Wednesday, 5 May 2010

Henry Review of Tax

This week's bland news for Australia is the Henry report into tax reform. Overall, it will have little immediate difference to Australia since most recommendations won't come into effect, and of those that do, it will be quite some time before they do.

Most attention has been given to the mining super-profits tax. I understand the policy that the resources are public assets and the people should get benefit from them, but I'm sure the shareholders won't care. Now we can watch the fight between big business and big government. Of course, taken to its conclusion, the resources are the public assets of the people who live in that region, not just in that nation. If a mine near Mt Isa earns enough to pay this tax, perhaps the money should go to the city of Mt Isa.

More important are the host of changes that are smaller and probably won't be enacted. I think especially of this recommendation:
The Henry Review also recommends that the tax-free threshold for personal income tax be raised to $25,000 and that there should be a simple, transparent two-step tax scale, with 97 per cent of the population paying 35 per cent. After five months of reading and discussion, surely the Government could have formed a view about that. Well, actually they obviously have formed a view - that it's too hard and they should just shut up about it.
Tax reform more like a Robin Hood shuffle - ABC News (Australian Broadcasting Corporation)

The tax-free threshold has been too low for too long. It hasn't risen with inflation at all. Raising the threshold is a tax cut that has the biggest relative benefit for the lowest earners, and the same absolute benefit for everyone. It's absurd that poverty level of income (single income, family of four) is just below $30,000 per year, but that we tax low income nonetheless. It's immoral to tax the poor back into poverty.

If only one recommendation was accepted, it should have been this one: raise the tax-free threshold.
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