The vast array of concessions and deductions allowed to Australian taxpayers makes me think that their system tries to be equitable to all, rich or poor, private or corporate, commercial or non-profit. Although taxation systems are generally complicated, Australia’s does seem particularly complex, which must be, at least in part, due to the admirable attempts at making the system fair for all.
Most of the taxation-related newspaper articles I have come across do not portray the Australian taxation system in a positive light. This does not necessarily mean that the system is unpopular with the general population (it might just be unpopular with journalists), but it does mean it has an image problem.
Compulsory charges in general are unpopular (for the understandable reason that people usually prefer keeping their money), but especially so when the benefits are intangible. In my home country, the United Kingdom, I find that the most vocal supporters of our National Health Service (and the taxes that go to support it) are those that have used it for a serious matter themselves or have had family and friends benefit greatly because of its existence. For everyone else, the benefits are intangible and so it does not get such vociferous support from them.
Ali from Afghanistan, as mentioned in Tim Elliott’s (2013) article, was happy to pay his tax. Although it is not stated in the article, in my opinion this is because Ali knows what it is like to live in a country which takes nothing but also provides nothing. He prefers the Australian way of doing things, where people in need are taken care of and lack of money is not a barrier for entry to education. These benefits are particularly apparent to Ali because of his previous life in Afghanistan and his new life in Australia, where he is attending a government high school.
A number of the articles I selected cover the recent changes to fringe benefits tax on vehicles. The problems of which Mark Pownall (2013) complains are a good example of a frequent problem with taxation: in an attempt to be equitable to all, some people are treated unfairly to the detriment of the country in some way. In his case, it was the difficulties now caused to people like nurses who have a genuine reason for not only needing to use a vehicle frequently for work, but also for needing the tax deduction. If the rhetoric is to be believed, the changes were made to target the well-off and corrupt who wrongly claimed the deduction and probably would not need a tax deduction anyway even if they had used the car to an appropriate extent.
As mentioned in Anthony Gough’s (2013) article, the changes could harm charities’ ability to find good employees. In the past, they did not pay high salaries but they did provide benefits such as the use of a vehicle. The CEO of one charity said that the cost of keeping logbooks for their hundreds of vehicles would lead to a reduce in salaries because of the cost. She could not take away their cars because they need cars to do their jobs. This is probably not what the government envisioned would happen when they decided to target wealthy people cheating their taxes.
According to John Rolfe (2013), the complexity of the tax system caused taxpayers to lose $436 of deductions on average. This is another example of a problem caused by attempting to be equitable to all: there are so many deductions that taxpayers do not know which ones to claim. As referenced by Shane Wright, stories of massive companies like Apple and Google using tax loopholes to evade billions of Dollars in tax must exacerbate the ill will caused by changes like FBT reform mentioned above. It must be hard for the average taxpayer to reconcile: wealthy companies were allowed to get away with not paying billions, but the government won’t allow a teacher to easily write off some of her travel costs.
The recent rise of the Financial Planner as a profession in Australia is quite interesting. There are many tax calculators on the Australian Taxation Office’s website to help people work out what they are entitled to. It is apparent that average people are supposed to be able to handle all of these matters themselves, yet more and more people are feeling the need to get professional help managing their finances and planning for the future, usually with tax minimisation in mind.
The way tax varies depending on the taxpayer’s income is probably always going to be controversial. No one wants to scare the richest members of society into hiding their income and assets in other countries, but it is hard to reconcile them paying only as much as everyone else. Taxing the poor at all seems unfair or unnecessary, but arguments could be made that they should feel like they are contributing members of society, even if they cannot contribute very much. It is also must be useful to gain experience dealing with tax forms early on in life when one is not earning very much rather than suddenly needing to later on when one’s finances are likely to be far more complex.
Complex taxation systems are more likely to have loopholes which will be used by some to avoid paying their taxes. Apart from costing the government money, it causes mistrust of the taxation system. People will not feel they are being taxed fairly if, for example, they feel that someone earning the same amount in the same field as them but self-employed rather than working as an employee would be able to pay far less tax by writing off a lot of their personal expenses as business expenses.
If people mistrust the taxation system, they are more likely to look for these loopholes themselves or try to get away with illegally evading tax. As taxation systems become more complex, it becomes less clear how to keep oneself from running afoul of the law, even if the taxpayer has the best intentions. If people find themselves in legal difficulties caused by innocent mistakes due to confusion, this will also give them reason to mistrust the system.
Elliott, T., 2013. From refugee to businessman: a success story, The Sydney Morning Herald, [Factiva] [Accessed 21 July 2013].
Gough, A., 2013. Tax drives charities’ pain, The Courier-Mail, [Factiva] [Accessed 21 July 2013].
Pownall, M., 2013. FBT is not the whole car expenses story, WA Business News, [Factiva] [Accessed 17 July 2013].
Rolfe, J., 2013. Taxpayers losing out on billions, Hobart Mercury, [Factiva] [Accessed 17 July 2013].
Wright, S., 2013. G20 aims to seal tax loopholes, The West Australian, [Factiva] [Accessed 13 July 2013].