Treasury Tax Expenditures Statement – Here We Go Again

It is that time of the year again when Treasury releases its “Tax Expenditures Statement”.  You know, the statement that essentially complaints that taxes are not high enough and if only Treasury had its way, another $100 billion plus dollars could be collected.

Here it is.  Pure public service gold – 2016 TAX EXPENDITURES STATEMENT.

As has been written on these and other pages many times, the underlying mindset behind this “analysis” is to say that any tax rate below the benchmark is “revenue foregone”.

Rather than a tax expenditures statement, can we have a tax supplements statement which calculates the additional revenue collected over the benchmark.  For example, rather than claiming the 15% superannuation tax rate is a discount, let us call it the benchmark and any income collected from rates above this is a supplement.

This is about Treasury’s thinking that all wealth and income belongs to the government and anything the citizens are allowed to keep is “revenue foregone”.

How do you like these people?  Any how about the greater fools who invest in this analysis?  Which is why I come to Peter Martin, economics editor for The Age who wrote today about this subject – Treasury says tax expenditures cost $150 billion.  Martin writes:

If abolished, they would close the budget deficit four times over.

I wonder what the budget impact would be from the abolition of the Tax Expenditures Statement?

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33 Responses to Treasury Tax Expenditures Statement – Here We Go Again

  1. Bill

    The country would be much better off if the Dept of Treasury was abolished. They produce nothing of value.

  2. Econocrat

    Peter Martin is an idiot.

  3. Barry

    The benchmark should be the biblical tithe 10%. Deuteronomy 26:12-13

    When you have finished setting aside a tenth of all your produce in the third year, the year of the tithe, you shall give it to the Levite, the foreigner, the fatherless and the widow, so that they may eat in your towns and be satisfied. 13 Then say to the Lord your God: “I have removed from my house the sacred portion and have given it to the Levite, the foreigner, the fatherless and the widow, according to all you commanded. I have not turned aside from your commands nor have I forgotten any of them.

    Anything above that is excessive.

  4. Bruce of Newcastle

    As I mentioned on the OT earlier, if capital gains on the family home are made taxable as Treasury seems to want then the family home is an income producing asset.

    Interest costs associated with income producing assets are tax deductible.

    Making mortgage interest tax deductible, which a HC challenge could force, would cause a vast loss of revenue to the budget. Much bigger than the “foregone” tax on family home capital gains.

  5. Roger

    Why is it that everyone but the government must cut their coat to suit their cloth?

    I say no representation without taxation!

    Only those who are net tax payers should determine who sits on the treasury benches. That will soon fix the problem of a profligate government.

  6. harry buttle

    What we need is an attitudinal change in Govt (to the idea that Australians have both rights and property that is beyond the Govts reach) AND a Govt with the guts to ram it down the throats of the Bureaucracy, and I can’t see it in either of the major parties.

  7. Econocrat

    “What we need is an attitudinal change in Govt (to the idea that Australians have both rights and property that is beyond the Govts reach) AND a Govt with the guts to ram it down the throats of the Bureaucracy, and I can’t see it in either of the major parties.”

    One word: Trump.

  8. classical_hero

    Actually Barry, there were 3 tithes that the Dhus gave.

    But anyway it’s only OPM.

  9. H B Bear

    Is the document subtitled “A Treasury Wet Dream”?

  10. H B Bear

    So many kd wrong-style Budget savings just waiting for the Lieborals to give them the tick.

    Potential Potential Greatness right there. C’mon Waffles you know you want to.

  11. Dr Faustus

    It is inevitable that a future Australian government will introduce CGT on the family home. Initially on ‘super rich’ homes because fairness, then bracket-creeping down the line of people-who-don’t-matter because massive government spending obligations.

    And unless Treasury is off on a frolic of its own, it looks like Morrison is warming up the orchestra for it to be a Turnbull Government initiative.

    Similarly inevitable: death duties on the ‘super rich’.

    There is probably no alternative visible to governments of either persuasion: manufacturing is now at the ‘cultural museum’ stage, we are committed to highest-in-class electricity prices – and innovation, crowd-funding and app coding are not going to pay for customised submarines, the NDIS Leviathan and Aboriginal treaties.

