Any increase in the GST will make Australia’s tax system more unfair and benefit corporations at the expense of workers, writes Ben Hillier.
If there’s one thing that Malcolm Turnbull has the business elite excited about, it’s the prospect of lower corporate taxes.
Lowering taxes on the profits of companies would require raising taxes elsewhere if government revenues are not to decline. That’s why there is a campaign to raise the rate and/or broaden the base of the goods and services tax (GST).
The left and the workers’ movement historically have opposed the GST because it is a consumption tax that disproportionately hits low income earners, who, unlike the wealthy, spend most of their money on goods and services. For example, 10 percent, the current GST rate, on the grocery shopping is little impost on someone earning $150,000 a year. But for a single mother on a low income, it means fewer groceries or smaller meals.
The National Centre for Social and Economic Modelling (NATSEM) estimates: “An increase in the rate of the GST to 15 percent would require people in the lowest 20 percent of the income brackets to pay 7 percent more, people in the middle 20 percent 4.2 percent more, and people in the highest 20 percent income bracket just 3 percent more of their income”.
Ben Phillips, the centre’s principal researcher, noted in early November: “A broadening of the base of the GST to fresh food, health, water and education would also be regressive, with people on lower incomes paying proportionately more of their incomes on these essentials. The relative impacts are clear: 4.6 percent of income for people in the lowest income brackets, 2.7 percent for people in the middle, and just 1.7 percent for the highest income earners”.
The arguments of proponents of a broadening/rise have been tailored to account for this. NSW premier Mike Baird in July appealed for the rate to be increased to 15 percent in order that state governments, which receive the proceeds of the tax, could make their health systems “sustainable”.
“Australia, we have a problem, and it is that the federal-state-financial system is in imminent danger of tumbling over a fiscal cliff”, Baird wrote in the Australian.
“… The fiscal reality is that all the resources of the commonwealth and the states, pooled together, can no longer fund health services to our current standard.
“Indeed, we are billions short. We have done some modelling in NSW that indicates that, on our current path, by 2030 the annual budget deficits across the commonwealth and states will be about $45 billion, of which about $35bn will be generated by health.”
Turnbull told the Economic and Social Outlook conference in Melbourne on 5 November that, in any transformation of the tax system, “fairness is absolutely critical” and that the government would ensure that any impact on low income earners would be compensated through other changes.
Don’t believe for a second that any changes would be fair in the long term.
Anything resembling “fair” needs to be based on the principle that the more wealth someone has, the more they should pay, and the less wealth someone has, the less they should pay. But we already know that the big corporations do everything they can to avoid paying very much.
In 2010, Jim Killaly, a deputy commissioner at the Australian Tax Office, told a corporate tax summit that between 2005 and 2008 more than 40 percent of large businesses paid no tax at all. Last year the biggest 900 companies claimed deductions and exemptions worth about $25 billion – i.e. more than two-thirds of the amount, in one year, that Baird says will be the total contribution of health to government deficits 15 years from now.
The big business lobby says that the 30 percent corporate tax rate is too high. But it already has dropped from 49 percent in the mid-1980s, and the effective rate – what companies actually pay – is less than 20 percent.
A 2014 report by the Tax Justice Network – an international organisation that investigates tax avoidance – and United Voice (the hospitality union), estimated that 57 percent of all ASX 200 companies have subsidiaries in tax havens and that avoidance is costing the federal government more than $8 billion per year.
Now the government has amended legislation so that companies with a turnover greater than $100 million do not need to publish details of how much tax they pay. Why would it do that, do you think? In the “absolutely critical” interests of fairness?
Where does the money really come from?
As unfair as the arrangements already are, the government tax system is not the main thing.
Higher income earners are usually the first to complain that their tax dollars are being wasted on welfare programs and that they actually pay the greatest amount of tax.
Yet the capitalist economy is not built on taxes. It is built on the exploitation of workers’ labour. If we view “tax” simply as a transfer of wealth, then the greatest tax system in the country is the one which siphons value from the working class to the bosses in the form of profits.
All the profit in the economy has been extracted from workers by holding wages much lower than the revenues generated from the products that workers produce. Still the bosses complain that 30 percent tax on profit is too high – even though the total profit in the economy is basically a capitalist-imposed tax on workers.
And the meagre incomes of the working class are further diminished by the state through income taxes and others, such as the GST.
In the interests of fairness, workers should not have to pay any GST (let alone a higher rate) or income tax or any other tax. Fairness demands that business, which organises the great exploitation of workers, should pay much more tax to fund the state services that workers rely on.
In fact, real fairness demands that the entire system of profit taking be replaced with an economy in which all production is carried out for human need.
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