I am seeking feedback, to weigh up the pro's and con's for further debate,on a single tax regime on gross income of individuals,partnerships,companies,and capital sales to replace all existing tax regimes of Federal,State and Local governments.Any comments on how this system would affect yourself and/or our society,for better or worse,would be greatly appreciated

A set tax rate, and this is what I assume you are proposing has dier consequences for lower income earners as it is they who require the largest portion of their income just to provide the basics of life.

This is why they are so hard hit by the GST.

One of the main problems that you face is the simpler you make the system, the more unfair it is. The complexity we have now is a result of years of adjustments to reduce the tax burden where it is deemed to be unfair, and to clamp down on those creative enough to exploit loopholes. I suggest it would be very difficult to have a system that is both simple and fair.

I agree,rehctub.Would a healthy threshhold before the tax came into play rid the problem?Maybe a threshhold just above the minimum wage but only for those on or below that,others to pay on all of gross income and capital sales.The tax proposed is a single tax of low single digit% and would need to raise equivalant revenue as is now raised for govt.It could be gathered automatically on each deposit into accounts in financial institutions,unless under the threshhold.It would not require any other tax to be needed.There are plenty of pro's and con's that I can think of but won't list or discuss them all at once here,rather hope people respond with their own ideas or slant on it,and then discuss those.

Hello,Country Gal,
The tax system's complexity is one main reason for this discussion on this proposal.The more complex,the more loopholes until it becomes incomprehensible to the vast majority,as it is,and therefore a very bad system by definition of a good system;simple and fair.This system would still allow the govt.to control the spending of taxes raised to alleviate difficulties,and deliver services,yet stimulate people to participate and achieve by not being burdensome and allowing them to know exactly where they stand at any time without trying to anticipate tax changes.

As a suggestion tax withdrawals from bank accounts and credit cards the idea being that it might encourage savings and, of course, save considerable costs in administering the tax laws. However I am not sure how to handle loan repayments.

A tax on capital sales is a bad idea. The market would be extremly sensitive to this, so you would screw with the market price of capital goods and have a huge impact on sales. To put it more simply, if you sell a capital good (not sure exactly what goods you would include - land, cars), then buy it back again, you would be far worse off, even though you haven't done much.

Income tax is a reasonable source, but should not bear the full burden because it encourages people to earn money on the black market. Consumption taxes (eg GST) are a good idea because they cut back on this problem.

"I agree,rehctub.Would a healthy threshhold before the tax came into play rid the problem?Maybe a threshhold just above the minimum wage but only for those on or below that,others to pay on all of gross income and capital sales.

That would also be a really bad idea. It would mean that as your salary goes up, your income takes a dive. It would create a massive disincentive for those on minimum wage to try to improve their lot. It would create a two class society. That's why we have marginal rates.

"The more complex,the more loopholes until it becomes incomprehensible to the vast majority

Wrong. Almost all of the complexity is designed to close loopholes.

"As a suggestion tax withdrawals from bank accounts and credit cards the idea being that it might encourage savings and, of course, save considerable costs in administering the tax laws.

Another really bad idea. For similar reasons why a tax on capital sales is a bad idea.

Why have taxes at all? Why shouldn't governments derive income from assets, as retirees are increasingly expected to do in order to avoid "burdening the taxpayer"? See http://zero-tax.blogspot.com/2008/05/but-why-have-taxes-at-all-dear-henry.html .

Another silly idea. Such a system would inevitably lead to monopolies, or at the very least greatly reduced competition. That would be very bad for the economy. Also, it would be impossible to sell the exemptions for their real value.

Hello Oldy,
Yes, how do you tax,under this proposal,a borrowing i.e. money coming into an account that you already pay interest on let alone another tax on that money?I have my ideas on how this might work.This whole concept could be inflationary by giving people more money to spend,or save,while an increase over and above the interest rate charged on borrowings by the amount of the tax on any deposit to an account could reduce the inflationary pressure(remembering ther are no other taxes to be paid).The inflationary pressure could then be a market force determined by the people's wishes to save or spend rather than an instrument of a central power that apparently determines what is good or bad for us as far as interest rates are concerned.
As far as saving costs of administering tax,yes it would,but what about the time saved in less compliance?We are only on this Earth for a short time and I have better things to do with my time and small income than to spend it on ever increasing tax compliance.

