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Bingo.
yes a lot of aspects, this tax would be overly complicated, with terrible side effects.
the current system is very simple and fair, you just don't seem to like the idea that a business gets a refund of the GST it's paid, even though there is a very good reason for this.
Yes, and this Tax you suggest would not help them
If you have been reading from the start, tax on inputs is offset by a lowered tax on profits.
People who can innovate and reduce their costs are rewarded by paying less tax for their efforts. Isn't that what competition and incentive are all about ?
.
If you can eliminate profits tax altogether
I don't really see how you can say that the GST is "overly complicated" when it's one of the most efficient taxes to collect
why not just keep the system we have, a simple tax that is 10% of the final sale price, and a 30% tax on business profits. Seems fair and very simple.
Profits are what should be taxed.
You suggested system of offsetting imports with tariffs. overtaxing the public but offsetting that with other tax breaks etc is complex
Why ?
Because Taxing profits seems a lot better than taxing losses.
Businesses who make a loss should think whether they should be in business.
Business can have bad years.
Wouldn't business spending on upgrades, repairs and other business expenses also stop with no deductions?
Also assembling a product from multiple materials under this tax system would wear a lot of the tax and business would simply offshore.
Is this a similar idea to old 'One Nations' 2% tax?
That's the way it appears on the surface, but if you tax business inputs (possibly exempting salaries), then does that not encourage business to lower their costs to be more competitive and to be more efficient and discerning about what they spend their funds on ?
If capital flows into more lightly taxed industries because they are more efficient what's wrong with that ?
What local steel ?
Whyalla (One Steel) and Port Kembla (Bluescope) come immediately to mind as blast furnace facilities producing steel from iron ore and coal.
TEMCO in Tasmania makes ferro alloys, used in steel production, and exports most production to numerous overseas buyers.
There's also a number of places that melt down either raw steel or scrap in electric or gas furnaces in order to produce various end products.
Author
Diana Kelly
Associate Professor, School of History and Politics at University of Wollongong
Disclosure Statement
Diana Kelly does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.
The University of Wollongong Provides funding as a Member of The Conversation AU.
uow.edu.au
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BlueScope has fallen victim to a changing export market, high Australian dollar and gradual structural shift to free trade policies. AAP
Once upon a time, 30 years ago, when we still thought the steel industry was an endless and bottomless well for economic growth and employment, many of us also believed in industry policy, corporate responsibility to communities, and the right to stay in the same place and space as long as we wanted.
We were happily unaware that “restructuring” would become inevitably intertwined with “job losses” or that the inheritors of the Kingswood (which many of us drove back then) would soon be driving cars neither built in Australia nor made from Australian steel.
But that was 30 years ago. Shortly after, the Australian steel industry began to spin into crisis, an early home-grown casualty of the globalisation of production.
Indeed, the crisis should probably have happened sooner but in those days there was a fair investment in Australian steel production and the low Aussie dollar meant good steel export prices – the US even accused Australia of dumping cheap steel – and profit levels were generally accepted at lower rates than today.
Shock to the system
Even so, when it came, that first steel crisis was pretty shocking – postwar Australians were not yet used to major job losses, nor the allied multiplier effects that devastated towns and communities.
I remember writing in the introduction to the Katherine Thompson play, Diving for Pearls, (set in an industrial town experiencing major job losses) that Christmas 1982 was a time of fear and spending, as people avoided each other, fearful of hearing bad news or telling it, and spending up big because of redundancy pay – or fear of job loss.
Yet, sooner than we hoped, most of us bounced back. That was because they had a wonderful instrument in those days called industry policy.
In those distant decades, governments were not wedded to day trading for policies – they took longer term views, knew “the market” could be as mindless and destructive as Triffids, and also took it as their responsibility to intervene so the polity, society and economy were not mere flotsam among the blips and bumps of market fluctuations.
Industry plan
And that was the case in 1983 when the Steel Industry Plan (SIP) was proposed, debated and implemented over a few months.
