Reality Is ‘The Rich’ Do Pay Their Fair Share

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

Yours truly

Tax denialist.

Update: Noodle emails to suggest that my corespondent might be Wayne Swan.

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38 Responses to Reality Is ‘The Rich’ Do Pay Their Fair Share

  1. Marko

    Sinc- I had always thought that the expression was “spouted” (as in ‘to pour forth’) not “sprouted”, but the latter is very common in the media currently e.g. Peta Credlin on Sky this past week. Thanks for the op-ed, it needs to be repeated.

  2. Squirrel

    What has been leaked so far about the Budget leaves the feeling that we’ll be hearing tax increases once again described as “saves” – back to the future/forward to the past and Wayne’s World!

  3. JC

    From the letter.

    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 !!!!!

    What a fucking moron. Even by his metrics you would end up with a similar picture.

    Sinc, email him and tell him to come here and argue his position.

  4. Scavenger

    I think “Tax Denialist” is a dickead. After many years doing my own tax returns, I got wise and found that the average suburban Accountant was able to find more deductions than I ever did (or was game enough to claim!) and the savings at least offset their fee. It also, I think, gives one some buffer/protection from the ATO with claims.

  5. Fred

    “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”

    As a tax professional, I can tell that you if you are a small fish the ATO will never bother to audit you.

    The ATO will only ever target someone if the additional tax claimed is greater than the cost of the audit.

    Ordinary taxpayers can easily reduce their “PAYE tax responsibility” by claiming false deductions and not drawing attention to themselves compared to their peers.

    If you’re in a lower tax bracket, claim away, the ATO don’t care.

  6. Perplexed of Brisbane

    Scavenger,

    Having your tax done by an accountant is no protection from the ATO. If they stuff up your return, you are liable because you sign that it is correct. You have to sue them to have them found negligent.

    Having said that, my tax return is so simple I should do it but I hope a competent accountant wouldn’t stuff that up.

    I agree about not being game enough to claim some things others in my profession do. I just hope they don’t get audited.

  7. cynical1

    If one does well in life, paying tax is a part of this.

    As a wise man one said, only an idiot pays one more cent the necessary.

    The bastards don’t spend it wisely enough to make extra donations.

    If it’s in the rules and legal, what’s the problem?

  8. fang

    Tax Denilist
    Why! The heck would ANY! Business, pay any more tax than they are legally obligated too???
    How much risk/reward do these businesses need to bare before the wage earner whos biggest risk is loosing his job! Employees “should” work as hard as the boss to keep the business profitable! Therefore keeping employees in a job and paying taxes to help fund all the things that people “think” they need goverment to supply! ( be real nice if most of these “people” would think about how they could do it them selves or hire A BUSINESS to do what goverment is hopeless at!!!)
    Business pay their way! And everbody elses way as well! How much tax is a business paying incuding employees part of their wage?

    The small and large business is the back bone of our country! Get Bureaucracies out of goverment and into private bussiness as a owner or employee and watch services and our productivity quadruple!!!!! 🙂

  9. Scavenger

    To “Perplexed”. Ah yes so true. I should add that I do query them on some things that seem, to me, to be a bit willing, but ultimately one relies on their competence. Otherwise why engage them.

  10. Zulu Kilo Two Alpha

    I think “Tax Denialist” is a dickead. After many years doing my own tax returns, I got wise and found that the average suburban Accountant was able to find more deductions than I ever did (or was game enough to claim!) and the savings at least offset their fee.

    My accountant has saved me far more in deductions and refunds over the years then I have ever paid him.

    And FWIW, anyone who thinks the ” ridiculously unfair” diesel fuel rebate is a concession is little better then an idiot.

  11. John Carpenter

    An easy way to increase government revenue from corporations is simply to reduce the company tax rate to zero and put a 28% withholding on dividends and certain other distributions.Once the withholding is deducted the dividend would be tax free to the shareholder.This takes taxation out of the equation for investment decisions and allows companies to focus solely on their markets.The withholding rate being well under the higher personal income tax rates would result in a distribution frenzy.Of course this will never happen because our stone headed “leaders” can’t think out of the bloody box.It would also be a complete anathema to the socialist public employees in the Treasury.

  12. Entropy

    But Zulu: raping the land + dirty hydrocarbons! A doubleplus ungood if ever there was.
    Thus those that goodly that opposemining and quarrying internal combustion for energy can claim any rubbish.

    It is well about time the diesel rebate was renamed the roaduser excise rebate. That is what I want in the budget.

  13. Entropy

    And oh, a farmer that paid tax? Sack your bookkeeper Zulu!

  14. Mark A

    Zulu Kilo Two Alpha
    #2373764, posted on May 7, 2017 at 5:56 pm

    And FWIW, anyone who thinks the ” ridiculously unfair” diesel fuel rebate is a concession is little better then an idiot.

