36200 Arguments, Evidence and Intuition: Assessment Task 3

36200 Argument, Evidence and Intuition

Assessment Task 3 -

A Contentious Issue

Anthony Hamilton

Student No. 10168577

The Presentation / Report can be found at

http://anthony-hamilton-36200.blogspot.com.au/2015/01/the-quantified-self.html

The Reflection can be found on the last page

Should Australia increase the rate of the GST ?

Over recent years Australia’s government expenditure has been greater than its revenue, well since 2008

Figures from the ABS

In the recent figures published by ABS at the end of the September taxation revenue decreased 15.1% to $99,763m from $117,469m in the June quarter 2014. Furthermore, general government sector expenses exceeded revenue resulting in a Government Finance Statistics net operating balance of –$19,288m. or in other words we are spending more than what we are earning.

Why has expenditure increased? Well spending has increased just as it has historically and yet revenue has also increased although not kept pace with expenditure. The challenge we face is that rate of spending has accelerated past the revenue. Therefore suggesting that we don’t have a spending problem we have a revenue problem. Even though the actual revenue figure have actually increased since 2006

Is there a case for Australians paying higher taxes, OECD report suggests that Australia had a relatively low level of indirect taxes as a percentage of the gross domestic product — 7 per cent compared to the average of 12 per cent.

OECD Report – Revenue Statistics 2014 - Australia

In Australian the GST is now an accepted method of tax collection as Stephen Koukoulas writes for the Drum on the ABC Network suggesting “The beauty of the GST is that it is a transparent tax that is well understood and widely accepted by both business and consumers.”

GST offers unifying benefits where weaker state can be supported by other stronger states economically speaking. So each state has the opportunity to offer same government services in terms of budgetary spending when it comes to health and education.

Furthermore it also removes tax variations between states along with have one source of collection offers cost savings rather than having 6 states collecting taxes at differing rates.

Therefore Australians are comfortable about the idea of a GST yet one who imagine that they are less comfortable about the idea of increasing the rate of the GST

Is the answer a higher GST or growing the pie? In terms of changing the rate at which revenue is increasing a simple solution would be to increase the rate of GST. This Australia would be less likely to embrace this option without additional trade-offs or for some incentive to change.

Peter Reith writing for the Sydney Morning Herald suggests that “Broadening the base on food might raise $6 billion to $7 billion, and of that about $2 billion might be given back in compensation”

Who should pay more If businesses where to pay more in terms of taxes , would that mean they are less like to invest in training new employees and investing in the youth of future? Current youth unemployment is around 17% in some regions across Australia. By directly increasing tax would certainly affect business activity.

Would the tax payers of Australia be happy to pay more if so which sector could higher tax payers offer more or would high tax payers be encouraged to avoid paying more tax? Just like the big multinationals tax minimising.

One thing is clear it that both Australians and Australian business would like to see the big multinational pay more in tax therefore reducing the amount consumers and business need to pay.

Heath Aston writing for the Sydney morning herald suggests “Apple has shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the past decade” basically robbing Australia tax payers.

Have better management of our tax collection processes offers an opportunity of increase the revenue growth rate, yet tax avoidance of big multinationals is not a new problem it has been going on for years.

In a recent OECD Report suggests that Australia’s Structure of Tax Receipts receive higher revenues from taxes on personal income, corporate income and property. Yet a lower proportion of revenues from taxes on goods and services. Furthermore we receive no Revenue from social security contributors, but Australia has higher revenues for payroll taxes compared to OECD as a whole

Historically Australia’s tax against GDP has been relatively low

Is the slow growth rate in Revenue a cyclic issue or is it a permanent issue? Falling commodity prices suggest less revenue for the Australia Government or less money floating through the economy.

Falling oil prices could hurt the Australian economy as Australia is an energy producer, with coal and natural gas being in the top five commodities exported

A recent article in the economist suggested the basis for falling oil prices is that there is less demand for oil and the energy sector as the United States of America is producing more oil from shale gas and drilling of more wells “ perhaps 20,000 new wells since 2010”

Australian Treasury figures

Looking at Australian Treasury figures they suggest that tax to GDP ratio is cyclic relationship that is predicted to recover in coming years this would make sense to some extent, with commodity prices as the world emerges out of the Global economic crises or returns to historical rates of growth.

Now if this is not the case and the reduction in the revenue growth is one of a permeant nature we may need to review our longer tem spending commitments better Management of fund and possibly reducing super tax concessions.

In concluding should Australia increase the rate of the GST or should we be boarding the base of the GST. Do Australians need to pay more tax as our contributions in comparison to other countries? Do we need to change anything and hope that our revenue growth will return as the world economy returns to higher rates growth?