# Which is your least favourite tax?



## Bushman (28 April 2010)

With the findings of the Henry Review to be published soon, taxation reform is becoming a hot topic. So which is your least favourite tax? You know the one that irks you every time you read about it.  

For me it has to be land tax and stamp duty. These ridiculous throw back to a by-gone era that unfairly penalises a whole investment class (i.e. commercial property) and adds to the illiquidity of a whole sector. Then if you do manage to make a quid on your investment, you are slugged with a CGT as well. Get rid off it!


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## TOBAB (28 April 2010)

*Re: Which is yout least favourite tax?*

Where do I start, simply can not limit to one:

1. Payroll tax: I make a point of trying to explain this one to my staff at review time. This usually results in a confused look and the incorrect assumption that it is the withholding of their PAYG. NO IT IS THE TAXING OF EMPLOYMENT PLAIN AND SIMPLE.

2. The fire levy: You do he right thing and insure your property and pay the fire levy. Your neighbour does not insure. The fire fighters will still turn up and douse the flames at your neighbours and not be charged for it. Huh? A good reason to self insure.

3. Land tax and stamp duty: I classify as the same due to the effect. Why tax property differently to everything else? Answer because they can.

4. CGT: Why do we discount this tax?????

5. GST: completely regressive, plain and simply unfair to the less fortunate.

I am a simple man. Why can't we tax Capital Gain and income at the same level AND remove all other taxes, levies etc EXCEPT those which have an alternative defineable benefit eg Alcohol and cigarettes due to their health effects. At least this way we would know what we are paying. If it means 60% top marginal then ok.


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## freddy2 (28 April 2010)

*Re: Which is yout least favourite tax?*



TOBAB said:


> 4. CGT: Why do we discount this tax?????




Inflation. Previously it was indexed but I believe the discount rules were brought in to be simpler.

Also remember if you are going to remove stamp duty or the GST where are you going to get the tax dollars from instead?


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## Tatts (28 April 2010)

What about the petrol excise that is taxed as a % of price. So as price goes up so does the excise. We are then also expected to pay tolls for using new roads?


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## Bushman (28 April 2010)

*Re: Which is yout least favourite tax?*



freddy2 said:


> Inflation. Previously it was indexed but I believe the discount rules were brought in to be simpler.
> 
> Also remember if you are going to remove stamp duty or the GST where are you going to get the tax dollars from instead?




Why is stamp duty only excised against property though? Why not incur it at a federal level and add a lower duty across all asset classes (shares, bonds, property etc). The issue is that state governments can charge the property taxes and no-one has had the political will to take this revenue stream from them. 

We could always remove the state governments if we want to save some tax dollars? 

The other one that irritates me is the pokies taxes. Talk about a conflict of interest for the state government. 

Personally I am with Tobab. Scrap the reems of taxation rules and simply have three taxes for individuals - income tax, a consumption tax and CGT. 

In terms of companies, have a company tax and federalise mining royalties and spread these across all the States. Non-resource states have to put up with the high Australian dollar so it is only right that we share in some of the mineral riches.


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## Mofra (28 April 2010)

*Re: Which is yout least favourite tax?*



TOBAB said:


> 1. Payroll tax: I make a point of trying to explain this one to my staff at review time. This usually results in a confused look and the incorrect assumption that it is the withholding of their PAYG. NO IT IS THE TAXING OF EMPLOYMENT PLAIN AND SIMPLE.



I'm very glad a tax professional put this one at number 1. It is the most counter-intuitive tax that I know of and I would prefer that companies receive an incentive for employing someone, not a disincentive. 

Fuel excise & land tax are the other two I have an issue with - I could live with them if there was sufficent clarity on where the funds go; for all I know they could go into consolidated revenue and nobody would be the wiser. I'd prefer if the fuel excise was spent on (wait for it) roads and public transport, with stamp duty/land tax contributing to maintenance and infrastructure.

Stamp duty on ETOs is a weird one - why is this even charged if most other asset classes are immune?


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## freddy2 (28 April 2010)

*Re: Which is yout least favourite tax?*



TOBAB said:


> I am a simple man. Why can't we tax Capital Gain and income at the same level AND remove all other taxes, levies etc EXCEPT those which have an alternative defineable benefit eg Alcohol and cigarettes due to their health effects. At least this way we would know what we are paying. If it means 60% top marginal then ok.




Governments increase tax on cigarettes, alcohol and petrol because of the inelascticity of demand for these items. Sure they might call it a "sin tax" or whatever but this is just politics. You have to understand that increasing tax by 10% on an item does not lead to an increase of 10% of tax revenue but is variable depending on what the tax is. What do you think the increase in tax revenue would be if the top marginal rate was 100%?