    This always gets me riled up, it’s a blooming road tax. Why pay it if you don’t use the road?

  15. Zulu Kilo Two Alpha

    This always gets me riled up, it’s a blooming road tax. Why pay it if you don’t use the road?

    That is, indeed, what some of the unfathomably moronic that infest the face of the Earth appear curiously incapable of understanding…

  16. Megan

    I cannot even begin to understand how utter idiots like tax denialist can so totally misunderstand simple data in order to shore up a ridiculous political position that has nothing whatsoever to support it. Our education system needs to start teaching basic thinking skills.

    And yes, as JC said, come here and try to argue your brilliant ideas, Tax Denialist. It won’t to take long and you might actually learn something. Although I don’t hold out much hope.

  17. Tel

    This always gets me riled up, it’s a blooming road tax. Why pay it if you don’t use the road?

    But since government does not use the majority of the money to actually pay for the roads, we could argue that it’s really more or a “snatch whatever you can” type tax, in which case you should pay too.

    Perfectly clear?

    And remember, we need government because you know… who’s gonna pay for the roads?

  18. Habib

    Obviously a oroduct of the public education system. Quite likely a teacher-english and economics I’d hazard. One thing we are heartily endowed with, a world leader in fact, is idiocy.

  19. duncanm

    As a tax professional, I can tell that you if you are a small fish the ATO will never bother to audit you.

    The ATO will only ever target someone if the additional tax claimed is greater than the cost of the audit.

    bulldust.

    I was audited as a student earning money over the term breaks. The bastards put me over the coals for an annual income of something like $17k, because I claimed all of my tax back (didn’t earn much during terms).

    They screwed up the assessment (double-counted a figure) – but I had to pay the full amount under threat of sheriffs and god knows what else, then it took 12 months of phone calls and angry letters to get my money back.

  20. Exit Stage Right

    Yep, pure Swansteen, the World’s Greatest Treasurer. Soak the rich irrespective of what the statistics say. Keep the lie alive so that his pensioner constituents can see that he is the MAN taking it to the Gubbermint and all those evil rich magnates that create the jobs that employ thousands.
    Didn’t have the guts to put a name to the piece. Tax denialist indeed. Reality denialist would have been a better moniker.

  21. Tator

    Tax Denialist is totally wrong about the top 5% as the ATO stats also cover deductions etc. I sat down one night whilst on an away trip and did some data analysis on the tax state re deductions on the 11905 who earned over $1 million in 13/14. Turns out the average tax rate on gross income was 42% and net income was 44%. Considering that 11082 did not drop below $1 million taxable income and claimed 2.73% in deductions on average means most are not even attempting to minimise taxation.

  22. Walter

    Thanks Sinc.,

    Reporting who actually pays tax should appear on the front page of every news paper each week, get people focussed on where our Common Wealth comes from. How about a tax payed “clock ” alongside a debt clock?

    Businesses are really the only generator of wealth and tax revenue, without them the Govt gets no income, group tax is the second biggest “cheque” I wrote in my business, the biggest was wages. People who invest or buy homes etc earn their money from working in a business! BTW Public Servants don’t pay tax either they get paid from taxes collected, the equivalent of what a worker would be taxed is withheld (not paid) to make it look like they pay tax. This fake tax should be excluded from any statistics. I would like to see the result of such a calculation.

    We have too many socialists ignoring the importance of businesses to the country, not to mention the risks we assume.

  23. Robber Baron

    Tax Denialist has proven conclusively that the leftists/Statists are winning the propaganda war.

    We must privatize all education now…all of it.

  24. The author of the email is as economically illiterate as he is linguistically illiterate.
    Clearly written by a school teacher or Green / Labor pollie.

  25. ned

    “Corporations Do Not Pay Taxes: They Can’t, They’re Not People

    all those who say that “companies should pay more tax” are simply being ignorant. Companies do not pay tax, cannot pay tax, and thus to call for them to pay more is just displaying that ignorance.

    It’s simply nonsense based upon ignorance. Either the ignorance of those proposing it or perhaps worse, their playing upon our presumed ignorance of the fact (yes, fact) that companies do not pay taxes, ever. Not one single cent or penny has ever been paid in tax by a company and no system of taxation will ever be able to make them do so. So to call for higher corporate taxation is simply nonsensical.”

    from forbes.com

  26. Zulu Kilo Two Alpha

    Clearly written by a school teacher or Green / Labor pollie.

    I did wonder whether Numbers Bob had a new sockpuppet..

  27. jonesy

    The tell is the diesel rebate..the writer is a watermelon green. Heaven help this country if the liars party ever lose ascendency and the watermelons gain power over the lefty vote.

