Should Australia introduce any tax or GST changes?
Uploaded by Zheng on Sep 11, 1999
Why do we need taxes?
Taxation makes up majority of our government's income. With this income the government can provide us with proper infrastructure and social services for little, if no cost at all. These include Medicare, social security and education. (These facilities are known as recurrent expenditures because it is needed time after time.)
Other expenditures include transportation, lighting, recreation etc. These services are granted to us at no costs. In many 3rd world countries where taxation is low or doesn't exist, all of these services are to come out of one's own pocket.
Over the many centuries, in which taxation was existent, people have cheated and avoided paying these taxes. Nowadays people with high-income put their money into trusts, superannuation, or incorporate it into businesses. Businesses would try and receive more cash transactions. This has led to a decrease in our government's revenues, thus leading to a tax reform in hope of a more effective result.
What makes a good tax system?
There are four elements in a successful tax system. They are effectiveness, efficiency, equitability, and simplicity.
1) Effectiveness: is the performance compared to the desired effect. E.g. the number of people who pays tax, how much tax is received.
2) Efficiency: is the cost of running the system. The system may be very effective with a million tax officers, but it would cost millions to hire so many people.
3) Equitability: is the fairness of the system. This is an impossible goal to achieve. From different people's point of views, the system will always be unfair to them in some way. Not to mention the tax cheats. The best solution is to broaden the number of people who pay the tax, which is only fair.
4) Simplicity: A tax system should never be too complexed, it is otherwise not efficient neither understandable. The income tax Act that just started off at just 120 pages in 1936 is now over 3300 pages and has doubled in size over the last 7 years. A complex system means that those who can afford expensive tax advice minimize their tax. But those that can't, pay the full share. It is impossible to have a system where all four elements are satisfactory. Where a system may be effective and efficient it will not be equitable or simple. It is impossible to fit the whole population all under one roof. Under these circumstances the government...