I had an op-ed in the Daily Telegraph on Thursday (no link) on tax.
It is pre-budget silly season again. You know, the time of year when we get to hear all of the good reasons why government should spend more money.
It is also when we get to hear why government should tax more. To hear some people tell it, the power of taxation is quite astonishing – it can solve any and every social ill.
If only negative gearing were abolished or the capital gains discount -removed housing affordability would improve. If only the government introduced a new tax on internet sales, Australian retailers would face an even-playing field. If only big business would pay more tax, life would be fairer for the rest of us. Not to mention “the rich” who seem to hardly pay tax at all. If only life were so simple. There is a lot of nonsense that gets sprouted about taxation. But every year there is a reality check in the form of the Australian Taxation Office’s annual Taxation Statistics.
Recently the ATO released the data for the 2014-15 financial year. As always it makes for interesting analysis. Did you know that “the 1 per cent” paid more in personal net income tax than the bottom 50 per cent of personal income tax payers? The top 5 per cent of net personal income tax payers (earning above $167,348) paid over 33 per cent of net personal -income tax while only earning 21 per cent of taxable income.
If people are worried about inequality, they should look no further than our personal tax system.
The company tax system is little different. In 2014-15 just over half of 1 per cent of all companies had a net taxable income of over $1 million. That small number of companies paid 74.78 per cent of the $68.4 billion in net company tax collected that year. When we look at the actual tax distribution for Australia – official data from the ATO – it becomes very clear that the Australian government, with all its spending, is very highly reliant on the hard work and efforts of a small number of taxpayers.
It gets worse. When you drill down into the company tax data, it quickly becomes apparent that two industries prop up the revenue: financial and -insurance services, and mining. The two industries many Australians love to hate.
The mining industry in particular punches well above its weight. Mining companies make up less than 1 per cent of the total number of companies in Australia, yet they pay over 14 per cent of the net company tax with an -effective tax rate of 26 per cent. That figure excludes any royalties paid to the state governments – strictly speaking royalties are not taxes, but they still contribute to the public purse. Financial services and insurance pay nearly 36 per cent of net company tax with an effective tax rate of 21.4 per cent.
Notions that “the rich” or “the big end of town” aren’t paying their fair share are simply not supported by data from the ATO.
On budget night, rather than talking about toughening up, or improved integrity measures, or new tax -increases, it would be nice if Treasurer Scott Morrison thanked the hardworking taxpayers of Australia and congratulated them for their excellent performance.
Then today I received this email:
Dear Mr Davidson,
I could not believe. some of your statements in your article as they are pure propaganda and only the Daily telegraph owned by the Despotic bulti millionaire Rupert Murdoch would publish this, most certainly the SMH would not have published such an nonfactual ,ridiculous biased piece of propaganda which surpasses anything written in the soviet union under Stalin for twisting and turning non facts into supposed justification of payment of taxes by the rich and rich companies.
Most particularly your assertion that mining companies constitute less than 1% of all companies in Australia yet pay 14% of the total tax
This is a ridiculous twisting of facts as we all know that the ATO levies tax based on the total pre-tax profits of companies NOT what particular industry a company happens to fit into.
. Why didn’t you publish the percentage of tax they pay relevant to the total profits the mining industry declares or even compared to the Total Capitalisation of all mining companies
What has this less than 1% got to do with anything !!!!!
Can you qualify this by quoting any economic text books that use this calculation to declare how much tax a particular industry must pay, I doubt not !!!
No-where in your article have you published anything about the tax write downs and the concessions the mining industry gets such as the ridiculously unfair Diesel fuel concession
Likewise the practise of the top brackets of tax payers soaking away earnings in super funds and paying only 15% tax
We all know the rich can afford to pay for expensive tax consultants to advise them on how to structure and devise schemes to minimise their tax yet you did not balance your article by mentioning this fact. I can guarantee that the majority of the top 5% of net income payers found a way to reduce their income before theyactually paid any tax.
Ordinary taxpayers have no way of reducing their PAYE tax responsibility because they cannot afford to pay for the tax minimisation experts and they need every dollar they earn to pay for weekly living expenses
Update: Noodle emails to suggest that my corespondent might be Wayne Swan.