pc.gov.au, 2016)
A tax system is needed where that explore can be seen of the new digital age and combines clearly with the new ways the life that is been lived and conducts business. A 21stcentury tax and transfer system should meet its purpose effectively .The main objectives should be high workforce involvement, a more good way of not spending more and spending in education and physical capital.. It would lead to transparency in government accounts to their citizens. The entire above factor affect the attitude of people against the system like their compliance with the system. When large number of tax transfers are present ,all the connected rules and the communication that takes place within them, administration of such taxes and transfers and also taxes related to them leads to increase in complexity in the tax transfer systems of Australia. There should be equitable very transparent and simplified personal tax is the huge revenue generation thing. The other objectives should be that the pensions, allowances and other transfer payments should be tax free. A double tax scale should be applied. (TaxReviewtreasury.gov, 2016)
The system has overreached an is overburdened through variety of tax transfers and different concessions The systems due to various complex goals is lacking of good policies. Lackingof administration and coordination of policies .The tax transfer system of Australia is failing in rising to the challenges of the globalization and is unable to attract the opportunities of investment that can be done in Australia. The country is facing huge challenges in respect to environmental challenges like climate change, soildegradation, water scarcity and various pollution problems .Taxes are to levied in such a manner that the environment improves, there is a better amenity solution given to the environment and it can also be names as a sustainable environment. Businesses deal with the systems in their own way the company needs to register with the applicable state tax, the company needs to apply with the payroll tax, GST applicability, they need to pay excise duty and register with the Excise Department and all other taxes charged on business inputs, so many taxes leads to overburden to the nation. The tax arrangement for goods like wine, tobacco, beer, luxury cars and spirits are a proof of the competing policy goals of tax transfer system of Australia. There need to be perfect balance in the bases and rates of taxes so that investment and businesses and other things are promoted internationally. (PC.gov.au, 2016)
The key directions to remove the negative part should be:-
The Board of taxation should be empowered to initiate its own reviews of how current tax policies are operating
Following the Pension Review changes, the single and couplepayments should be improved across other payment types.
Deductions and offsets should be rationalized.
It serves very important to rationalize or a mechanism to overcome all the shortcomings .It is very important for the Government of australia to take charge of transfer system. the tax policy makers and administration should be responsible to the problems experienced by the tax payers. A transparent and understandable system is required with citizens holding equal right and share great experiences. It also requires more effective procedure so that the costs are less and it is effective. The reputation of the system should be consistent and that the threats are properly seen
Revenue should be concentrated on four types of tax bases:- (Austlii, 2016)
Private consumption through taxes .Insurance taxes, payrolltaxes, Property transfer taxes, luxury car tax should be abolished. (Mackie, 1991)
Some of the factors should be taken in to consideration by the Australian government are:-
A Board should be set up to tell the Taxation authorities on the general organization . (TaxReviewtreasury.gov, 2016)
transfer taxes should be lower down and should be replaced by efficient taxes mostly annual land tax. Deductions and offset should be rationalized.
Balances of superannuation should be included in the Age pension and the tax on the fund should not be applicable which should increase savings fromcurrently taxed contributions by around 18 percent and all the income and gains of funds should be taxable at the rate of 7.5 percent.
So at last but not the least a number of issues are addressed and if they are accordingly reported without compensating changes elsewhere, can reduce losses for some people in the community. To have strong foundation and base the Review tells that the governments theinstitutions such as the Productivity Commission should be allocated with the charge to maintain the integrity of the country and the methods should be transparent enough.
The administrative and policy making taxation should be responsive very understandable and more open to the tax payers
Personal Income tax should become more transparent as it is the biggest source of income
Attention should be made to the long term growth of Australia because it determines the living standards of the citizens present there. More practical taxes and neutral taxes should be introduced, better work incentives should be introduced to attract and introduction of expenditure tax at business level. (G, 1986)
The transfer system of Australia is to be work supportivefocused, fair and adequate and should be sustainable in nature .A good connection should be there between the tax systems of Australia.
There are way too many taxes in Australia which is overburdening the nation. Due to multiple goals there is lot of complexity. Taxes should be lower down to four bases as mentioned above that is personal income private consumption business income and economic rents derived from rent
Taxes on gambling tobacco and gambling and other type of illegal activities should be charged.
Reference
Architecture of Australia’s tax and transfer system. [online] Taxreview.treasury.gov.au. Available at: <https://taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_2-10.htm> [Accessed 9 Aug. 2016].
Taxreview.treasury.gov.au. (2016). Part 1: Overview – Executive summary – Australia’s Future Tax System: Final Report. [online] Available at: https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/executive_summary.htm [Accessed 9 August 2016].
Taxreview.treasury.gov.au. (2016). Executive summary. [online] Available at: https://taxreview.treasury.gov.au/content/ConsultationPaper.aspx?doc=html/publications/Papers/Consultation_Paper/executive_summary.htm [Accessed 9August 2016].
Taxreview.treasury.gov.au. (2016). Architecture of Australia’s tax and transfer system. [online] Available at: https://taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_2-01.htm [Accessed 9August 2016].
Pc.gov.au. (2016). Tax and Transfer Incidence in Australia – Productivity Commission. [online] Available at: https://www.pc.gov.au/research/completed/tax-and-transfer-incidence [Accessed 9August 2016].
The Conversation. (2015). It’s time to choose what kind of tax system we want. [online] Available at: https://theconversation.com/its-time-to-choose-what-kind-of-tax-system-we-want-38050 [Accessed 9August 2016].
Alrc.gov.au. (2016). Complexity of the tax transfer system | ALRC. [online] Available at: https://www.alrc.gov.au/publications/7-income-tax/complexity-tax-transfer-system [Accessed 9August 2016].
The Conversation. (2016). Ideas for Australia: Five ideas to help fix Australia’s tax system. [online] Available at: https://theconversation.com/ideas-for-australia-five-ideas-to-help-fix-australias-tax-system-56272 [Accessed 9August 2016].
Taxreview.treasury.gov.au. (2016).Part 1: Overview – Chapter 1: The need for reform – Australia’s Future Tax System: Final Report. [online] Available at: https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_1.htm [Accessed 9August 2016].
AustLII – Australian Taxation Law Library. [online] Austlii.edu.au. Available at: <https://www.austlii.edu.au/au/special/tax/> [Accessed 9 Aug. 2016].
Architecture of Australia’s tax and transfer system. [online] Taxreview.treasury.gov.au. Available at: <https://www.taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_2-01.htm> [Accessed 9 Aug. 2016].
Tax and Transfer Incidence in Australia – Productivity Commission. [online] Pc.gov.au. Available at: <https://www.pc.gov.au/research/completed/tax-and-transfer-incidence> [Accessed 9 Aug. 2016].
Keating, M. and Mackie, K., 1991. The Tax-Transfer System in Australia. The Australian Quarterly, 63(3), p.294.
G., J., 1986. Reforming the Australian Tax System: The Issue of Comprehensiveness in the Draft White Paper and the Tax Reform Package**Commonwealth of Australia, Reform of the Australian Tax System, Draft White Paper, (AGPS, Canberra, 1985) and Commonwealth of Australia, Reform of the Australian Taxation System, Statement by the Treasurer The Hon. Paul Keating, M.P. September 1985, (AGPS, Canberra, 1985). Economic Analysis and Policy, 16(2), pp.145-167.
Humphery-Jenner, M., n.d. Entrenching Provisions in Australia: Are They Effective?. SSRN Electronic Journal.
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