The great political tax dance... and why reform feels out of reach

The Oxford Dictionary notes the first use of a "corporate tax" some 200 years ago in the 1820's, as a type of tax levied on business profits to fund public services. One could credibly assume the first instance of tax evasion followed a similar timeline, and whilst tax minimisation is a lawful process, the line danced by many a big corporate, I'm sure, is rather fine.

Adopted soon after Federation, so merely a relative tick over a century ago, Australia's steadfast commitment to the extremely costly governance of a ludicrously complex system of deductions, concessions and offsets is a homage to successive Governments embarrassing absence of imagination and leadership.

Generally in any high stakes game the house always wins but with policy implementation, governance and enforcement all glaring bureaucratic weaknesses, complexity is the obvious enemy. You see, the lumbering nature and compromised outcomes of our political systems and bureaucracy means that even without the duplicitous intervention of ruinously overpaid and morally corrupt consulting firms, like death and taxes themselves, there is nothing more inevitable than the very well resourced tax avoidance machine remaining at least two steps ahead.

The proverbial ace up the Governments sleeve is that they can change the games rules, and there is nothing so utterly critical to future prosperity in this country than tax reform.

Time then for a radical change in approach. But that's hardly a new or even unique perspective is it... so why so hard people?

So inherently flawed is our current system it is hard to reconcile that in over 25 years and not since the introduction of the Goods and Services Tax (GST), has Australia seen anything remotely resembling economy-wide tax reform. 

Frustratingly, for the most part opposing political interests continue to argue about tinkering on the fringes of sub-optimal policy, whilst comprehensive white papers painstakingly compiled at great taxpayer cost gather dust, and bipartisan expertise... from "real experts"... continues to be ignored, to the collective humiliation of every voting member of the public.

In something akin to robbing Peter to pay Paul, and yet more confirmation of the caricature our political elite are, some suggest increasing the rate of the GST and applying it to fresh food and education, to enable the Treasurers stated goal of lower income taxes. Like the recent 5% homebuyers deposit, yet another painfully obvious reminder that political outcomes trump economic outcomes, every time.

Whilst "creative accounting" may be considered an overly inflammatory term, from a corporates perspective those responsible would be considered derelict in their duties if not maximising available tax minimisation strategies and actively exploiting often glaring loopholes, because even at significant cost it is still money well spent... especially given that very same money spent is likely a lawful deduction itself.

It is a completely nonsensical, non-value, economically detrimental and continuously circular game of cat and mouse... with the Government mistakenly believing they are the cat.

And what is any rational individual to make of a process where a business deducts PAYG from an employees wage, sends it to the ATO, who then requires that every single affected person be complicit in the idiocy by compelling them in the millions to lodge an individual personal income tax return.

Economic waste, refers to the inefficiencies and losses incurred when the performance or funds invested produces outcomes that are of less value than can be reasonably expected.

It is a disturbingly apt description of our bureaucracy, and despite the oxymoron that is the Governments "Transparency Portal", trying to estimate the potential direct savings from a smaller Australian Taxation Office (ATO) due to a less complex tax system is futile, but billions annually is an extremely safe bet, and it is the proverbial tip of the waste reduction iceberg.

A simpler tax system means;

1. Reduced corporate tax avoidance

2. Reduced need for governance oversight hence smaller bureaucracy

3. Additional reduced non-value add cost in the economy through spend by individuals and corporates on tax returns & tax compliance / minimisation.

But everyone's idea of simple is different... mine is of the "go hard" and the "back to basics" type of simple. So if we're going to have the conversation...

1. Tax Corporate income less employee remuneration (to encourage healthy wages) as the one and only deduction and applicable only when "to be determined" thresholds are exceeded to support small business.

2. Abolish personal income tax except when "to be determined" thresholds are exceeded to curb excessive Executive remuneration.

3. Abolish GST.

Yes of course there are caveats, but less is more and the imperative must be to agree the principles and let the experts argue the finer details.

But as intimated earlier there are much more learned and articulate voices to be lent to the tax reform cause than mine. The reality... knowing there is an issue and even identifying solutions is not the problem.

The stakes are high and self interest is a horse well backed. Where political influence isn't so much hard won as purchased, the road to reform is a treacherous path indeed.

Tax reform is the single most important issue facing this country and if I could have it my way, politicians would not be allowed to talk about anything else until it had been comprehensively resolved... but political reform may ultimately need to be prioritised to achieve it.

Hold my (indie) beer...