Category: Taxes

Australia’s GST Methodology has its Supporters, but also Detractors

Recently, the Economic Society of Australia polled 49 prominent Australian economists on the issue of GST reform.

They asked each member of the panel whether they agreed with the following statement:

Increasing government revenue collected through the Goods and Services Tax (GST) by removing exemptions (such as food, health, and education) is better than achieving the same extra revenue by increasing the GST rate while retaining the existing exemptions.

The U.K. Government Crack Down on Tax Avoidance…Not So Much

Corporate tax policy says more about power than anything else does. Corporations seek to minimise the tax they pay – and, while governments ordinarily try to maximise their revenues, in the case of transnational corporations (TNCs) they understand that they have to tread carefully. Governments have come to accept that they hold fewer and fewer cards as capital has become more mobile.

Tax Havens are Safe from the OECD for Now

The news has been full of stories about how companies such as Amazon, Apple, Google, Microsoft, Starbucks and others are able to shift their profits to low or no-tax jurisdictions by using novel, legally permitted corporate structures and complex internal transactions (known as transfer pricing schemes). Companies are able to do so because they pay taxes at the place of their residence rather than where the underlying economic activity takes place.

Discretionary Trusts and the Smell Test

The public knows something is “not right” with the tax treatment of family trusts (discretionary trusts). Accountants and tax lawyers working with discretionary trusts know firsthand that the income tax treatment has trouble passing the “smell test”. That is something even the most aggressive tax minimisers would concede.

Yet, the tax treatment of discretionary trusts has had little attention in government tax reviews. The 2010 Henry Review did not consider the appropriateness of the tax treatment of discretionary trusts – this was a shortcoming.

Can Australia Grow Their Economy via Tax Cuts?

In his recent speech on personal income tax cuts, Treasurer Joe Hockey made clear that the “common cause of reform [of the tax system is] to improve the growth trajectory of the Australian economy”. The key to this for Hockey is to ensure the income tax system is not constraining workforce participation and effort, through things such as bracket creep.

Hence the need for a downward revision of personal income tax rates.

It sounds quite straightforward and reasonable, not the least because it addresses the average income earner.