# Tax on Bank Deposits



## Craton (29 March 2015)

Have been touted for the upcoming May Budget. Link: http://www.abc.net.au/news/2015-03-...set-to-introduce-tax-on-bank-deposits/6355662

Surely this will be political suicide in such a low interest rate environment?
Details are scant but is the govt. nuts or are they trying to tighten the screws so that other budget measures will be passed?

Still nothing would surprise me as the Abbott govt. seems hell bent on fixing the apparent spending craze of the Labor party. Now the mining boom is over, what have our govts. done to negate the inevitable?

Not much from my way of thinking as I can't shake the feeling that we are in a belated and protracted post CFG hit. 
The PM must have been aware of this hence him taking on the mantel of "infrastructure PM". Nothing like govt. spending to help the economy right?
TA reckons his mob will do a far better job than the opposition so they will need the money to fund this from somewhere. The last budget was an appalling mess so why not really put our nosed out of joint and tax our bank deposits.

I keep saying that the major party's all fail to ignite and garnish support from the mug punters so please, give us something to cheer about. Something tangible that will make me say, yep, I understand and fully support our leaders and their vision (aka business plan) and I'm prepared to tighten my belt and/or give a little back or forego now for more later. Oh wait, that's been done... ho hum...


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## So_Cynical (29 March 2015)

Craton said:


> Surely this will be political suicide in such a low interest rate environment?




The $5 GP tax didnt get up due to the political ramifications, can't see a deposit tax being more politically palatable or easier to sell.


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## Craton (29 March 2015)

So_Cynical said:


> The $5 GP tax didnt get up due to the political ramifications, can't see a deposit tax being more politically palatable or easier to sell.




Exactly. So why is the govt. even going there?
No wonder there's scant details, this'll get scuttled before launch I'd reckon.


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## waterbottle (29 March 2015)

I thought this was a joke when I first heard about it. 
I just don't understand why they are only applying the tax to those deposits under $250 000?

Anywho, if the falling interest rates haven't got you to pull your money out of Australian banks then I guess a tax will


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## tech/a (29 March 2015)

waterbottle said:


> I thought this was a joke when I first heard about it.
> I just don't understand why they are only applying the tax to those deposits under $250 000?
> 
> Anywho, if the falling interest rates haven't got you to pull your money out of Australian banks then I guess a tax will




GST
Tax on interest
Now on deposits

The cash economy florishes


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## nth brisbanite (29 March 2015)

tech/a said:


> GST
> Tax on interest
> Now on deposits
> 
> The cash economy florishes




There is no GST on interest. Check at ato.gov.au


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## banco (29 March 2015)

waterbottle said:


> I thought this was a joke when I first heard about it.
> I just don't understand why they are only applying the tax to those deposits under $250 000?
> 
> Anywho, if the falling interest rates haven't got you to pull your money out of Australian banks then I guess a tax will




Because the Government only guarantees deposits under $250,000.  

I'm not sure if there's another way to have done it but annoying that the banks that benefit so much from the guarantee will pay zero.

The policy is partly about trying to maintain Australia's credit rating as money from tax will probably go into some sort of contingency fund.


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## tech/a (29 March 2015)

nth brisbanite said:


> There is no GST on interest. Check at ato.gov.au




Aware of that.
I'm on another page to you.


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## Gordon7 (29 March 2015)

waterbottle said:


> I thought this was a joke when I first heard about it.



Indeed. I had to double check it wasn't 1st April. 

We are not amused, in the slightest.


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## galumay (29 March 2015)

Another captain's call? 

It has to be strategic, start the rumour of something so stupid and un-sellable, argue in support of it as long as possible, distract electorate, ditch at the last minute and replace with something slightly more palatable - but still unpleasant, FTW!


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## Bill M (29 March 2015)

Another stupid idea, just tax the savers on their after tax money, unbelievable


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## Smurf1976 (29 March 2015)

A tax on bank deposits in order to provide funds in the event of a bank collapse.

