Academic Nirvana

Some ideas are so ridiculous that they can only come from academics.

Writing in the AFR today, two UNSW academics have proposed that the Government increase the rate and base of the GST but provide all Australians with a $7,500 per person GST free threshold.  And this would be effected through:

Australia’s sophisticated payments system.

Follow the bouncing ball.

Professor of Economics @ UNSW, Richard Holden and Professor of Law @ UNSW Rosalind Dixon write:

We should use Australia’s digital payment system to give consumers at $7500 GST-free spending exemption from a bigger, non-regressive consumption tax.

And how would this work?

Each Australian adult would receive a $7500 a year “GST-free” spending threshold. That is, the first $7500 of consumption would attract a GST rate of 0 per cent. Beyond that, all goods and services would be taxed at a rate of 15 per cent – including those that are currently exempt such as fresh food, health, and education.

And what would this deliver:

A broader GST would raise more than $60 billion a year, according to analysis by PwC. By our calculations, the compensation stemming from the $7500 exemption would be around $20 billion. This leaves the government with $40 billion a year in fiscal improvement from the progressive GST.

You really must admire the writing here.  Is not a “$40 billion a year in fiscal improvement” basically a $40 billion tax grab?  Why yes it is.

And how would this all work:

But thanks to Australia’s world-leading payments system, the exemption could be implemented very efficiently. Any Australian adult could register any debit or credit card in their name. Each time such a card was “tapped” at, say, the supermarket checkout the user’s GST-exemption balance would be looked up electronically, and, provided there was sufficient balance remaining, the GST applicable to their transaction would be removed and their balance updated accordingly.

Genius.  Just genius.  Apart from the fact that this payment system (NPP) is not world leading, far from it, and was forced upon the banks by the RBA, it would deliver even more personal data to the tax office who would need to have access to the data.  But who cares about little things like that.

But the compliance question:

Would this mean that cash transactions would not be not eligible for the GST exemption? You bet.

And the academic solution:

There is simply no legitimate reason for tax-dodging through under the table, cash transactions in a world where the New Payment Platform would allow real-time person-to-person transfers. Close to all point-of-sale transactions can already be made electronically.

Right.  Because it is simpler to pay electronically, there is no “legitimate reason” for dodgy transactions.  Ok.  Austrac needs to go.  Add that to the savings list.

But of course that would never happen so the government would need to eliminate cash from the economy.  Let’s go electronic payments.  Great for the government.  Great for the banks.  Great for the public sector.  The rest of us?  We don’t matter.  We are just food for the system.

So there you go.  Bish, bosh, bash.  Two birds with one stone.  Grab an extra $40 billion p/a in tax from Australians (to start with) and eliminate all cash in Australia to allow the government to take even more through negative interest rates.

A pretty shrewd idea from 2 unworldly academics, one of whom has also previously advocated for a mass bailout of the university sector.

High distinction worthy.

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28 Responses to Academic Nirvana

  1. I’ll just leave this here.
    They’re the ones on the left and right.
    The one in the middle must have been the inspiring one.

    Innovative new method puts a price on public spending …

  2. Tim

    Please can someone in Government get rid of these academics.
    While they are at it clean out UQ of its china influences

    Enough is enough

    Freedom to choose whether to use cash or plastic is much more important than making it easy for government banks and the like. Seriously how do such people get to where they are.

  3. Seriously how do such people get to where they are.

    Most simply transition from being a perpetual student to becoming staff. They have known no other life.

  4. dopey

    The gushing smile seems to be compulsory for the leftist.

  5. Alex Davidson

    I wonder why the AFR publishes this sort of subversive nonsense. Is it because they or their readership agrees with government plundering another $40 billion from us and removing the last vestiges of freedom, or because they hope to engender outrage and stop it from ever seeing the light of day?

  6. Bruce

    “The gushing smile”

    Reminds me of Heath Ledger’s “Joker”; for a number of reasons.

  7. Terry

    progressive GST’

    Ah yes, “progressive”; like Stage 4 Cancer.