The SIP was not just a comprehensive and integrated set of assistance, responsibilities, goals and gains for the steel stakeholders, it was even a tripartite policy (that is sooo 20th century!) and had the commitment of the steel company, the trade unions and communities, and the government. It worked – at least for a time.
Now again in 2011, we have a steel industry crisis. After reports of an annual loss of nearly $1 billion (nearly ten times the average profits of 20 years ago), 1000 redundancies and a major reduction of contractors have been announced at BlueScope Steel. The causes are fourfold.
Paradox
The most important factor has been the high Australian dollar – paradoxically driven by the resources boom – which has raised the price of steel exports.
The paradox is that the second factor leading to the current steel crisis has been increased input costs – notably iron ore and coal. The drivers of the very mining boom which has raised the Australian dollar have also raised the costs of production – coal prices for example have tripled in the last decade.
The effect of these factors has meant the crisis has been more pronounced on BlueScope, which has less favourable access to inputs than has its former sister company, OneSteel.
Third, there is pressure on steel companies throughout the developed world – the Brazilian company Usiminas is in trouble, and even ArcelorMittal, the biggest steel company of them all is struggling.
Market shift
Export markets are shifting. Japan is planning to buy steel for post-earthquake reconstruction from China or Korea, and many former customers of Australian steel are now exporters. And on top of all of that, in Australia, the fall of steel is tied to the inexorable decline of local manufacturing.
When manufacturing booms, steel bounces, but employment in manufacturing has fallen to well less than 10% of employment in the last decade, and its contribution to the national economy has fallen similarly.
So it is perhaps not surprising that we have another steel crisis. The job losses may be fewer and the impact on buyer, supplier and contractor firms may be less, but we have a steel crisis that will once again weaken and depress the steel communities of the Illawarra. Brave words are being spoken of resilience and hope, but the options in steel are few.
Anti-competitive
Certainly we won’t have a Steel Industry Plan this time around – the WTO has put paid to that. Giving preference to local product for construction is now “anticompetitive”, and so are tariffs and subsidies.
Governments can support the steel communities – at least a little – but they cannot support the steel industry, they cannot offer carrots to encourage capital investment or enforce requirements on major new projects to buying Australian made products.
They can ask nicely, but in the brave new world of free trade, governments are tied to the higgling of the market.
Chillingly, perhaps the story books of the future might begin – “Once upon a time, when Australia had a steel industry …”
http://theconversation.com/once-upon-a-time-when-australia-had-a-steel-industry-2967
…our taxes haven’t even covered each year’s government spending. Over the past 40 years, budget deficits have been the norm…If anything, I and my fellow baby boomers should pay the rest of Australia a lump sum when we retire, to cover the debt we are leaving…
And it’s not as though my taxes have been devoted to buying assets that will be in service for decades to come. Successive Commonwealth governments have been selling off these assets for much of my taxpaying career. Rather, my taxes have been devoted to providing services to the voters of the day, including many from which I’ve benefited…
Given the debt we will leave behind, baby boomers like me have a duty to make the asset test comprehensive. Those who own million dollar houses shouldn't rely on welfare when they can draw on their own wealth…
It is blatantly unfair to expect workers – whose share of the population will fall as the population ages and the proportion of retirees rises – to keep shouldering more and more of the tax burden and Budget cuts, at the same time as tax concessions on superannuation and housing, as well as access to the Aged Pension, go largely untouched
There's plenty of options out there to make our tax system far far more efficient. I'd like to see the Feds just cut back on grants to the states over say a decade, with savings directed to balancing the budget and eventually lowering income taxes when possible.
So far as industry is concerned, something that is generally missed in discussion (everywhere) is that globalisation is not a new concept. It has been tried before, failed, and was followed by protectionism which lead to the establishment of most big industries, for example steel, car manufacturing, paper, chemicals, refineries and so on, in Australia in the first place.