Personal income tax is about social control, not revenue. As I recall, the Govt pays out to individual taxpayers (and other citizens some $5 billion annually more than is collected in personal income tax receipts. That's without even figuring in the cost of administration and, as g.w. said, compliance.

No Govt is going to forego the control offered by personal taxes simply in the interest of simplification.

My simple ideal Tax scheme would be everybody pays 10% on Zone A, 9% on Zone B & 8% on Zone C on all forms of gross income from all sources regardless of what or where it is. No rebates for anything, no depreciation, no discounts, nothing off what-so-ever. Just 10% flat.

Should money be taxed going into accounts as income or going out as expenditure?
Freediver,doesn't the price of a capital good(land,house,car)depend on what someone will pay for it?Why have complicated tax laws for something so simple and necessary as purchasing a house?
As a persons income goes up the tax rate doesn't change;it would be x% of gross income or sales and,yes,automatically deducted from accounts.
As for this tax reducing competition,I believe it would create a very competitive marketplace where people would be able to pursue their ideas and ambitions without being penalized or burdened by compliance.
Jayb,would you say you were in agreement with this proposed tax system?
Antiseptic,do we need such a level of govt.control?Some govt.control is necessary but have we got too much?Could this tax proposal give people a freer,more invigorating outlook on their lives?

Aust politics and the parliaments it produces are becoming increasingly authoritarian, with some truly draconian legislation implemented by govts both Labor and Coalition. I simply can't see any point in discussing any change to taxation that may lead to a reduction in the capacity of Govt to control the behaviour of the populace.

It may be that a far-future Govt will be sufficiently sanguine to introduce such a reduction of the power to control, but I will be advising my grandchildren not to hold their breath waiting for it(when they eventually emerge to take one).

Sounds OK g.w.

Should money be taxed going into accounts as income or going out?

Going in. (Gross earnings) No deductions for anything. This would stop people like Bondy & company from only paying $1 tax for the year because of Tax minimilasation scemes while the rest of us pay dearly.

Another measure, I'd like, would be double tax on "Interest free, non repayable loans" to "mates" and full public disclosure. The loan would be considered as speacial income as it wasn't "earned."

I am putting this forward as a motion, for a detailed investigation into this proposal, at the State Conference of a political party soon. It it succeeds, the study will be done and decided whether the proposal stacks up. I will be pursuing it with passion and vigour and it will later be voted on to become policy and taken further. Have to start somewhere and getting input from everywhere is the beginning.

gw, one of the problems with levying tax on gross income is that those that have low margins (or individuals with a high cost of earning their income) are punished. That's why we now allow deductions for costs incurred in earning that income that is being taxed. Eg It costs me about $5000-$6000 in additional expenses to earn my salary, which at the moment I can deduct from my gross income. My sister earns roughly the same amount as I do, but costs her maybe $500 a year.

Likewise you could levy one rate of tax on a construction company and see it be fair, but the same rate of tax on the gross income of a supermarket (particularly an independent one) would see it lose money thanks to the tax burden.

To do the same thing to capital sales without allowing for costs of purchase and improvement would encourage rapid escalation in land prices, as there would be disincentive to sell current holdings and competing buyers would need to increase their offering to attract a shrinking pool of sellers.

I am fully aware of the complexities of the tax system - its what I do for a living - and would welcome simplification. However, there needs to be a very careful analysis of the impact of the simplifcation on both taxpayers directly and the economy (ie the example on land sales above).

Any alternative tax system is worth considering.

The present system is cumbersome, prone to both anomaly and error and is, most likely therefore, "unfair" by default.

I am not sure anyone could ever devise a “fair” tax system because people, being people will always focus their interest on their own disadvantage compared to their neighbour.

So if we say fairness is a national impossibility, maybe we should go to simplicity.

For simplicity, in my book, read “fewer”.

We have GST, FBT, Income Tax (personal and corporate), CGT, Land and Stamp duties, import duties, excises, and soon we might even have a carbon tax, courtesy of the man elected to and seemingly heel bent upon bring us another "recession we have to have".

As well as that we have all the user-pays governmental charges from EPA and planning regulations and licences to vehicle tax then we have water rates, council rates, charges for parks and gardens, the removal of sewage and this is in no way intended to be a comprehensive list.

A swathe of charges and what value do we receive?

Well the "benefit" is a different story so I will not go there.

But is the cost of some of the supposed "Regulation" actually worth the bother, both financial and personal?

Back to simpler system.

Oldy was close when he observed the emphasis of taxing consumption versus savings.

