coastymike
28-08-2005, 04:53 PM
Its good to see Malcolm Turnbull's 52 page proposal for tax reform. It can be downloaded from his website for those who are interested in his analysis.
Vague reference is made to removing some of the tax concessions currently built into our tax system. Reading further through the paper Turnbull discusses the generous concessions given with respect to capital gains tax and I know some commentators have been discussing the merit of introducing a flat 30% rate for capital gains.
I agree totally with Turnbull's disagreement with the argument that business owners are not treated preferentially as it is merely a deferral of tax i.e. the business owners eventually have to get the money out of the company as a dividend which is taxed at marginal rates. As Turnbull states this argument not only ignores the time value of money but it also ignores the fact that a business owner can take advantage of the corporate tax rate, keep the money locked into the company until a time when other shareholders e.g. wife are not working or owner is reducing their input into the business and then take the dividend when their marginal tax rate will be much lower. In some cases this could actually result in a refund to the business owner if the marginal rate is less than 30% i.e. the franking credit received from these dividends.
My personal view is that a reduction in income taxes would be welcome as decreased taxes from income generated from personal services or business ventures will assist in providing more discretional expenditure which will indirectly result in increased revenues through increased GST collections. If the State and Federal governments can agree on a model for distributions of GST revenue collected to the States then this will benefit all. A model needs to account for the fact that we have an aging population and services and infrastructure can only be funded through taxation. A model whereby those who are retired are still contributing indirectly through the taxation system i.e. through GST collected from expenditure by these retired people is in my view a sensible model for an ageing population.
It may move people away from passive investments such as property into more active investments such as business ventures without the current impediments but I don't think this is a bad thing. It helps stimulate an economy by encouraging people to work harder and not fear loosing half their income to the government. It also encourages those who work hard or take extra jobs to enjoy the fruits of their labor. Indirectly it may actually help stimulate the property market as increased after tax dollars enable people to invest in things such as property without the heavier weighted benefits to higher income earners.
Should be an interesting Budget in 2006.
Vague reference is made to removing some of the tax concessions currently built into our tax system. Reading further through the paper Turnbull discusses the generous concessions given with respect to capital gains tax and I know some commentators have been discussing the merit of introducing a flat 30% rate for capital gains.
I agree totally with Turnbull's disagreement with the argument that business owners are not treated preferentially as it is merely a deferral of tax i.e. the business owners eventually have to get the money out of the company as a dividend which is taxed at marginal rates. As Turnbull states this argument not only ignores the time value of money but it also ignores the fact that a business owner can take advantage of the corporate tax rate, keep the money locked into the company until a time when other shareholders e.g. wife are not working or owner is reducing their input into the business and then take the dividend when their marginal tax rate will be much lower. In some cases this could actually result in a refund to the business owner if the marginal rate is less than 30% i.e. the franking credit received from these dividends.
My personal view is that a reduction in income taxes would be welcome as decreased taxes from income generated from personal services or business ventures will assist in providing more discretional expenditure which will indirectly result in increased revenues through increased GST collections. If the State and Federal governments can agree on a model for distributions of GST revenue collected to the States then this will benefit all. A model needs to account for the fact that we have an aging population and services and infrastructure can only be funded through taxation. A model whereby those who are retired are still contributing indirectly through the taxation system i.e. through GST collected from expenditure by these retired people is in my view a sensible model for an ageing population.
It may move people away from passive investments such as property into more active investments such as business ventures without the current impediments but I don't think this is a bad thing. It helps stimulate an economy by encouraging people to work harder and not fear loosing half their income to the government. It also encourages those who work hard or take extra jobs to enjoy the fruits of their labor. Indirectly it may actually help stimulate the property market as increased after tax dollars enable people to invest in things such as property without the heavier weighted benefits to higher income earners.
Should be an interesting Budget in 2006.