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## trainspotter (28 April 2010)

Stamp Duty and GST on Insurance policies is my least favourite of taxes. I was of the understanding that Stamp Duties would be wiped out and we jsut pay a broad based consumption tax. Then it got polluted along the way so that Howard could get the GSZT through the senate. BINGO ... 2 lots of taxes on the same thing. Grrrrrrrrrrrrrrrrrrr !


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## subasurf (28 April 2010)

Stamp duty.


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## doogie_goes_off (28 April 2010)

Stamp duty sucks the most, although capital gains runs a close second with medicare surcharge third.

No one likes tax, but these are bordering on stealing from success.


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## zzaaxxss3401 (28 April 2010)

Payroll / Income tax for me. Capital Gains Tax is still just another form of income tax anyway. Why should we be taxed on our savings and investments??? There's no incentive to save, and even though Super has it's tax advantages, you can't touch it for 40+ years!

Bring on the Henry Tax Review - apparently the Government is going to offer tax relief on savings with banks... it's a start at least.


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## TOBAB (28 April 2010)

*Re: Which is yout least favourite tax?*



freddy2 said:


> Inflation. Previously it was indexed but I believe the discount rules were brought in to be simpler.
> 
> Also remember if you are going to remove stamp duty or the GST where are you going to get the tax dollars from instead?




Income tax. Keep it simple and try not to be regressive.

Also do we index PAYG? No, so why do it on CG?


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## TOBAB (28 April 2010)

*Re: Which is yout least favourite tax?*



freddy2 said:


> Governments increase tax on cigarettes, alcohol and petrol because of the inelascticity of demand for these items. Sure they might call it a "sin tax" or whatever but this is just politics. You have to understand that increasing tax by 10% on an item does not lead to an increase of 10% of tax revenue but is variable depending on what the tax is. What do you think the increase in tax revenue would be if the top marginal rate was 100%?




NOT REAL FLASH IF THE TOP MARGINAL WAS 100%; but that is being silly.


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## Frank D (28 April 2010)

Every year our tax code gets bigger and more complicated, and god helps
 us if an ETS is introduced. Biggest scam in history if it is.

 There should be a flat tax on everything. I’d be happy for 13%  
(Income & GST).

That means first dollar earned is taxed @ 13%, and no other taxes 
other than GST. 13%.

That should get rid of half the government bureaucrats (Cut Govt spending) 

A low tax rate doesn't mean less money for government. In fact tax 
revenue should increase because people are willing to produce more and
 pay their taxes when the system is fair and tax rates are low. 

Less reason to evade tax or move offshore, as high personal & business
 income tax rates are  responsible for high levels of tax evasion.

Hong Kong has had a flat tax for a long time, and it's been one of the
 fastest-growing economies for nearly 50 years. Most previous 
soviet countries have been running flat taxes for the past 10 years and 
their economies are expanding by 10% per year.

First year of a flat tax in Russia and real revenue increased by 26%.
 Income tax revenue by 46% (less evasion).

History tells us that by lowering taxes Government 'real' revenues & income 'tax' revenues increase often by double digits.

Anyone willing to be provided with a service by being taxed at a higher rate 
are kidding themselves.


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## drsmith (28 April 2010)

Frank D said:


> There should be a flat tax on everything. I’d be happy for 13%
> (Income & GST).
> 
> That means first dollar earned is taxed @ 13%, and no other taxes
> other than GST. 13%.



Ideally there should just be a flat rate of tax on consumption and corporate profitability (say, 20% for example) and not on personal income or personal capital gains. That would be the simplest of all.


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## Frank D (28 April 2010)

drsmith said:


> Ideally there should just be a flat rate of tax on consumption and corporate profitability (say, 20% for example) and not on personal income or personal capital gains. That would be the simplest of all.




It’s not about the 'simplest'; it’s about simplifying the ‘tax’ whilst
 at the same time increasing ‘revenue’.

Without increasing revenue there’s no way the government is going
 to change anything, other than introduce more taxes (robbery)

A flat tax is a flat tax on everything. You can’t remove income tax as 
it decreases revenue for the government.

And I'm certainly not in favour of keeping income tax rates as they are, or as someone mentioned 'willing to pay 60% income tax'.


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## TOBAB (28 April 2010)

Frank D said:


> It’s not about the 'simplest'; it’s about simplifying the ‘tax’ whilst
> at the same time increasing ‘revenue’.
> 
> Without increasing revenue there’s no way the government is going
> ...




