What kind of country has a tax system that can’t be
navigated without an accountant or lawyer? Long answer short, it’s Australia.
I was studying in a gorgeous little café this afternoon and reading about Capital Gains Tax – riveting right?
As I was reading, I came to thinking, what kind of equality
is our tax system based on?
In Australia,
there is a significant socio-cultural
divide. This gap means that the
government must make considerations for people who are illiterate, unable to attend public consultations or challenged in some other way. It is not a prejudicial attitude that I am displaying, but a realization that the Australian Tax System is largely discriminatory towards the middle and lower classes of the Australian population. The system is currently unfair because it is so comprehensive and convoluted, that any individual or enterprise requires at least a bookkeeper to have some handle on their financial affairs. This sort of requirement is an impracticable reality for financially struggling individuals and enterprises.
My lovely cup
of tea and books J
Imagine, a small
group of new entrepreneurs determined to make their way in the Australian
business environment. Then they are suddenly, slammed with a bunch of seemingly
unintelligible tax demands; random capital gain assessments, audits and dividends
and even interest from bank accounts. We don’t get taught about this stuff in
High School, and few entrepreneurs are aware of these limitations before they
start their first business. By failing to simplify our system, or to educate
the youth about it, we are handicapping our entrepreneurial adventurers through
this regressive tax scheme.
I will say now, I am not against tax. I just feel that our
current tax system is serving a great injustice to the legally ignorant – which
with this level of tax complexity is everyone without a law and accounting degree.
A progressive tax system which has been simplified would be
far more beneficial. While a progressive system may
still tax young entrepreneurs it would never require entrepreneurs to navigate
two legislative pieces. Then investigate whether they are accounted for by;
- - The principle of receipt of mutuality
- - exempt income
- - Non-Assessable non-exempt income
- - statutory income with a contrary intention
- - merely statutory income
- - ordinary income
- - capital gains provision
The time associated with this sort of process is valuable
time – and the failure to do so could mean the death of an invaluable and
innovative business. The complexity of this process is discouraging to many business
people, even those with experience. Extrapolation would suggest that foreign
entrepreneurs would be hesitant to start a business in Australia because of the
comprehensive nature of the tax system.
As Australia is desperately attempting to revive its
innovation and uplift entrepreneurs through movements like innovation Australia
and offering subsidies and grants to entrepreneurs. Our tax system seems to be
holding us back. What actual benefit do
we offer people, to offer so many exceptions, when they lose any financial advantage
because of the cost of a financial assistant?
I work part-time at a café, and my experience there in mere by-the-way discussions with my boss and
some her suppliers show that this amount of taxation complexity is crippling to
their business. Surely we as a nation would be much smarter to take a deep
breath, broaden the income and GST base, and deal with the tax exemptions we lose the right
to?
Obviously if you don’t make the tax threshold now, you
probably won’t if we broaden the base. But the extra revenue and simplicity of
administration could mean that the tax rate could be dropped to reflect revenue
neutrality financially benefiting most. It may also capture income that
previously had helped individuals
enormously but was exempt under current provisions.
This simple change in both revenue
and GST tax bases could exponentially improve the socio-cultural perceptions of
tax in Australia too. There’s no doubt the perception
of taxes – particularly amongst the middle class – is a negative one. While European countries with higher tax rates
suffer no such stigma, rather the government is seen to make an efficient use
of taxpayer funds and so the people are satisfied. Also, I suggest that the
middle class of Australia are amongst the most disillusioned citizens of this
generation. In no other country would a
ridiculous onslaught of tax complexity be allowed. Justice Edmonds in July 2015
noted that the political environment was preventing our tax system from
adhering to the three critical elements of a tax system; equity, efficiency and
simplicity.
The Henry Taxation review found 128 areas for improvement
and yet less than 5 were acted upon. What does this show but an unwillingness of
the Australian government to initiate a fair tax system? It stands to reason
that any person should be able to perform their own tax return with minimal
issues if they wanted/needed too. Yet, I would like to put forward that no one
can. The current Australian system is so complex that only those with
specialist knowledge can possibly perform one.
Our Australian Tax system is turning accountants into the
next neurosurgeons.
To read justice Edmonds speech
follow click: justice edmonds speeches
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