Draft letter to the ATO
To: The Commissioner of Taxation
Cc: The Treasurer
The Minister for Financial Services & Superannuation
Letter of Demand re Unconstitutional Taxes
Section 82 of the Australian Constitution says that the cost of collecting Federal taxes is chargeable to Consolidated Revenue. We (name of company) therefore claim that it is unconstitutional to require us, at our expense, to collect personal income tax payable by our employees or contractors, or to collect GST payable by our customers. While we expect you to deny that s.82 means what it says, we will be surprised if you are willing to gamble most of the Federal Budget on that denial! We therefore expect you to accept our very reasonable offer to settle our claim out of court. The offer is as follows:
(1) We will keep the PAYG income tax that we withhold from employees and contractors; but the employees and contractors will still receive credit for the withheld tax as if it had been paid to the ATO on their grossed-up wages/salaries/fees.
(2) We will keep the GST that we collect from customers; but the customers will still receive input credits on tax invoices issued by us.
(3) We will no longer pay company tax, except capital gains tax (CGT).
(4) We will no longer make compulsory superannuation contributions or pay the Superannuation Guarantee Charge (SGC).
(5) In lieu of PAYG income tax, GST, company tax and the SGC, we will pay a VAT at a rate of x% on our gross value added, with border-adjustment. The quoted rate will apply to the VAT-inclusive, GST-exclusive base (this being the base that gives the simplest accounting). In other words, we will subtract our domestic purchases (ex-GST) from our domestic sales (ex-GST) and send x% of the difference to the ATO.
(6) This settlement will remain in force until Federal tax legislation is amended so that private entities are no longer required to collect tax in their own time or at their own expense.
- Terms (1) and (2) avoid any disruption to the affairs of other taxpayers. They relieve us of the obligation to collect tax for the Commonwealth, but do not entirely relieve us of the compliance costs that give rise to our claim. We therefore demand terms (3) and (4) as compensation for the remaining compliance costs.
- Term (3) makes an exception for CGT in order to assure you that we will not avoid tax by realizing capital gains during, rather than before or after, the period of operation of this settlement.
- Term (5) prescribes a VAT rather than a retail tax in order to assure you that we will not avoid tax by concentrating on non-retail activities.
- The rate quoted in term (5) is the rate that would have left our total bill for compulsory superannuation and Federal taxes (other than CGT) unchanged during the last accounting period. The rate is therefore sufficient to enable the Commonwealth to make superannuation contributions on behalf of our employees as if we had paid the SGC.
- The VAT, unlike PAYG tax, superannuation and company tax, would not enter into prices of our exports. And unlike PAYG tax and superannuation, it would not enter into our marginal labour costs. Hence we would be able to expand our business. Hence the Commonwealth would receive more revenue from us (through the VAT on our domestic sales) and from other taxpayers (through the flow-on effects).
- Will the VAT force us to raise prices for domestic customers? No, because our VAT remittances will be covered by the avoided remittances of PAYG tax, GST, company tax and superannuation. There will be no need to rake in extra income by raising prices (as there would be if the avoided PAYG tax were paid out in gross wages and salaries rather than retained by us).
We have taken pains to ensure that your acceptance of our offer would not cause any difficulties if other taxpayers were to demand the same treatment. (Indeed, our offer is inspired by G.R. Putland’s “Draft Federal Budget Speech, 2014-15“, which is obviously designed to apply to all taxpayers.)
As users of Federally-funded services, we have no desire to starve the Government of revenue. By offering to pay the old CGT and the new VAT, we have demonstrated our willingness to make a fair contribution to that revenue. But we will not tolerate compliance costs that violate our constitutional rights. Neither will we tolerate other unnecessary compliance costs and deadweight costs as long as we have a legal means of resisting them.
Accordingly, if you do not accept our generous terms, we reserve the right to sue the Commonwealth for injunctive relief and compensation for past violations of s.82. And in view of the rate at which productive enterprises are failing under the deadweight of the current tax system, we regard suing the Commonwealth as one of the better investment opportunities around!
. . .
CEO, . . .