  8. Natural Instinct

    Editors used to be sensible enough to see through such drivel.
    But i guess they are desperate for low cost content – and nothing is as low cost as a free thought bubble

  9. DD

    Odd that lawyers are advising on implementation at POS but have totally ignored the law governing GST calculation by the merchant to pay the ATO.
    The shutdown and wearing of masks has addled their brains to the extent that they are playing at being accountants.
    Next week they will play at being doctors and nurses just as soon as they push the politicians off the stage.

  10. Terry

    That free thought bubble’ has cost the taxpayers plenty.

  11. a happy little debunker

    I have a much better idea.

    Make all payments to University Academics, Public Servants, ABC types and Politicians via government issued, cashless, welfare cards.
    All monies unspent at the end of each welfare (pay) period is forfeited – because they obviously don’t need it.

  12. NoFixedAddress

    I think these 2 academics should be lauded for highlighting the PwC report, How GST reform can help reboot prosperity for Australia.

    There is no doubt that our present taxation system is holding back Australian Prosperity.

    Australia should adopt a more enlightened taxation system and encourage you all to study the other PwC report, Overview of PRC Taxation System

    You might also take the time to understand where Australia is headed with Victoria leading the way with another PwC report, The Belt & Road United

    We only have 12 months to prepare the country to celebrate the glorious founding centenary of the One True Communist Party, The Chinese Communist Party.

  13. Rohan

    I’m not sure this is the “Participation Award” that everyone was hoping for.

  14. Spurgeon Monkfish III

    Make all payments to University Academics, Public Servants, ABC types and Politicians via government issued, cashless, welfare cards.
    All monies unspent at the end of each welfare (pay) period is forfeited – because they obviously don’t need it.


  15. Tom

    My poke at the Australian Financial Review as the “anti-business daily” started as a joke. Not any more.

    It’s not just that they got this gibberish for nothing from a couple of tax-hoovering academics on the make who’ve never had a real job in the real economy.

    Most of the the AFR‘s staff are fellow communists who loathe the free market — though government and big business have almost succeeded in killing it off in Australia.

    Just look at the op-ed page and the virtually daily deranged rants of the staff cartoonist against the most pro-business US president in American history.

    Like the ABC and the other Nein (former Fairfax) newspapers, the AFR is controlled by a leftist mob run wild. Management has no say in it.

    After returning to the AFR from The Australian as editor in chief in 2011, Michael Stutchbury quickly surrendered after boasting he would be an editor who breaks stories. He is now a follower, not a leader and the AFR‘s circulation has collapsed (from north of 100,000 copies per day to 56,000).

  16. Struth

    MV is onto it, you have to give him that.
    Although many of us have known they were coming for cash, but the timing is fantastic.
    These fuckwit academics have amazingly timed this little outburst of cash hate perfectly in line with proceedings.

  17. Scriptman

    So every Point Of Sale system in use in Australia needs to be updated to generate a different tax invoice total to display on each receipt depending on this new threshold? Did they calculate the cost of implementing that?

  18. duncanm

    Seriously how do such people get to where they are.

    Such people are where they precisely because of their talents.

  19. BM

    Holden, Dixon whistling dixie!

  20. Roberto

    My local Woolies is “trialling” electronic payments only. Customers wishing to pay for their groceries with cash are turned away.

    It’s pretty clear where this is all heading.

  21. Tim Neilson

    But of course that would never happen so the government would need to eliminate cash from the economy. Let’s go electronic payments. Great for the government. Great for the banks. Great for the public sector. The rest of us? We don’t matter. We are just food for the system.

    Great until the system crashes.

    As best I recall, Michael Andrew’s “Black Economy” task force report recommended against a cash-free economy largely for that reason.