Hmm...

Firstly, this suggests that the government believes there to be at least some chance of an Australian bank actually collapsing. You don't need flood insurance if you live on top of a mountain.

Secondly, taxing deposits logically ought to lead to a lower level of deposits. That concept seems to be fairly well accepted, tax something and people do less of it. Tax cigarettes and that supposedly reduces smoking. Etc.

So, a tax to protect us from something that might happen, with the tax itself increasing the likelihood of it actually happening. 

I'm starting to think that we've reached a point where the economy is headed for serious trouble and the government doesn't have a clue what to do. That being so, if the ship really is sinking, well the band might as well put on one hell of a last show before it all goes down. Heck, even the captain may as well start singing if there's nothing left to do which might actually stop the ship sinking. Note that I'd make this observation regardless of who was in government - none of them seem to have any real ideas what to do, indeed the last one who did was probably Keating and maybe the earlier days of Howard.


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## sptrawler (29 March 2015)

Bill M said:


> Another stupid idea, just tax the savers on their after tax money, unbelievable




Why is a tax on savers, unbelievable? They are the only ones who have any money.

I'm not saying it is right, but no one wants to tighten up on those who spend everything, so that only leaves the savers.

All the chardonnay leftie savers say," don't tighten up on welfare, education and health spending". 
Where do they think the money will come from?

Do you think it will come from business, when we have a high corporate tax rate, and will cause further job losses?

Do you think it will come from wage earners, which will pass it on with wage demands?

Or do you think it will come those who are sitting on money in the bank, or those that are retired and can't make wage demands?

It isn't rocket science.lol


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## sptrawler (29 March 2015)

Smurf1976 said:


> A tax on bank deposits in order to provide funds in the event of a bank collapse.
> 
> Hmm...
> 
> ...




It isn't a case of not knowing what to do, it is more a case of getting people to understand, it needs to be done.
Let's not forget Keating said "this is the recession, we have to have".
Unemployment was 10%, yes 10%, wages and inflation were out of control, there was a real drop of 18% in wages under the Hawke/Keating wages accord. However people accepted it because everything was going down the gurgler.

What we see now is no one wanting to give up anything, it won't end well.IMO

I see a generation of kids(relative to my age) spending all their money from the recent(20 year) boom in wages.

They have no idea what tightening the belt is.

I think until India comes on line, Australia is going to have a very lean period, anyone for rabbit stew, rabbit and dumplings, rabbit pie. lol  

No fries with that.


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## McLovin (29 March 2015)

Deposit insurance is hardly a new concept and if a guarantee is being provided then it's not unreasonable to charge for it, but the government has ensured it'll be still born by calling it a tax.

Geez they're stupid.


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## waterbottle (29 March 2015)

sptrawler said:


> Why is a tax on savers, unbelievable? They are the only ones who have any money.
> 
> I'm not saying it is right, but no one wants to tighten up on those who spend everything, so that only leaves the savers.
> 
> ...




What?

Let's not ignore the number of tax concessions/loopholes that should have been closed up long ago but are still costing the government billions.

And what is your point about wage earners? or welfare recipients? Do you think that neither of those two saves? That deposits aren't made into some sort of a transaction account and a portion transferred into savings, however meager they are?
This is clearly an attempt to skim some funds off of the rest of the economy without trying to upset the fat cats.

Anywho, shouldn't be too hard for people who are financially literate to get their money out of useless banks and into assets


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## waterbottle (29 March 2015)

Smurf1976 said:


> I'm starting to think that we've reached a point where the economy is headed for serious trouble and the government doesn't have a clue what to do. That being so, if the ship really is sinking, well the band might as well put on one hell of a last show before it all goes down. Heck, even the captain may as well start singing if there's nothing left to do which might actually stop the ship sinking. Note that I'd make this observation regardless of who was in government - none of them seem to have any real ideas what to do, indeed the last one who did was probably Keating and maybe the earlier days of Howard.