That 60% call was an exasperated suggestion. You are right stating that a consistent tax is best. I disagree with your consumption tax though. I think it is unfair to those on smaller incomes. Do not have and make the rate higher.


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## drsmith (28 April 2010)

Frank D said:


> A flat tax is a flat tax on everything. You can’t remove income tax as it decreases revenue for the government.



Probably true. Governments have grown fat by collecting too much tax overall from too many taxes.

A regressive tax statem is the simplest and hence the most transperant but difficult to implement given income support at lower an middle income brackets. This could potentially take decades to unwind in order to satisfy the ideal above.

The initial step would be to fix loopholes in existing taxes and use the proceeds to eleiminate some taxes and reduce the rates of taxation on others. This is hopefully what Henry will address and the government implement.

My most hated taxes are the medicare assiciated ones and inparticular the surcharge. The medicare levy itself should be integrated into marginal tax rates. As for the surchage it almost makes me ill to think I have to contribute to private health insurance for effectively nothing in return.


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## Julia (28 April 2010)

drsmith said:


> Ideally there should just be a flat rate of tax on consumption and corporate profitability (say, 20% for example) and not on personal income or personal capital gains. That would be the simplest of all.




That would be immensely unfair to people on low incomes.
Our society already comprises the "Haves" and the "Have Nots".  This would exacerbate the divisions.


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## Bintang (28 April 2010)

I don't have ANY *favourite* taxes.
They are all detestable.


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## prawn_86 (28 April 2010)

Julia said:


> Our society already comprises the "Haves" and the "Have Nots".  This would exacerbate the divisions.




Only because we are not starting from an equal base anymore. If everyone started from the same amount of assets, with a flat tax, it would be a true laisse faire capitalist system.

Never happen though, but would be interesting


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## drsmith (28 April 2010)

Julia said:


> That would be immensely unfair to people on low incomes.
> Our society already comprises the "Haves" and the "Have Nots".  This would exacerbate the divisions.



This to some extent was addressed above.



drsmith said:


> A regressive tax statem is the simplest and hence the most transperant but difficult to implement given income support at lower an middle income brackets. This could potentially take decades to unwind in order to satisfy the ideal above.
> 
> The initial step would be to fix loopholes in existing taxes and use the proceeds to eleiminate some taxes and reduce the rates of taxation on others. This is hopefully what Henry will address and the government implement.



Unfairness to people on low incomes is one reason why it could only be implemented over a long period of time. Another would be the sudden sacking of public servants such a simplification would bring.

The purpose of taxation is for governments to raise funds to efficiently provide essential services. Our current tax regime fails this on two counts.

1) It also serves as an income re-distribution mechanism through progresivity. Beyond a basic safety net this should be addressed purely by wage levels.

2) There are too many mechanisms (deductions and rebates) by which tax can be avoided. 

Both reduce the efficiency of government service delivery increasing the cost and hence taxes needed. The second increases tax rates further by having to overcome shortfalls from deductions and rebates.


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## Smurf1976 (1 May 2010)

Inflation. Surely that has to the be ultimate in taxation that affects literally everybody in some way.

One issue I have with Income Tax is that there is no "hours worked" component. For example, I'd argue that someone who worked 3000 hours over 12 months to earn $60,000 is clearly in a worse off position than someone who worked only 2000 hours to earn the same money and tax rates ought to reflect this.


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## drsmith (1 May 2010)

Smurf1976 said:


> Inflation. Surely that has to the be ultimate in taxation that affects literally everybody in some way.



Inflation is another reason governments like a progressive income tax structure. It's effectively increased taxation by stealth.  



Smurf1976 said:


> One issue I have with Income Tax is that there is no "hours worked" component. For example, I'd argue that someone who worked 3000 hours over 12 months to earn $60,000 is clearly in a worse off position than someone who worked only 2000 hours to earn the same money and tax rates ought to reflect this.



This could be achieved by settings marginal rates for hourly rates of pay. Increased complexity though would be a problem as the annual tax return would have to include hours worked along with income. In the case of private bisuness owners declaring wage income from their business, how can hours worked be verified ?
Potential for tax avoidance ??

Other issues arise with part time workers or for part of the year. Someone for example who works, say, 200 hours in a year and earns $5000 could be subject to tax whereas currently they are not. Income thresholds would still be required to overcome this and for investment income for which no hours are worked.


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## Bigukraine (2 May 2010)

I have no prob with tax it's a fact of life ....but the way it is applied to the different classes i have a problem with !!!


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## cutz (2 May 2010)

Agree with the above poster,

Potentially a low income earner could pay more tax than a wealthy individual, the whole system is way to complicated and top heavy, people that supplement income by working overtime are punished by stepping into a higher tier.