    A friend of mine used to do work for the UN (bear with me) flying into disaster zones to supervise emergency reconstruction work. He’d be given say 24 hours’ notice of his flight. One thing he always took was a briefcase of cash USD to pay local tradespeople and suppliers to get things done and start things moving again.
    Then the UN bureaucrats decided to ban cash. After all, we couldn’t allow something to be done that might facilitate corruption – not with the UN!!!
    His next job was Nepal. First thing at the scene he started to talk (through an interpreter) to a tradesman about getting a job done. The tradie asked about payment. My friend explained that payment would be by electronic transfer to the tradies’ bank. After some discussion the interpreter said “he wants you to follow him”. They went along a road and round a corner, and the tradie pointed to a heap of rubble. “That’s his bank” said the interpreter.

  22. Lee

    Then the UN bureaucrats decided to ban cash. After all, we couldn’t allow something to be done that might facilitate corruption – not with the UN!!!


  23. Kneel

    “Customers wishing to pay for their groceries with cash are turned away.”

    Wow. A company trading in Australia, advertising products for sale, and refusing legal tender? That’s very, err, courageous of them – in the Sir Humphrey vernacular.

  24. Richard Bender

    There might well be no legitimate reason for under the table tax-dodging cash transactions. But what does that have to do with the me paying cash today for a coffee and an egg and bacon roll mid-mornig, a salad roll at lunch and a case of beer at the bottleshop on the way home? I have receipts for two of those transactions that quote an ABN and a GST component of the transaction.

    What the UNSW academics need to provide is a cogent argument about why I and the merchants concerned should not be able to engage in those transactions using a medium of exchange that suits us both. And good luck mounting that argument, because there is no legitimate reason that we shouldn’t be able to.

  25. Taking a second best view of the world here…. (first best being less tax = good, ntoing this is just another tax grab proposal).

    There is a super easy method to apply a progressive (or quasi-progressive per the proposed) consumption tax…. no need for any convoluted calculation schemes or massive new bueracracies and onerous costs to manage the reporting of etc etc.

    Take income, allow 100% deductability for investments and then tax the residual using the existing income tax calculation, reporting and enforcement infrastructure. The residual of income minus any investment/ savings is consumption.

    Of course the definition of income and deductible eligible investment is open to manipulation, but i’m talking merely in second-best worlds here but would note those manipulations/ definitions are already the subject of intensive definition by tax authorities, which even further supports the case that a progressive income tax (progressive GST) is possible without requirement for any new bureaucratic systems.

    Of course, in reality, the art of taxation is “plucking the chicken while creating the fewest squawks”, with most proposals / schemes being highly expensive distortions simply to hide tax incidence and make the chicken squawk less. From the governments perspective, the economic cost of distortions is less than the political cost of tax-revolt…. this is ultimately yet another one of those schemes that could both be simpler and cheaper…..

    A question is – how did these academic economist actually pass their undergraduate level public finance courses if they cannot think about the simpler solution above?? Or are they simple political ideologues that understand the economics but are using the pulpit of academic titles and prestige to push their political agenda?? (nb: rhetorical question)

  26. Squirrel

    Professors Holden and Dixon seem to have overlooked the fact their nifty little system would complicate things for some of the more interesting “personal services” expenditures of important people.

    They also seem to have overlooked the recent surge in demand for $50 and $100 notes – and the fact (surely not?) that many of those notes would have been acquired by perfectly decent, honest people who have perfectly legitimate doubts about going cashless – not least due to the extraordinarily leveraged balanced sheets of our banks and the risks of disabling cyber attacks on those banks.

  27. *note, whenever i use the word “Government” in the above please substitute the words “Stationary Bandit with a Monopoly over means of Overwhelming Violence”….

    eg “from the “governments “perspective, the economic cost of distortions is less than the political cost of tax revolt”

    should be read as

    “From the Stationary Bandit with a Monopoly over means of Overwhelming Violence perspective, the economic cost of distortions that hide tax incidence (which results in lower total output that is available to be taxed, and thus lower taxes) is less than the economic cost of having to suppress the tax revolt…… which is also WAY less than than the economic cost (to itself) of outright losing it’s monopoly of violence and the theft ‘rights’ associated with said monopoly in the event of successful revolt……..”

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