I think we've reached a point where, globally, the central banks are stuck in perma-stimulation mode with no way of getting out without bringing the entire thing down. 
The RBA just seems to be playing catch-up with the rest of the world by moving its cash rate as close to 0% as possible and installing perma-stimulation down under.


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## sptrawler (29 March 2015)

waterbottle said:


> What?
> 
> Let's not ignore the number of tax concessions/loopholes that should have been closed up long ago but are still costing the government billions.
> 
> ...




Like I said, It is easy to tax savings.

Most wage earners are accumulating, therefore borrowing money to buy assetts, that would mean they have minimum savings.

Welfare recipients are apparently doing it hard, so they won't have any savings.

it isn't rocket science, as I said.

It should only hit the well off and retirees, so who is going to complain.


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## Smurf1976 (29 March 2015)

waterbottle said:


> This is clearly an attempt to skim some funds off of the rest of the economy without trying to upset the fat cats.



BINGO!

Logically, if government is carrying the risk on behalf of a private business then it seems only fair and reasonable that government should also receive some of the profits of that business in proportion to the extent of risk carried.

That would be, a bank profits tax! If taxpayers are carrying x% of the risk if a bank goes broke, then it seems reasonable to me that taxpayers should also receive x% of the profits from that bank if it doesn't go broke. You know, the old "risk and reward" thing, that bit about no free rides and everyone having a go. Bankers and the like love this stuff, right? Oh wait....

No chance the LNP will go anywhere near that one. Easier to target the small guy with savings instead. 

As for the overall concept of a tax on savings, we already have 3 in the context of the average person. A tax on earning the money in the first place. A tax on interest earned. And the big one, inflation, effectively an annual tax on the entire balance of the account.


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## McLovin (29 March 2015)

Smurf1976 said:


> BINGO!
> 
> Logically, if government is carrying the risk on behalf of a private business then it seems only fair and reasonable that government should also receive some of the profits of that business in proportion to the extent of risk carried.




That's not logical in the context of this discussion. By the time deposit insurance is required the equity of the bank in question (and those who own the equity) will be toast. The depositor is being protected in the event the bank fails; the bank is not being protected in the even the bank fails.

The current oligopoly being what it is means the full cost will be passed on, there's probably an argument that with a more competitive banking industry the cost of insurance would be  partially absorbed by banks.


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## waterbottle (29 March 2015)

sptrawler said:


> It should only hit the well off and retirees, so who is going to complain.




It will hit anyone with a deposit that is less than $250k i.e. every FHB who was saving 10% for that home or unit; or the young man/woman saving for a new car or holiday; or the parents who were trying to build savings for the child's future education.
Retirees and the well-off aren't the only people with less than $250k. In fact, I would guess that they are the minority as most will be playing the property or sharemarket game.

We'll just have to wait and see as to who will actual complain


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## waterbottle (29 March 2015)

McLovin said:


> That's not logical in the context of this discussion. By the time deposit insurance is required the equity of the bank in question (and those who own the equity) will be toast. The depositor is being protected in the event the bank fails; *the bank is not being protected in the even the bank fails*.




WHAT?!

How in the world can you make this claim when as of 2008, we saw $US being pumped into failing bank - without regard for depositors - as they were 'too big to fail'!

Have you already forgotten? Are you so naive as to think that the government would use this fund to save depositors and NOT the bank? Did you think that when the LNP came out with the $20bn medical research fund that it was going to be pumping all that money into science, too?

Please.


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## sptrawler (29 March 2015)

Smurf1976 said:


> As for the overall concept of a tax on savings, we already have 3 in the context of the average person. A tax on earning the money in the first place. A tax on interest earned. And the big one, inflation, effectively an annual tax on the entire balance of the account.




Wait until you're retired, and have nobody putting money in your bank every fortnight.

