The comparison with either Eastern Europe or Western Europe countries is generally poor, since it leaves out some rather important cultural differences

1) People in Europe tend to speak the language of the country they come from. For the majority of the populations there, this is a huge factor in leaving. Thus the governments can essentially place whatever burden of tax they want on the population, and there is nothing much people can do about it. This is unlike Australia, where people speak English. If you must insist on excessively taxing the most mobile people (i.e., entrepenerial and motivated single, cash rich, asset poor people -- i.e., young doctors, teachers, engineers...) at such high rates, then it is much more simple to simply pick up and move to another country if you speak English, than, say, Finnish.

2) Movement of people in Europe tends to be to a mix of other high tax European countries, and to a lesser extent, lower tax countries like the US. Excluding the UK (where wages are higher for professionals, hence causing the same effects as lower tax anyway), movement of people of from Australia is almost always to lower tax countries (US, Asia). Thus, the origin of competition for people sick of high tax rates is different, and the competition is much greater for someone from AUstralia comapared to someone from, say, Germany.

Thus, before you suggest making tax rates even higher, you need to consider the loss of people this is likely to cause, and the overall effect on the economy (and the effect on the more specific things like medical services, the science and technology industry, and so forth). If you don't believe its a problem, then you might like to check the ABS statistics that show an accelerated number of people leaving Australia, and indeed who those people leaving are (well educated and motivated young professionals -- although those statistics are presented elsewhere). Alternatively, you could just look across the Tasman and see what effect higher wages in Australia have had on New Zealand.

I prefer a solution that grows the pie rather than trying to redistribute the existing one. Socialism is not the answer.

You've never heard the saying money makes money? It's alright for the pie to grow, but if it grows in the wrong places it makes NO difference to the social welfare that Mr Ewins was talking about in his article.

Free market capitalism doesn't work when it's relied on to provide for the needs of the underprivileged, nor does it build infrastructure (as, just like the underprivileged, infrastructure doesn't produce recognisable profits). We'll just have to wait for the next lefty government (if there is one remaining, which I doubt) to provide us with our "needs" and enable us to catch up on the last decade or so of right wing economic ignorance and ready us to survive the next spate of right wing economic leanness.

Dividend imputation has been a tax bonanza for the Federal Government. Company tax receipts have been growing at a much faster rate than for personal tax. Shareholders prefer companies that pay tax because they pick up the credits and pressure companies to pay fully franked dividends. The superannuation funds are the biggest beneficiaries of franked dividends because their tax rate is lower than the company rate and the funds are credited for the difference.

Scrapping imputation would encourage companies to move offshore as James Hardie has done already. Tax receipts would decline as companies reorganised their operations to pay less tax.

The author also talks about Capital Gains Tax concessions but this is misleading. What concession is he talking about?

Prior to 1985 there was no CGT. In 1985, the Hawke Government introduced CGT but indexed the cost base to inflation. The Howard Government later scrapped indexation but halved the tax rate to compensate for inflation. The Hawke system was good for long term investors and tough on short term and the Howard system the reverse.

To tax capital gains without some sort of compensation for inflation would be disastrous. Most long term investments for capital gains would become uneconomic, particularly housing.

Firstly - re: the 'brain drain' - Australia already has a net increase in population from migration including skilled migration - the so-called 'brain drain' simply isn't an issue. Also - many people in Western Europe already speak English. But they don't migrate. They enjoy superior social services and superior working conditions. Home is home. Why would they want to move?

Secondly - re: dividend imputation - superannuation is already tax free - dividend imputation, in this case, represents a 'negative tax' - of course superannuation could also be made exempt from make proposed changes beneath a certain wealth threshold. The vast majority of shares are owned by the top 10% of wealth holders. (actually - even the top 1% hold a majority) Thus this would be a very progressive change.

Finally - re: capital gains tax concessions. Capital gains tax is now only applied to 50% of assets - this needs to be changed. Also there are four small business capital gains tax concessions that need to be reviewed - including a 15 year exemption.

also - see here: http://www.abc.net.au/am/content/2004/s1156695.htm

Capital Gains Tax concessions cost over $3 billion in lost revenue - enough to pay for the private health insurance rebate - and enough to make significant inroads into hospital waiting lists.

Tristan

Tristan, you could have fooled me about there being no brain drain (and probably anybody who works in any science related area, for that matter). Simply adding up who comes and who leaves doesn't tell you very much at all. If I get one plumber and lose one biotechnologist, there is no meaningful comparison to be made. Both would useful to Australia.

I think you need to read some of Greame Hugo's work, who is the top demographer in Australia for this sort of thing, who argues that _at present_ things might be relatively balanced, although it is very hard to track things like the best of the best leaving, and relatively inexperienced people coming, which appears to be what happens in Australia's case at least in the areas where meaningful data has been collected.

In any case, even if things were equal now (and even if you really believe that people leaving and coming are two sides of the same coin -- which many people would argue are not) it seems reasonable to suggest that as mobility rises and as populations age in the future, many countries will offer greater and greater incentives to try an plug holes in their workforce (the recent US visa for Australians being a good example). Increases in taxes -- which inevitably fall disproprotionaly on younger hard working people, isn't going to help this.

Also, your comment on Western Europe is off the mark. The vast majority of Western Europeans don't speak (let alone write -- a prerequisite for many jobs) English fluently at all (go to France for a holiday if you don't believe me), and even for those that do, speaking your native language is undoubtedly a big cultural factor in why many stay, and one reason they are less mobile than AUstralians. Despite this, they still have the same problem as Australia (albeit to a lesser extent), where many of the smartest people still move to the US (figures from the NIH show that European scientists number in the millions in the US -- this is a huge loss to them).