23.9% and Taxation by other means

The Liberal-National Coalition Government has a stated budget policy of not collecting more than 23.9% of GDP in tax. What a laughable objective. It reminds Spartacus of a “strategy” executive in an organisation he once work for who convinced the CEO to set a business objective of generating $500 million of “profitable revenue”.

When it comes to tax, the reality is that the true rate of taxation is actually government spending because this spending has to be paid for either the current year through taxes or in future years through taxes.  We should not be fooled by the accounting trick of moving flows between reporting periods.

Total tax = tax collected yesterday + tax collected today + tax collected tomorrow. 

But worse, the 23.9% objective is a sham for the reason that the government generates other taxes elsewhere although by a different name and through other means. And no, Spartacus does not refer to the “Tax Expenditures Statement” but rather other government policies which forcibly extract money from citizens.

Let’s start with the most obvious being compulsory superannuation contributions. The reason this is really a tax is not only because it is mandatory (at threat of property, life and liberty) but when comparing tax rates to other countries, those other countries (eg US, UK, France) have their retirement savings schemes wash through the government’s accounts and hence within tax numbers. Thus Australia needs to automatically add in some extra percentages for this.

But then Australia needs also to account for the equivalent of the tax penalty for not maintain private health insurance. There is also the raft of “user” and “industry” charges imposed by ASIC, APRA and Austrac which collectively amount to $1b per annum. If you run a financial services business in Australia, you have to pay the piper, and these are not licence or company registration fees.

There are a raft of things citizens are forced to pay for and the the suggestion that this Liberal National government is a low taxing one is as laughable as the suggestion that Australia is a low taxing country.

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11 Responses to 23.9% and Taxation by other means

  1. Mother Lode

    It is early yet, so I may not be thinking too clearly, but since GDP includes government, and government is paid for by tax, then the private sector must pay 23.9% of their own, but 23.9% of government to make it GDP.

  2. RobK

    The RET is another statute that extracts funds to prop-up a government scheme which the market would otherwise not engage in and users pay.
    Various levies to producers, enshrined in legislation can sometimes edge toward the same.
    It all gets a bit murky when government research generates IP returns… I’m a bit ambivalent on this one.

  3. MACK

    And then there’s the States. A particular favourite is the landfill fees they charge to local councils, who have to pass the cost onto rate-payers. Currently $64.30 per tonne in Victoria, up from $4.50 three years ago.

  4. .

    Yes indeed, what about the States?

    Federally: 23.9% of GDP collected in tax and 600 bn of debt.

    The States (and Shires)? Also, another 400 mn of debt.

    No fiscal restraint in sight, deficits abound, despite a decade now of “forecast surpluses”.

    Our tax system is also very inefficient. The amount of production and productivity we are destroying with our fiscal policies, tax policies (and also the costs of regulation) must be truly prodigious.

  5. John Constantine

    Taxation is progressively and fundamentally transformative.

    Once an area of the economy is subject to over a hundred percent sin tax, it is doomed, Stalin Rules Victorious.


  6. BoyfromTottenham

    Just for comparison, the latest figures that I have seen (https://www.zerohedge.com/news/2018-08-10/budget-deficit-soars-684bn-10-months-spending-interest-hits-all-time-high) for the US is that in the last tax year the feds collected US$2.76 trn in taxes, made up of US$1.41 trn in individual income taxes and a miserable US$166 bn in corporate taxes (excluding payroll tax). For the wealthiest country in the world, it appears to me (no socialist!) that business gets off very lightly. And as the US government is running a whopping budget deficit of about US$684 bn, either future taxes will have to rise substantially or spending will have to be slashed. I pity the poor US worker, it looks like he is on a hiding to nowhere.

  7. Fat Tony

    Well, we and all our productivity belongs to the government. We should be grateful they give us some.

  8. Alex Davidson

    2 things we need to remember when discussing taxation:

    1. It is theft.
    2. The political class are masters at deception and the use of propaganda to hide the truth of point 1.

    So today, for example, their ABC broadcast the chief demagogue telling his acolytes with a straight face that his government has lowered taxes, when many would argue they have never been higher in the entire history of the country.

    And as Mother Lode points out above, including government expenditure in GDP hides the real impact of the pillaging upon those who create wealth. Excluding government expenditure reveals that the mystical 23.9% of GDP federal limit actually requires confiscation of 31.8% of all wealth created; and if we consider all the additional forms of plunder that the political class engage in, it’s not hard to come up with a tax to GDP ratio closer to 33% – a figure that requires confiscation of half of all wealth produced, and a figure that seems a lot closer to the lived experience of those who are forced to fund the system.

  9. JohnA

    Alex Davidson #2786429, posted on August 11, 2018, at 2:20 pm

    2 things we need to remember when discussing taxation:

    1. It is theft.

    Sez who? The guy in the video didn’t explain either.

  10. BoyfromTottenham

    Tax is theft – Er, as far as I can tell Australia introduced, via an elected government, Income and Company taxes in 1915 to help pay for our involvement in WWI. Until then the federal government’s main source of income (at about 5% of GDP) was from customs and excise duties. After WWI the government continued these taxes, and added a few more here and there as we all know. I’m sure that one of the readers here will know and can tell us whether any ‘anti-taxation’ parties were formed between 1915 and say WWII, and how many of these were at all successful in lowering our taxes. Unfortunately, we have now reached a point where the number of those who benefit from higher taxation (such as those on social security benefits, government pensions, etc.) almost certainly exceed those that suffer excessive taxation, therefore making it highly unlikely that our taxes (and the associated social benefits) will ever fall.
    Unless, of course President Trump wins a second term, by which time he will have (hopefully) rejuvenated the US economy, cleaned up the fossilised and in-bred US political system, and shaken loose many of the leeches that have attached themselves to the US and other Western economies over the past half century or so. Then perhaps our federal government will see the light as well and move in the same (rational) direction. I only hope that I live to see both of these events. Fingers crossed…

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