Then you really get an appreciation, for the erosion effect, when you are constantly drawing on the interest and capital.


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## McLovin (29 March 2015)

waterbottle said:


> WHAT?!
> 
> How in the world can you make this claim when as of 2008, we saw $US being pumped into failing bank - without regard for depositors - as they were 'too big to fail'!




So the bank was saved (along with depositors money) but it was done "without regard for depositors". Do you have the faintest idea what you're talking about? Better yet, find me a single FDIC insured bank where depositors lost one cent.


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## sptrawler (29 March 2015)

waterbottle said:


> It will hit anyone with a deposit that is less than $250k i.e. every FHB who was saving 10% for that home or unit; or the young man/woman saving for a new car or holiday; or the parents who were trying to build savings for the child's future education.
> Retirees and the well-off aren't the only people with less than $250k. In fact, I would guess that they are the minority as most will be playing the property or sharemarket game.
> 
> We'll just have to wait and see as to who will actual complain




Yes but the first home buyer, or anyone working can mitigate the cost, by waiting a little longer.

Those who rely on the earnings, to live on, will have to further erode their capital to survive.:1zhelp:


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## waterbottle (29 March 2015)

McLovin said:


> So the bank was saved (along with depositors money) but it was done "without regard for depositors". Do you have the faintest idea what you're talking about? Better yet, find me a single FDIC insured bank where depositors lost one cent.




You are right, depositors didn't lose a cent.

My point was, that banks were saved and were allowed to continue operating. Depositors weren't saved because the government decided to insure them - they were saved because they had no option but to save the banks. Hence, the banks should be responsible for paying any charge for a fund that will be used to rescue them in the future.


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## Smurf1976 (29 March 2015)

waterbottle said:


> My point was, that banks were saved and were allowed to continue operating. Depositors weren't saved because the government decided to insure them - they were saved because they had no option but to save the banks.




It seems fairly clear that if an Australian bank gets into trouble then our taxes will be used to bail it out. It may not be written anywhere, but it's almost certain in practice.

Same goes for a few other things. "Too Big To Fail" is just another way of saying "taxpayer guaranteed" in practice.


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## DaveDaGr8 (30 March 2015)

So here's a scenario. My wage into bank account A, i lose 0.5%. I then transfer it to my trading account, i lose another 0.5%, because i have now deposited it into another account. I transfer it again to my offset account, i lose another 0.5%, market conditions change i transfer it back and lose another 0.5%. Same money but it has the potential to be taxed multiple times and out of existance.

"Moving Money tax" doesn't sound very good, so they've called it a Deposit tax.

Take this a step further. As a trader constantly buying and selling, every time i make a buy/sell i will lose 0.5% of the total capital for that trade, because once i sell i will get $x deposited into my bank account. Do that 100 times and the numbers are really against you.

Is this how this system is supposed to work ?

They forget that they introduced this to stop people panicking and pulling money out of the system.


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## McLovin (30 March 2015)

waterbottle said:


> Depositors weren't saved because the government decided to insure them - they were saved because they had no option but to save the banks. Hence, the banks should be responsible for paying any charge for a fund that will be used to rescue them in the future.




The government doesn't choose to insure them, FDIC receives a premium from the bank for insuring its account holders. Since 2007, 460 FDIC insured banks have failed and depositors have received their money back in every instance, but the banks have been sent to the graveyard. If an Australian bank were to fail it's very likely the bank would be nationalised (either wholly or partly depending on the extent of the damage) for a period of time -- like the UK did with Lloyds TSB. That would completely wipe out, or close enough to it, shareholders (as it should) but leave the "bank" operating as a government entity until it can be resold. At that point the bank is being run almost as a mutual for deposit holders. So yes, maybe the shell of the bank is saved, but for all intents and purposes the bank has failed and those with an equity interest in it are toast. They're certainly not insured from loss.


