For those that wish to learn what the Henry Review was about and want to learn why Joe Hockey is such a lying prick.
.
The Henry Tax Review was "about" a comprehensive review of the Australian Tax System across the entire system excluding GST.
It has nothing to do with Joe Hockey. Why you even need to raise him in the discussion is odd and suggests a pathological political bias.
To the extent that you paint the Henry Tax Review as some form of crackdown on "the rich" then you misrepresent it. And again suggest a political imperative behind your comments.
Number37 said:
1. There is a strong bias in the tax system favouring investment in assets that appreciate in value such as shares and property, which has encouraged overinvestment in these areas, especially speculative investment..
The bias is that Capital gains tax provides 50% discount on the capital gain. Henry suggested that be reduced to a 40% discount. That was knocked on the head by the then government.
Of course if it's genuinely speculative investment, Investment entered into for a gain on sale, then it's actually taxable on revenue account and no capital gains discount is available. I agree that both taxpayers and the tax office and, it appeared, some members of treasury struggled with this concept.
Remember the history of this concession is that it replaced the indexation previously available on capital gains. Which was to ensure that the gain taxed was only the real gain on that asset and we weren't simply taxing inflation.
I mean if sometime buys an asset in say 2004 for $100,000 and sells it in 2014 for $120,000 have they really made any money?
If we discounted the value of $120,000 in 2014 to 2004 it would be worth less than 100,000. So in real terms they have made no money. Indexation of the original $100,000 results in zero gain.
But indexation was removed and replaced with the simpler 50% discount (the intention being simplification not a concession)
Under the 50% discount the person pays tax on $10,000. In circumstances such as this the"discount" is no concession at all and results in tax on a real dollar loss.
But hey let's just call it a concession regardless. It is true that we'd raise more money by simply taxing all gains without allowing any adjustment for indexation. Whether that's fair is another thing. The boom in prices post 1999 (when these measures) came in of course skews the result and makes the discount seem more concessional than the indexation method it replaced. A few years of flat growth or decline would alter that perception. More on this later.
Number37 said:
2. Tax subsidies for housing are highly inequitable, mainly benefiting high income earners and those who already own housing assets and increasing housing costs for renters and those attempting to buy a home
Which subsidies?
More on this below.
Number37 said:
3. High income earners can avoid tax on their earnings by having it converted into lower-taxed forms of income such as ‘company cars’, employee shares, or ‘golden handshakes’.
Add I'm sure a man of your immense knowledge is aware, cars and employee shares have been gutted since 2010 by changes under the former government. So that aspect is not relevant.
Golden handshakes is a very minor issue with minimal cost. But if we are just throwing out grab bags of context free tax concessions maybe mention that redundancy payments and death benefits are hugely confessional taxed. I could name a few more if you'd like?
Number37 said:
4.Work related deductions are often skewed towards those on higher incomes and lead to complexity and evasion of tax
Seriously? Work related deductions are expenses necessarily incurred in gaining our producing assessable income from work.
Things like uniforms, work clothes, tools etc
Accountants on $200,000 have very few work related deductions generally.
Tradies on $80, 000 often have a lot.
But sure, it's entirely possible that people who earn more spend more in earning that money. Shocking concept. Complexity in the area of deductions generally can be significant, but the area of work related deductions was the bit where Henry embarrassed himself (and showed one of his biases) by suggesting we do away with all such deductions and replace them with a standard deduction for everyone. He also argued for abolition of individual tax returns which would eliminate the need for many tax accountants allowing them "to do more useful and fulfilling things". This was an unfortunate burst of arrogance from Henry.
The government decided against this measure when many unionists (for one group) noted they'd be worse off if they couldn't claim their tools, cars etc....
Number37 said:
5. High income earners can avoid tax by diverting income through discretionary trusts to lower taxed family members or a private company. Tax can also be avoided by sheltering earnings in a private company where it is taxed at 30%
Well that's simply untrue if it's "their income" - we have PSI rules and anti-avoidance rules to deal with that.