  12. Gavin R Putland

    In summary, the GST pays for the CGT concessions.

  13. OldOzzie

    Econocrat
    #2280150, posted on January 31, 2017 at 11:33 am
    “What we need is an attitudinal change in Govt (to the idea that Australians have both rights and property that is beyond the Govts reach) AND a Govt with the guts to ram it down the throats of the Bureaucracy, and I can’t see it in either of the major parties.”

    One word: Trump.

    Australia – A Gina Rinehart/Cory Bernardi/Peta Credlin/Andrew Hastie Team could be a good start

    The Stupid thing is the Liberals/Nationals are so dumb, they don’t realise sacking half the Federal Servants in Canberra – e.g. Eliminate Dept of Education, Dept of Health, would lose them no seats in ACT, as the Public Servants always vote Labor/Greens.

  14. Rabz

    Faustus – I’ve been warning about CGT on family homes and death duties for many moons now. Our beloved politicians simply won’t be able to help themselves. Along with the inevitable seizure of superannuation, of course.

  15. OldOzzie

    How Stupid are the Liberals/National Party being rin by Canberra Bureaucrats?

    This Stupid

    Judith Sloan – Kick this FWC circus out of the tent

    My guess is that the following might have escaped your attention. In last year’s mid-year economic and fiscal outlook, the Fair Work Commission was awarded an additional $16 million in cash appropriations over the forward estimates.

    There had been no request for additional funding, although needless to say the extra cash was welcomed by the general manager. Why on earth the government would want to increase further the funding of the FWC is anyone’s guess. I thought the government was trying to repair the budget and impose efficiency dividends — code for cutting funding — on government departments and agencies. But evidently the FWC needs more.

    The reason given was to fund investigations arising from the royal commission into trade union governance and corruption. But this isn’t the role of the FWC, particularly after the imminent termination of the division dealing with trade union regulation, a function that has been performed with utter dereliction and complete incompetence by the FWC.

    And I should point out that the FWC received a boost of close to 12 per cent (to $85m) in funding from the taxpayer in 2015-16 compared with the previous financial year. Is this government insane?

    Here is a chance to begin to defund an agency that kills jobs, and yet the government hands over even more dough than requested? (The same could be said of other regulatory agencies — the Australian Securities & Investment Commission has received an additional $122m over four years.)

    The FWC is awash with cash. For example, it funded a ludicrous survey on workplace industrial relations which received a response rate of about 10 per cent. Even so, staff at the FWC — there are more than 300 — dutifully went about producing some completely meaningless and pointless analyses of the survey. Indeed, a conference was held, at taxpayers’ expense of course, to talk about the survey.

    And then there is the excessive use of our money to contract out various functions of the FWC that should be undertaken by the actual members (commissioners, deputy presidents, vice-presidents — did I mention that the remuneration of the members ranges from $366,000 to $548,000 a year? The president is paid even more.)

    Recently, a barrister with barely any experience in employment law was engaged to assist in the rewriting of modern awards as part of the award review process.

    We are told the 122 awards are modern but they need to be rewritten in plain English, a point that has been made for the past 30 years, incidentally. A decision is made to engage an ill-informed outsider to help out. The current review of awards is so drawn out that it will likely overlap with the next review, which must be held every four years. Talk about making work.

    Of course, if the focus of the award review process had been to bring these arcane documents into the modern era by slashing the clear over-regulation and interference with management rights that would be one thing. But, in fact, the convoluted process has led to the possibility of award entitlements being extended (and overturning precedents).

    Throw in a costly survey of small businesses using a series of leading questions and it is clear why the FWC is overfunded and in serious need of efficiency measures and economy. But still the government doesn’t get it.

    Given that many of the FWC members regard themselves as dab hands when it comes to productivity matters, there should be a lot of internal support for achieving better value for money for the taxpayers. (Pause for laughter.)