GST does this quite effectively. It is one of the reasons I like it. The other reason I like GST is it is simple and it has a wide base. That means those who spend pay the most.

This automatically loads the tax cost to those who earn more, on the assumption that they have greater spending capacity and the poorer off pay less.

Of course, those who are more prudent or frugal do comparatively well versus those who spend like no tomorrow....

Col, GST at the moment probably costs the average small business as much to comply with annually as does annual income tax. That's before you get to particularly complex areas like the margin scheme. While it provides some simplification in the eradication of other taxation regimes, GST in itself could be significantly streamlined.

As another person pointed out, consumption taxes hit the lowest earning the hardest. So if we were to re-write the tax system so that we had only GST, then we would need to re-write the welfare system too and supplement the incomes of our lower-earners so that they could cope with the rise in costs.

Then you ignore the social benefit tax schemes of tobacco and alcohol excises, which are supposed to assist a user-pays principle, given that we have free health-care. Do you do away with these as well and go back to having society as a whole pick up the tab for associated health problems??

Cetainly a consumption tax that is levied only on domestic consumption would go further towards encouraging exporting and improving the current account balance, as exporting businesses would be more competitive by not having to levy GST on their prices. Given our obsession with importing "cheap" goods from developing countries, this is probably a good thing.

Going down this path you would also need to legislate against salary-packaging, so that some people would not be able to rort the system by having their employer pay for certain items and thus claim back the GST.

gw, perhaps you should study a bit of economics before wasting their time. I think you'd find it enlightening.

I would like to expand on my suggestion of a tax on all withdrawals – if you like a consumption tax.

As Col Rouge pointed out there are too many different taxes. John Hewson went part way towards eliminating many of them with his 15% GST. A consumption tax would eliminate the need for income tax, FBT, CGT etc. and would be an equitable method for Governments to derive their income. Again, as Col Rouge points out, because of their greater spending capacity those who earn more will pay more tax than those who earn less and who, therefore, would have a lesser spending capacity.

The system would be based on the obvious premise that for every dollar earned there would be a corresponding amount paid whether the payment is immediate or deferred. With some exceptions all withdrawals whether in cash, cheque, electronic transfer, credit card or payments through institutions such as Australia Post would be taxed and would include distributions of profits in whatever form – dividends, trust distributions etc. Also included in the taxed withdrawals would be payments of a capital nature.

The banking system would collect the tax and pay same to the treasury thereby eliminating the need for a collector of taxes from individuals, companies and trusts etc. The banking system would also be responsible for catering for the exceptions and whilst the objective is to make the system as simple as possible there must be exceptions.

The exceptions will cater for the likes of the following using special accounts:

• Federal, State and local government bodies/departments
• Not for profit/donor gift recipient entities
• Loan repayments

These special accounts would be flagged to indicate that that tax was not payable on any transfers to those accounts. Obviously there would need to be some dialogue between the payer bank and the payee bank. Computers would need to be programmed to achieve this end but with the equipment available I don’t believe this should present any difficulty.

I think we should have 20% flat income tax for annual income over twenty thousand dollars, no capital gain tax, 10% GST and a much smaller government.

Yes, all your comments prompt deep thought and, as I expected, all bring up legitimate points to be considered.
In my limited study of Economics, I was most impressed by the effects of competition to create a healthy economy and healthy society (mostly though, as they say, I think Economics was invented to make Meteorologists look good!)
My perspective of economics and the tax system comes from practical, direct involvement as having been an employee, employer,a small business owner/operator (cash business), agricultural business, land owner, local Govt. representative, husband and father and community involvement.
Each area is crying out for simplification. The longer the present system goes on, the more complex it will become; new laws and changes constantly until what?
There are rich people and poor people under our present system as there is under any system.
If a person or business has low margins (higher costs) they would fare worse than a high margin business or income. However the higher margin areas would naturally attract more competition or people moving into that business and reduce, over time, the higher levels of profitability.
Also, cannot business pass on the cost of the tax by raising prices? The only ones that can't are primary producers.
I would ask each person to quickly weigh up if they would be better or worse off with a , say, 5% gross tax on income or sales with no other taxes whatsoever.
For myself, it is a mixed bag, however looking a year or two ahead, it is favourable and I'm less restricted.

"Also, cannot business pass on the cost of the tax by raising prices? The only ones that can't are primary producers.

Farmers are no different to any other producer in this respect.