What if the Tax System Was Simplified?

Discussion in 'Accounting & Tax' started by hammer, 21st Apr, 2017.

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  1. hammer

    hammer Well-Known Member

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    Serious question?

    We spend a LOT of time and energy as a country plotting, structuring and working out Tax. It's an entire industry.....I was wondering though....what if it was all simplified?

    A total Tax reset?

    Any good or service bought or sold incurred a fixed tax. Period.

    Say 30 percent? (Could be any number, just using this as a hypothesis)
    - Import/export all 30 percent.
    - Sell a house/shares/toothpaste whatever. 30 percent. Fixed.
    - Buy/sell online - 30 percent as well.
    - Blanket across the country for everyone. rich people can consume more, so therefore pay more Tax?

    No tax returns, no real ATO, no ATO rulings, no need for Tax accountants, structures etc...maybe no income tax?

    Has any country tried this approach, does it work? Would the efficiency gained outweigh any potential inequalities?
     
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  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Those who pay nothing ATM will be the ones who whinge loudest whether it be 5% or 25% as a flat tax is regressive, hits those on low incomes the hardest and is seen to benefit high income earners (who already use good minimisation schemes to pay very little but would possibly end up paying more).

    Many feudal nations used to extract as much as possible from the peasants by using torture, maybe we should investigate a return to the good old days?
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The simpler the tax system the easier to avoid. Thats how tax used to be....It evolved.

    The NZ tax system is often said to be very simple. Its laws are concise and apparently simple. What fits on a bookcase for tax lawyer in Australia is a shelf in NZ. But then they have no CGT and GST applies to everything. That said they have adopted some clever issues to limit red tape. ie no state govts !! and workers comp is integrated into the PAYG reporting system, no super as such and a simple age pension rule that is universal for all working taxpayers. However NZ also has some very old fashioned laws too eg auditing rules etc.

    A tax rate itself isnt a true indicator of tax efficiency. Look at the Mineral Resources Rent Tax and Super Surcharge (both repealed). Both were more costly to administer than the tax raised.

    The problem with tax is it inflates. No matter how much is collected the Government wants to spend it on stupid ideas eg hand outs and supporting the element who want a free ride. Then next year they want more, and more (Both the freeloader and the Govt). When things get tough then they look for more ways to fill the void...They broaden taxes and increase them. Then people play games since the Govt gets more than they do.

    [​IMG]
     
    Last edited: 21st Apr, 2017
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Assuming you only mean 30% to the end consumer of this 'Goods and Services Tax' and not on every transaction (which would mean things cost 1000% more than they do today), there's a small problem...

    It works well for people on high incomes, it's a disaster for people on low incomes. Many people would no longer be able to afford toothpaste.

    Also the introduction of GST created additional need for people such as book keepers and accountants. As a small business owner, i was quite annoyed when I was informed I had to pay certain taxes on a monthly basis instead of quarterly. I don't have a problem with paying the money, but it increased the amount of time I have to put into processing it.
     
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  5. Ross Forrester

    Ross Forrester Well-Known Member

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    The tax act is so hard to read they should try to write a new one in simple language and get rid of the old act.

    Oh hang on. They tried that in 97 and instead of having one messed up act we now have two...
     
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  6. Guest

    Guest Guest

    I like the idea of a massive simplification to our tax system, but I think your specific proposal would crash the economy.
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    So lets think about a 30% GST rate.

    GST doesnt apply to exports so sending our iron, sheep, beef and aluminium to China is now a nil tax exercise. Jobs - Gone. Most employers would service customers offshore to save 30%.
    And pensioners would seek a 30% pension increase as their rent, food etc is all spend so they need to fund the gap. Medical costs, education etc all up 30%. State Govt then decides it must charge for schools....Tourists would likely find we are now 20% more expensive to visit and stop coming but local tourism would decline as taxpayers cant afford a 20% costs increase either...Unions would strike and demand higher wages ....

    Since GST is a value added tax I can see it now acts to limit incentives to add value. Avoidance becomes rampant. People see selling drugs as far more profitable than real work. Or they just give up trying. Hyper inflation, unemployment and no social security, riots and military coup risks escalate.

    Welcome to Zimbabwe in the Pacific. A loaf of bread will cost 3billion south pacific pesos after the hyper inflation kicks in.

    Treasury employs loads of economists who model these things. This is one that seems so simple but its simply just a bad idea. Effective tax encompasses a range of specific issues rather than a single magic potion.
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The way to do it would be to abolish state governments or at least unify the laws and then add GST on absolutely everything with no sill exemptions like now (raw chicken no GST, cooked chicken GST etc).

    Increase the pensions to match.
     
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  9. Ed Barton

    Ed Barton Well-Known Member

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    I propose a tax on windows. Simple?
     
  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    And they endlessly leave all the repealed crap in there too. They tried to clean up the Act/s back then too and gave up cause it was hard work.

    I love the 1936 act...
    s 152 ABAAAZ (I made that up) ....No limit to the alphabet is there !!

    I wonder why a coder hasnt worked out a better way of writing laws. Its like cascading code. A coder would link it all logically unlike the pollies who just add bits like a gypsy house