There are so many things wrong about the current tax debate it's difficult to know where to begin. For a start, Australia is not a low-tax country. Second, the wealthy don't in fact get any special treatment from the country's tax system. And third, the suggestion that multinational companies should pay tax, not according to what the law requires but according to the personal interpretation of politicians of what's "fair", is ludicrous — and dangerous. When the policy debate is populated with notions that are so wrong it's no wonder the only solution that politicians appear to be able to come up with is higher taxes — as Peter Costello so trenchantly said this week.
The claim that Australia is a low-tax country isn't just repeated by the left. It's in the government's own tax discussion paper: "Australia's overall tax burden is relatively low compared to other developed countries". The reality is that the average tax-to-gross domestic product ratio across Organisation for Economic Co-operation and Development countries in 2012 was 33.7 per cent. If compulsory superannuation and health insurance payments are counted as taxes, Australia's tax-to-GDP ratio was 33.5 per cent.
Then there's the issue of so-called tax "concessions" for the well-off. Somehow the idea has taken hold in Australia that if the wealthy pay the same rate of tax as everyone else, the wealthy are getting some sort of benefit. Such thinking applies especially to superannuation.
NO SUCH THING
Two weeks ago the ABC headlined a story "End high-income retirement tax breaks? Super idea!" In fact, there's no such thing as "high-income retirement tax breaks". The rules governing the tax treatment of superannuation apply to everyone equally — rich, poor, and all those in between. The Association of Superannuation Funds of Australia got lots of publicity recently when it called for an end to "tax concessions" for "higher income earners". The association was targeting superannuation accounts of more than $1 million. Given many of the association's members are trade union-dominated, industry superannuation funds and given that 140,000 of the 210,000 people with more than $1 million in superannuation have a self-managed fund, the association's attitude isn't surprising. Yet the association acknowledged that "the same tax framework" applies to large superannuation balances as to small ones.
Finally, there's the question of what's "fair". Senators like Labor's Sam Dastyari and the Greens' Christine Milne are demanding that multinational companies should pay "their fair share of tax". Exactly how much is "fair" no one can say. Dastyari and Milne are wrong. Multinational companies, just like individuals, have no obligation whatsoever to pay a "fair share of tax". The obligation of companies and individuals is to obey the law — nothing more and nothing less.
What's happening is that politicians are demanding first that companies do more than obey the law, and second that companies satisfy a criterion of "fairness" for which those politicians have no democratic or parliamentary mandate.
RELEVANT PRINCIPLES
Two of the relevant principles of the rule of law are that laws must be understandable and they must be able to be obeyed. Because everyone's definition of "fair" is different, it's impossible for any company executive to ever know whether they have complied with the Labor/Greens specification of "fairness". If Labor and the Greens want to change the tax laws affecting multinationals, by all means they can try. But in the meantime politicians should not be expecting anyone to obey their personal whims.
The former Labor minister Craig Emerson said in these pages a few days ago that the Senate hearings against multinational companies "involve an element of rough justice, since some of the corporations making invited appearances might have done little or nothing wrong". What's happening is worse — it's a breach of the rule. If we're now prepared to accept our elected representatives handing out "rough justice" the country is in even more trouble than we've realised.
On June 15 we'll be celebrating the 800th anniversary of the Magna Carta. The achievement of the Magna Carta was that it began the process that replaced the arbitrary rule of kings with the rule of law. The recent behaviour of senators Dastyari and Milne isn't very different from the "rough justice" that once upon a time King John handed out.
ADVERTISEMENT
No comments:
Post a Comment