    Mind you, since the members are statutory office-holders and are technically appointed by the governor-general, they effectively have no boss. Up to a point, they can determine their own work patterns and travel requirements. One member of the FWC — a keen sports lover — is wont to arrange his travel to fit in with major sporting events.

    This so incensed another senior member of the FWC that he circulated an email to all members containing a photo of this person attending a sporting event and words to the effect of “gotcha”. It’s not only politicians who get up to these tricks.

    And then there was the case of a member who decided that it suited her to live in another city, so she simply moved without informing the then president. Even the current president has shown a keenness to switch cities. Like many public sector agencies, there is a clear 80/20 rule going on at the FWC. Twenty per cent of the members undertake the vast bulk of the (statutory) workload.

    A number of members has decided it is more fun advising companies on how to improve workplace relations and lift productivity — the mind boggles given the background of most members — and spend their time doing this rather than the more mundane roles envisaged by the act.

    If you want a laugh, you should go to latest annual report (titled Continuing Momentum) and read about the “new approaches”. There is a case study written up about improving relations between Patrick and the Maritime Union of Australia. It’s quite hilarious until you realise that we are paying for this wasteful claptrap.

    With the May budget coming up, here is the government’s big chance. It is clear that the real demand for the services of the FWC is in decline. The number of applications for approval of enterprise agreements is in free-fall, for example.

    A lot of what the FWC does is just make-work: the processes are deliberately prolonged. The “new approaches” program is a total joke.

    Time to swing the axe. There will be widespread cheering when this happens.

    Re – Time to swing the axe. There will be widespread cheering when this happen

    if you believe Lord Waffles of Wentworth Turdbull would be allowed by Lady Lucy and Martin Parkinson to do this, then you definitely believe in Fairy Tales

  16. Fred

    Home renovation businesses would start booming.

    Why move and pay heaps of tax, when you could spend that money improving the house you’re in? New kitchens, bathroom, extensions pools, you name it. Selling would be a mugs game.

  17. Anonandon

    Pathetic. Capital gains tax on the family home ffs. Come to think of it, why does capital gains tax exist at all?

  18. The Centre for Independent Studies has issued this press release along similar lines to Judith’s comments:
    https://www.cis.org.au/commentary/articles/claims-of-foregone-tax-revenue-should-be-treated-sceptically

  19. miltonf

    Wasn’t Ken Henry on about a tax on the family home during the Krudd era?

  20. Gavin R Putland

    Anonandon at #2280380:

    “Come to think of it, why does capital gains tax exist at all?”

    Because it’s better to confiscate unearned windfalls than to confiscate the fruits of production. The present tax system does the opposite, with the result that we get too many people seeking something for nothing and not enough people producing. And you know where that leads (Say’s law and all that).

    On that basis, the GST would not be at the top of the list of existing taxes to be eliminated. But it gives you a sense of scale.

  21. Anonandon

    Gavin

    They are not unearned windfalls. They are profits either as a result of risk taking or merely keeping up with inflation/the market. And they are paid for with taxed earned dollars.

  22. Louis

    If Treasury were an accounting firm no one but Enron would want to hire them.

  23. JohnA

    For example, rather than claiming the 15% superannuation tax rate is a discount, let us call it the benchmark and any income collected from rates above this is a supplement.

    As Barry said earlier, try matching to the GST at 10%.

    And since this government cannot consider itself anywhere near God-like status (a fact applicable to all governments), forget about the 3 tithes point, and stick to the 10%.

    Above that, call it theft (or idolatry if you want some moral punch).

    Below that, call it Treasury’s bad luck, and we refuse to concede the territory: they can’t grab it.

  24. Gavin R Putland

    Anonandon at #2280481:

    You just made an excellent case for not taxing income from capital, and for excluding inflation from the CGT base.

    “And they are paid for with taxed earned dollars.”

    Yeah, but my preferred position is that those earned dollars shouldn’t have been taxed. In other words, if the problem is that the combination of CGT and tax on current income is double taxation, then the solution is to get rid of the tax on current income.

  25. Squirrel

    It’s worth noting that the same revenue gougers who would like to see the capital gains tax applied to the family home are typically also very enthusiastic about replacing conveyancing duties with an annual land tax or similar on the family home – the latter argued as facilitating mobility, “encouraging” older people to move to more “appropriate” homes etc. etc..