It is true that anyone setting up a business from a plumber through to a personal trainer through to a large multinational enterprise can use a company or trust to operate that business. These are separate legal entities that have tax obligations. And certainly, say, plumbers who run business through such enterprises can limit tax to a 30% Corporate rate. Of course if individuals access those moneys as loans or dividends there are provisions that require them to return those amounts as income.
I understand that this area can confuse people. Henry seemed to struggle with it at times. But I also understand that the softish rules around loans from these entities were considerably tightened from 2009.
Could you tax Mum & Dad plumbing Pty Ltd more? Yes. Henry recommended cutting the rate though, to ensure companies remain competitive.
Number37 said:
http://archive.treasury.gov.au/documents/1719/PDF/TES_2009_Consolidated.pdf
Table 1.3 provides the numbers.
If you look at the top items ,Capital Gains & super concessions ($50b +) and compare it so say Family Tax benefits ($2b) you will quickly realise that Joe Hockey is taking us all for fools.
Take another example: Point 3 above: A $1.5b concession for golden handshakes (C3 on the Table 1.3) and compare that to Family Tax benefit ($2b)
The Henry Review is aimed squarely at things like Capital Gains because that is where the big expenditure in tax concessions is and that is why the government could increase its revenue by FAR MORE than targeting the middle where concessions pale in comparison..
Interesting that you went to that list. Tax Expenditure Statement 2009.
Here is a summary from your link.
"LARGE TAX EXPENDITURES
Table 1.3 provides a list of the largest measured tax expenditures for 2009-10. The largest measured tax expenditures are the concessional capital gains taxation of owner-occupied housing (E4 and E5) which is estimated to provide a benefit to taxpayers of around $31.5 billion in 2009-10. Together, these tax expenditures represent the exemption of owner-occupied housing from CGT.
After the owner-occupied housing exemption, the next largest tax expenditure is the concessional taxation of employer contributions to superannuation (C5) of around $11.4 billion in 2009-10. This is followed by the concessional taxation of superannuation entity earnings (C6) and the GST-free status of food (H23). These tax expenditures are estimated to provide benefits to taxpayers in 2009-10 of around $9.8 billion and $5.6 billion respectively.
The largest negative tax expenditures in 2009-10 are customs duty (F21) and the higher rate of excise levied on cigarettes (F7). These tax expenditures are estimated to be around $3 billion and $1.4 billion respectively.
There are a number of tax expenditures for which an estimate is not available but which have been assigned an order of magnitude classification (for details refer to Chapter 3. The largest such tax expenditures are as follows:• income tax exemption for religious, scientific, charitable or public educational institutions (B23);• income tax exemption for State and Territory bodies (B110); and• quarantining of capital losses (E28)."
So $31.5 billion is from the tax exemption on Owner occupier housing and $11.4 billion is from only taxing employer contributions to support at 15% (rather than taxing the super at marginal rates)
So your$50 billion of capital gains and super concessions is really the exception of the family home and confessional tax on employer Superannuation contributions.. You suggesting we reverse these?
As for family tax benefits being $2b this is simply errant nonsense. The 2015 budget shows the cost of FTB at $19 billion and the total cost of family tax assistance through family assistance payments at just under$38 billion.
The 2 billion figure you quote is simply the cost of not subjecting FTB to income tax. That is the cost of treating it as exempt income.
As for C3 being 1.5 billion for golden handshakes that's completely false. It's actually$1.5 billion for concessional Taxation of non Superannuation termination benefits. That's redundancies mainly.
Number37 said:
Joe Hockey and parrots like Eagle talk about the middle being tax neutral the reality is there are people out there getting far more benefit from the tax system than the middle and not just a little more, 10 or 20 or 30 times more.
So yes, we need to have serious discussion about the tax system in our country, let's start with the facts.
Yes, let's start with the facts indeed.
At this stage you are proposing what?
The abolition of the tax exemption on the family home?
The elimination of concessional Taxation on employer Superannuation contributions?
The elimination of concessional tax on redundancy?
The elimination of work related deductions?
And you were out either$17 billion or$35+ billion on family Assistance costs.
You really want to do this? Or you better off going back to some sledge posts?