  28. Sydney Boy

    1. The rich can’t squirrel away millions in super at 15% tax – only a maximum of $25k can be saved in super at this rate – any $ on top of that $25k is subject to normal marginal tax rates.

    2. Sinc, can you please advise which sections of the Taxation Act are marked “for expensive accountants only”, as I can’t seem to find them.

  29. Tel

    Corporations Do Not Pay Taxes: They Can’t, They’re Not People

    No… but they make fine tax collectors though.

  30. john constantine

    The threat of the ATO audit is the fees that have to be paid for professional backup, the time that is stolen dealing with ‘war of attrition’ phone queues that could be used in productive business and their ATO know they can make a profit through State sanctioned fines.

  31. Philby

    Lies damn lies then statistics. That is what comes to mind when I see these figures about taxation. The whole system is like swiss cheese it is full of holes. There are more creative ways out there to avoid tax used by many . Even the accountants don’t know or don’t want to know what goes on. So many distortions so little truth to base “statistics” upon.

  32. OldOzzie

    As do the “Dumb” Self Funded Retirees in this Country

    And the Liberals say they can find where to cut Spending

    Budget 2017: foreign citizens get $15bn in welfare


    About 870,000 non-citizens, mostly from Britain, New Zealand, Africa and the Middle East, are claiming $15 billion a year in welfare­ benefits, according to new analysis by the Parliamentary Budget Office, raising questions about the generosity of Australia’s social security system.

    The analysis, requested by Libera­l Democratic Party senator David Leyonhjelm, estimated that 710,000 non-citizens from nations with which Australia has no social security arrangement, includ­ing Britain, Vietnam and China, claimed an average $17,500 each annually in welfare, totalling 83 per cent of the $15bn total.

    “At present, around 2.5 million (non-citizens) live in Australia and are eligible for welfare,” said Senator Leyonhjelm. “While I believe refugees should continue to be elig­ible for welfare to help them find their feet, the vast majority of non-citizens are not refugees and should not require handouts.”

    More than 150,000 non-citiz­ens from countries with which Australia does have a bilateral agreement, such as New Zealand and India, were estimated to claim $15,500 a year each, making up the remainder of the total.

    Eligibility for pensions, allowances and family tax benefits is based on residence rather than citizenship. Eligibility for the Age Pension, Australia’s biggest welfare payment, requires a minimum of 10 years’ residency.

    John Wanna, a professor of public policy at Australian National University, said Australia was one of the most generous countries in the OECD for payments to non-citizens. “We’re one of the few in the OECD where somebody who doesn’t work can go straight on to benefits,” he said, noting that in Europe access to social insur­ance was often predicated on prior ­contributions.

    British citizens made up the largest share of the total, at 170,000, followed by Africa and the Middle East (90,000) and China (50,000). “Before 1949 everyone here was simply a British subject,” said Professor Wanna. New Zealanders who arrived before­ 2001 are eligible for welfare.

    The government has recently tightened eligibility for skilled temporary visas and citizenship, paring back eligible job categories and toughening English-language and residency requirements. “Citizenship still doesn’t really give you that much; a lot of people in Australia still vote who aren’t citizens.”

    Senator Leyonhjelm said limiting welfare to citizens “will discourag­e those with poor job prospects from coming to Australia, and will build support for immig­ration within the Australian community.”

    Social security and welfare is the largest area of government spending, projected to grow from $158.6bn this financial year to $191bn by 2020.

    The new figures “represent the total number of adult welfare recipients affected by limiting welfare payments to only Australian citizens, except where a reciprocal social security agreement is in place with the non-citizen’s home country,” the PBO said in its costing. “It includes both those who would have their total transfer income­ reduced and those who would lose all of their transfer income­.”

    The PBO excluded payments to non-citizens from countries where expatriate Australians would receive similar payments, mainly age and disability benefits, as a result of bilateral agreements. A deal struck with New Zealand last year gives Australians access to age and disability benefits. Thirty international social security agreements allow Australians “to claim payments from other countries where they have spent part of their working life”.

  33. Michel Lasouris

    Hmmm. If you’re right Sinc, and The Gooses is your email interlocutor, it speaks volumes that he remains anonymous does it not?

  34. the sting

    Like Mark A ,I always get alarmed when the diesel rebate gets written about by non thinkers. Why should a professional fisherman have to pay ”road tax” on the diesel he uses in his boat on the ocean ?

  35. EvilElvis

    Ned, nice piece on corporations here,

    I like the river analogy.

  36. Mother Lode

    I liked the clarion-like salutation to the noble souls at Fauxfacts – currently shrinking into oblivion by the very scribes who would never write such…ahem…propaganda

  37. OneWorldGovernment

    There are 5 inequitable taxes levied in the Australian system,
    – Excise Duty;
    – Company Tax;
    – Stamp Duty;
    – Payroll Tax; and
    – Council/Shire Rates and Taxes.

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