    Of course, such people do not see any inconsistency between a tax change which would purportedly encourage mobility and another which would kill it stone dead (for anyone who had any choice in the matter). But those big PS salaries and empires have to be paid for some how, don’t they……..

  26. Siltstone

    The top marginal personal tax rate is 45%, plus 24 Medicare Levee plus 2% so-called “Temporary Budget Repair Levy”, 49% total. According to The Treasury, any tax take from an individual less than 49% really is a benefit to the individual bestowed by the Treasury. According to The Treasury, someone on the tax-free threshold of $18,200 should really pay them $8,918. What a bunch of wankers.

  27. Ez

    The treatment of superannuation under a comprehensive income tax benchmark is for: superannuation contributions to be funded from after-tax income, earnings to be taxed at marginal rates, and benefits to be untaxed. Under an expenditure tax benchmark, on the other hand, contributions are taxed at marginal tax rates, while earnings and benefits are exempt from tax. The point of difference between the two benchmarks is the taxation of superannuation earnings. Estimates of superannuation tax expenditures using the two benchmarks will be quite different.

    The use of a comprehensive income tax benchmark for superannuation is consistent with the benchmark applied to savings generally in the Tax Expenditures Statement; that is, for bank interest, term deposits and debentures, investment returns on shares and managed funds, rental income and net capital gains.

    Ref: Appendix A – SUPERANNUATION TAX EXPENDITURES A.1 (Pg#127)

    Spelled out in black and white (as if needed).
    Treasury’s preference is clearly: contributions and earnings taxed at marginal rates.
    For the sake of ‘consistency’.

    Why not scrap super altogether and let me invest my own money for retirement? (because that’s what super was designed for… right…)
    Never mind, easier to confiscate if it never touches my hot little hands. Carry on, then.

  28. Gavin R Putland

    Squirrel at #2280524:

    In my experience, those who advocate land tax on the family home tend to regard CGT as an inferior option, precisely because of the lock-in effect (reducing mobility). But, for what it’s worth…

    Dollar for dollar, CGT has less lock-in effect than stamp duty, because:

    (i) Under a stamp duty, an owner who “trades up” more frequently pays proportionally more tax; but under a CGT, an owner who “trades up” more frequently pays tax in a larger number of smaller instalments.

    (ii) A CGT, unlike a stamp duty, cannot turn an otherwise profitable purchase-resale cycle into a loss-maker, and cannot increase a loss.

    Land tax, of course, has no lock-in effect at all, but scores less well against Adam Smith’s third canon of taxation, in that a CGT falls due precisely when the taxpayer has the cash to pay it, whereas the capacity to pay land tax is not automatically realized in cash.

    Of course, in Australia, if a CGT on property were to replace stamp duty, it would need to be implemented at state level (as was briefly done in NSW) or the revenue would need to be granted to the states. If the revenue in respect of each property were granted to the state in which the property is located, it would solve the infrastructure-funding problem by recycling some of the land-value gain due to state investment in infrastructure.

    For these reason, I have long regarded a CGT-for-stamp-duty swap as a no-brainer. But I don’t seem to have many friends. 🙁

  29. Richard H

    Let me tell you how it will be
    There’s one for you, nineteen for me
    ‘Cause I’m the taxman, yeah, I’m the taxman
    Should five per cent appear too small
    Be thankful I don’t take it all
    ‘Cause I’m the taxman, yeah I’m the taxman

    – The late George Harrison

  30. .

    The best tax system of all would consist of a broad based consumption tax, a non-renewable resource royalties tax and a land value tax – all low rated as well.

    I suggest 10-20% (ideally 5-10%), 5% and 2-3% to begin with, to be halved over time with economic growth under a TABOR.

  31. Rabz

    According to The Treasury, any tax take from an individual less than 49% really is a benefit to the individual bestowed by the Treasury.

    I actually tried reading the “statement” and got about half way through the first page.

    Talk about an inexcusable abuse of the English language.

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