I’m no expert but systems like negative gearing; family trusts and all those other tax reducing structures should be banned, rates need to be reduced, everyone needs to pay their fair share.
:hide:


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## robots (2 May 2010)

hello,

yeah sure thing cutz,

income tax least favourite

the tax free thrershold is almost up to 15k, so someone earning 30k or 40k would pay maybe on 4-6k tax, thats nothing

yet someone smart enough to earn 100k or 200k contributes far more, should be a standard rate for everybody

thankyou
robots


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## cutz (2 May 2010)

robots said:


> yet someone smart enough to earn 100k or 200k contributes far more, should be a standard rate for everybody




It doesn't have to take the smarts to earn good money but yeah you're right, everyone should be paying their fair share.

Negative gearing, trusts and other tax reducing schemes need to be scrapped for a start.


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## robots (2 May 2010)

cutz said:


> It doesn't have to take the smarts to earn good money but yeah you're right, everyone should be paying their fair share.
> 
> Negative gearing, trusts and other tax reducing schemes need to be scrapped for a start.




hello,

nah, you earn a $1 you pay a set tax rate $0.20 or $0.15 or $0.40 and that way its even

NG, trusts and other tax reducing schemes are available to everybody has nothing to do with taxation

thankyou
robots


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## cutz (2 May 2010)

robots said:


> NG, trusts and other tax reducing schemes are available to everybody has nothing to do with taxation
> 
> thankyou
> robots




Incorrect,

Tax reducing schemes are not available to everybody, take someone who is busy paying off the first home, huge mortgage due to the property bubble is probably not going to enter into a negative gearing strategy ( why someone would want to now is beyond me anyhow ).

This same person may be working for the man on PAYE, working heaps of overtime to pay of the first mortgage, no trust arrangements available here.

See Robots, the system is unfair.


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## mazzatelli (2 May 2010)

Stamp Duty



robots said:


> yet someone smart enough to earn 100k or 200k contributes far more, should be a standard rate for everybody




I'd disagree, utility differs among individuals, companies - no one likes to pay tax, but e.g. a $0.4 per $1 tax rate would affect the standard of living of someone earning $40k significantly more than someone earning $400k


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## robots (2 May 2010)

cutz said:


> Incorrect,
> 
> Tax reducing schemes are not available to everybody, take someone who is busy paying off the first home, huge mortgage due to the property bubble is probably not going to enter into a negative gearing strategy ( why someone would want to now is beyond me anyhow ).
> 
> ...




hello,

you are focusing on an individuals circumstances, you need to put that aside and look at the tax issue

in the examples you provide those "people" are still eligible to use any tax reducing schemes that are around whether that be NG, trust or any other

thankyou
robots


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## It's Snake Pliskin (12 May 2010)

Just heard on 2gb.com Morrison drive programme that NSW has raised stamp duty on property. Can anyone find an article on this?


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## trainspotter (12 May 2010)

From an email I received about 10 years ago. Still relevant.

The Tax System – Explained With Beer

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

* The first four men (the poorest) would pay nothing.
* The fifth would pay $1.
* The sixth would pay $3.
* The seventh would pay $7.
* The eighth would pay $12.
* The ninth would pay $18.
* The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

‘Since you are all such good customers,’ he said, ‘I’m going to reduce the cost of your daily beer by $20.’

‘Drinks for the ten now cost just $80.’

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
* The fifth man, like the first four, now paid nothing (100% savings).
* The sixth now paid $2 instead of $3 (33%savings).
* The seventh now pay $5 instead of $7 (28%savings).
* The eighth now paid $9 instead of $12 (25% savings).
* The ninth now paid $14 instead of $18 (22% savings).
* The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’ declared the sixth man. He pointed to the tenth man, ‘but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only Saved a dollar, too.

It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

*The nine men surrounded the tenth and beat him up.*

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.


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## Hedders (12 May 2010)

The beer analogy is sensational Trainspotter!

My least favourite tax is payroll tax- it's the most lame grab for cash I've ever come across. When I owned 2 stores that ran independently of each other, I paid payroll tax as if all the staff were under one roof. I paid a LOT more payroll tax compared to the scenario of the businesses having separate owners (one store would not have paid any payroll tax at all).

The thing that really gets on my wick about tax in general though is handing over money to a government that fritters it away on layers of inefficient beaurocracy. I try not to think about it too much. 

If I could introduce one quick way of reducing the current tax expenditure, I'd look at the way politicians are paid- give them a $100K annual pay rise, then make them pay for their own travel/dinners/incidentals. And when they retire from office, let them live on super/savings like the rest of us.


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