WEALTHY older people who warehouse their investments and properties in superannuation should be the subject of a government crackdown in the hunt for genuine, fair budget savings.
Grattan Institute chief executive John Daley has remade the case for a dramatic structural overhaul of retirement policy in light of a looming budget crisis, savings measures stalled in the Senate and an ageing population.
“The government’s problem is they now have a budget deficit of $40 billion per year and that means you have to find structural changes worth that much every year,” he told The Weekend Australian. “You’re not going to get there with $1bn on unemployment benefit changes and $2bn worth of Medicare co-payment changes and a bit from higher education. The numbers don’t add.”
Mr Daley said the government could save at least $16bn a year by capping the maximum yearly super contribution at $10,000, including the family home in the pension asset test and taxing super earnings after people turn 60 at 15 per cent, the rate younger people pay.
As it stands now, investments can be made through super and transferred once it is in pension mode, avoiding capital gains tax.
“From a fairness perspective, those earning any material amount in super ought to be paying tax on it and, from a tax efficiency point of view, it is one of the biggest games played at the moment,” Mr Daley said. “If you purchase an asset in super *before you’re 60 and hold on to it to sell it you pay no capital gains tax, none. It is insane. Completely insane.”
In Grattan’s wealth report, released last month, Mr Daley notes the income tax bill for the over-65s *declined “despite strong growth in income over the last decade”.
“This may be because con*cessional superannuation tax *arrangements now allow individuals over 60 to materially reduce their income tax liability, by up to $5000 a year, and the Seniors and Pensioners Tax Offset can also *reduce tax payable by up to $1600.55,” it says.
Treasury estimates it would gain $30bn in revenue next financial year if it did not have concessional tax arrangements on both super contributions and earnings, taking into account presumed behaviour changes after *incentives are taken away.
“The reality is there is nothing else that looks remotely this good for investments,” Mr Daley said.
“Any financial planner not *advising their clients to do this should be fired.”
There are more than 500,000 self-managed super funds in Australia with one million members; the prime vehicle for individuals who are keen to invest in property.
“My clients are multi-millionaires. Of course it is an attractive investment option, otherwise they wouldn’t be paying me to run things for them,” one adviser, who did not wish to be named, told The Weekend Australian. About 50 per cent of super tax breaks go to the top 20 per cent of income earners.
The Australian Council of *Social Services has targeted these and the churning of wages through superannuation for people older than 55 at an effective tax rate of 15 per cent without actually saving for retirement. Abolishing this loophole, it says in its budget submission, would save the government $500 million in its first year. Reducing the assets*-test threshold for couples, excluding the family home, from $1.1m to $794,250 saves about $1.35bn.
“There is a whole market of *financial advisers out there who specialise in getting people access to the part-pension,” ACOSS chief executive Cassandra Goldie said.
“And we firmly agree with *(financial inquiry boss) David Murray that we need to define what the core purpose of super*annuation is, because at the *moment there is a lot of unfair leakage from the tax system.”
Industry Super Australia chief executive David Whiteley said any move to reform super would need to be bipartisan and include consensus with the industry.
“Policymakers need to find a way to contain future growth of tax concessions and of ensuring those concessions are aligned to the purpose of super,” he said.
Joe Hockey said growth alone would not drag the budget back into a sustainable position.
“In the coming weeks I will *release the next Intergenerational Report that will facilitate a conversation with the Australian people on the challenges the nation faces over the next 40 years. The challenges we face are likely to be significant. The task will be complex.
“We will address the issues systematically and methodically.”
Globalisation may be going on, but is there any sign of Europe lowering its tariff structure or the US reducing industry and agricultural subsidies ?
Whilst I foresee the demise of globalisation at some future time, right now it's the only game in town so we need to play along. Taxation policy needs to bear this in mind - Australia is a high cost place to do business to start with, taxing production isn't going to help our situation. At some future time it might make sense, but not now
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