By Michael David
When ordinary people claim they want "tax reform", what they want is an end to tax rorting, legal and illegal and quasi-legal. They want equity in the tax system.
During the federal election campaign, Liberal and Labor both promised to attack tax rorts. Those words were hollow: no government in Australia has attacked the systemic advantages for the rich and big business that are built into the tax system.
Taxation is wide open to rorts and actively discriminates in favour of the rich. The promises made this year by the major parties do nothing to change this.
For example, the Coalition's proposed trust legislation will tax trusts as companies. However, it will still allow income splitting, which is illegal if you are a pay-as-you-earn (PAYE) employee but not if you are an employer paying your profits into a trust.
Likewise, the proposed Australian Business Number might close down a number of rorts, since better data can be kept, but it will not affect the business deduction rules, which allow travel to work for business but not for employees. Neither will it prevent an owner having a group of companies, all legally separate and operating with fictional independence.
The new pay-as-you-go tax system, a combination of the PAYE, prescribed payments, reportable payments and provisional tax systems, is designed to prevent "erosion" of the PAYE net. Grouping them together under a new acronym will not fix all the problems in these systems.
The government's claim that the tax system is about to "collapse" is a high spot in government hypocrisy. The tax system hasn't failed. Rather, it is a system run by politicians who have failed to both stop the constant rorting and address its inherent inequities.
The Australian Taxation Office estimates that tax rorts have cost at least $6 billion a year in recent years. Trust tax rorts alone are estimated to have cost $1.5 billion a year.
Over the decades, politicians have constantly refused ATO requests for legislation to curb rorting, and for the resources and measures needed to police the system. Instead, the ATO has been attacked — downsized, deskilled, outsourced and downgraded.
Governments of both major parties have allowed rorting on such a scale, for so long, that it has significantly contributed to Australia's national debt and forced up PAYE tax rates to historically high levels.
This loss of government income has spurred the sale of profitable public assets and consequently resulted in the further loss of government income generated by public assets such as Telstra, Qantas and the Commonwealth Bank.
The rich have quickly grasped this opportunity, grabbing both the assets and their profits. The money that big business has used to buy public assets is inseparable from their tax rorted funds.
The Liberals claim that giving $10 billion to business via a broad-based goods and services tax and business tax cuts, and transferring more of the tax burden to ordinary families, is a "necessary" good for all.
The Liberals stole $20 million from the public purse to sell their "not a new tax" message before the election. When that wasn't working, they resorted to wrapping the message in nationalism: "we have to become efficient or die in the global market place", "we all must make this selfless sacrifice for the good of the nation".
One of the many fallacies promoted by this argument is that Australian owned businesses will reinvest their profits in job-creating production in Australia, rather than assign them to the highest rate of interest, wherever that is available.
The bigger fallacy is that by giving away further billions in public money and assets to the rich, they will look after everybody else better. The rich, we are told, will provide more economic growth, more wealth and more jobs — and we'll all be better off.
That trickle-down line was also pushed by the Hawke and Keating Labor governments. It didn't work then and it won't work now.
Rather, the legal, illegal and quasi-legal taxation rorts of the rich will continue, facilitated by governments intent on redistributing wealth from the poor to the rich and from the honest to the dishonest.