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## McLovin (30 March 2015)

DaveDaGr8 said:


> So here's a scenario. My wage into bank account A, i lose 0.5%. I then transfer it to my trading account, i lose another 0.5%, because i have now deposited it into another account. I transfer it again to my offset account, i lose another 0.5%, market conditions change i transfer it back and lose another 0.5%. Same money but it has the potential to be taxed multiple times and out of existance.




Presumably it would be calculated in a similar way to interest. Eg calculated daily based on account balance and charged monthly.


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## sptrawler (30 March 2015)

DaveDaGr8 said:


> So here's a scenario. My wage into bank account A, i lose 0.5%. I then transfer it to my trading account, i lose another 0.5%, because i have now deposited it into another account. I transfer it again to my offset account, i lose another 0.5%, market conditions change i transfer it back and lose another 0.5%. Same money but it has the potential to be taxed multiple times and out of existance.
> 
> "Moving Money tax" doesn't sound very good, so they've called it a Deposit tax.
> 
> ...




Your forgetting one thing, they are trying to fund YOUR welfare system.
Your wage, transferred to your trading account, then transferred to your trading account, then transferred to your offset account.

Yep, they're going to tax it to pay for your welfare system, and why not?

Where the hell do you think they get the money to pay for it?

Maybe the magic wand, Rudd ran the batteries flat on that.


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## DaveDaGr8 (30 March 2015)

McLovin said:


> Presumably it would be calculated in a similar way to interest. Eg calculated daily based on account balance and charged monthly.




So it's an ongoing charge ? I thought it was just a lump sum when deposited


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## McLovin (30 March 2015)

DaveDaGr8 said:


> So it's an ongoing charge ?




Yes.


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## Bill M (30 March 2015)

sptrawler said:


> Why is a tax on savers, unbelievable? They are the only ones who have any money.
> 
> I'm not saying it is right, but no one wants to tighten up on those who spend everything, so that only leaves the savers.
> 
> ...



Yep you are right it's got to come from somewhere but not from me.

I have decided to spend all my money, live it up and blow the lot so I have no money anywhere.

Then at 65 my wife and I will get a free full government pension with free medical card.
Then I won't be paying tax on any bank accounts.
I won't need to worry about lump sums on Super as I won't have any.
I will be able to travel for $2.50 a day within a 300 km radius of Sydney.
When my Chemist bill gets to $344 p/a everything else after that will be free.
I will get half price licenses and utility bills.
I won't have to pay a Refundable Accommodation Deposit of up to 550K for entry into an Aged Care Facility. (Govt. pays that for people with no money)

Yep, I'll blow my money, take cruises, eat in the best restaurants, travel all over the world and then get everything for free. Way to go..............


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## galumay (30 March 2015)

So lets tax the savers and retirees, but continue to let the multi nationals rape and pillage the country at will, paying almost no tax. Thats a good idea.


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## Bill M (30 March 2015)

galumay said:


> So lets tax the savers and retirees, but continue to let the multi nationals rape and pillage the country at will, paying almost no tax. Thats a good idea.




And this is why we have a shortfall. These are the people they should be after.

---
Treasurer Joe Hockey has broken a pledge to impose tough new tax avoidance rules on multinational companies that shift billions of dollars in profits between Australia and their international subsidiaries.

The practice of global corporations loading up subsidiaries with debt and then claiming relief from the Australian tax man on the interest paid gives an "unfair competitive advantage" over local rivals, Treasury said in 2013.

http://www.smh.com.au/federal-politics/political-news/hockey-backflips-on-tax-laws-to-target-multinational-profit-shifters-20141216-128ebg.html
---


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## sptrawler (30 March 2015)

Bill M said:


> Yep you are right it's got to come from somewhere but not from me.
> 
> I have decided to spend all my money, live it up and blow the lot so I have no money anywhere.
> 
> ...




The wife and I have decided exactly the same, we won't be going stupid spending. 
But we won't be watching the pennies, as we currently do.


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## sptrawler (30 March 2015)

galumay said:


> So lets tax the savers and retirees, but continue to let the multi nationals rape and pillage the country at will, paying almost no tax. Thats a good idea.




Who is the easiest to hit? Complex multinational companies with teams of lawyers and accountants or peoples savings.


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## galumay (30 March 2015)

sptrawler said:


> Who is the easiest to hit? Complex multinational companies with teams of lawyers and accountants or peoples savings.




You are dead right, but which one of those votes!?

(given that both major parties have both proposed the same double tax thats probably irrelevant.  )


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## banco (30 March 2015)

sptrawler said:


> The wife and I have decided exactly the same, we won't be going stupid spending.
> But we won't be watching the pennies, as we currently do.




Well political risk can go both ways.  There's nothing to guarantee the Government won't be forced to sharply cut back on the many welfare benefits that it offers to over 65s.


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## sptrawler (30 March 2015)

banco said:


> Well political risk can go both ways.  There's nothing to guarantee the Government won't be forced to sharply cut back on the many welfare benefits that it offers to over 65s.




That's true, but going on the public outcry they faced, when they recently suggested changing the indexation, I doubt it.

Much easier to hit people with superannuation, everybody hates them. Labor did a great job of demonising people with super.

So as Bill said, spend it, you saved it, you should enjoy it.


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## r2d2c3po (30 March 2015)

Bill M said:


> Yep you are right it's got to come from somewhere but not from me.
> 
> I have decided to spend all my money, live it up and blow the lot so I have no money anywhere.
> 
> ...




Or better yet become a politician, you will get much more than this and you wont have to wait till you are 65.
Do a little short selling on bank shares while you destroy the finance industry.
What a ride.


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## Craton (31 March 2015)

So it is all about the previous budget not getting fully passed and the fact that govt. revenue has to increase.
Joe Hockey has released his White Paper and no tax is off the table. I read this to mean that somewhere along the line we'll all be paying more in taxes.

Would Medicare up another 50bps do it?

My bet is that the GST will broaden, rise or both.


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## Smurf1976 (31 March 2015)

Craton said:


> My bet is that the GST will broaden, rise or both.




One of the arguments put forward against the GST at the time it was introduced is that, it was claimed, similar taxes introduced in other countries have ended up being broadened or increased in rate.

Whether or not that's true I don't know, but it was an argument put forward at the time.


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## sptrawler (31 March 2015)

Craton said:


> My bet is that the GST will broaden, rise or both.




The other thing with the GST, that people forget, is that even the rich pay it.

From memory pre GST, there was a belief many wealthy individuals, were running their whole personal finances through a company. 
This ended up with them paying themselves a pittance, and funding all their day to day expenses with company money, which could be offset against the business.

With the introduction of GST it didn't matter who bought it, they paid tax on it, it is difficult to dodge.


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## Craton (9 April 2015)

sptrawler said:


> The other thing with the GST, that people forget, is that even the rich pay it.
> 
> From memory pre GST, there was a belief many wealthy individuals, were running their whole personal finances through a company.
> This ended up with them paying themselves a pittance, and funding all their day to day expenses with company money, which could be offset against the business.
> ...




Sure sp, the GST is difficult to dodge but that's not the real issue. The issue is that our govt. needs to up its revenue to pay for our way of life. That or cut funding which the electorate is always up in arms about. Thus, the only alternative is to implement new tax regimes, modify others or a combination of measures most of which, if not all, will be unpopular.

Tax on Bank Deposits could also be seen as an effort to stimulate the economy by way of getting those savings/deposits spent instead of taxed.

I wonder too, would a portfolio of shares be considered a deposit of sorts?
Well, it is parked cashed a deposit of sorts by way of a share purchase, something akin to a term deposit. Or am I seriously off the mark on this?

Anyways, we'll know more when the Budget comes out.


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