Shadow Minister

1. A FET would help the economy a lot by reducing other domestic taxes and giving local businesses a better opportunity to compete with foreign companies that pay less tax.

2. Importing machinery etc will cost 10% more. But this is more than offset by a 66% reduction in the company tax rate. ie. 30% down to 10%.

3a. Businesses could have overseas trading accounts but they will need to get funds into those accounts to start with and that will require moving money out of Australia.
3b. If they ever want to export their locally generated revenue they will need to shift money out of Australia and be taxed. Or they could export goods and services tax free and this would be a benefit to Australia due to the creation of local jobs and produce.

Shadow Minister

1. A FET would help the economy a lot by reducing other domestic taxes and giving local businesses a better opportunity to compete with foreign companies that pay less tax. No restrictions whatsoever to free trade.

2. Importing machinery etc will cost 10% more. But this is more than offset by a 66% reduction in the company tax rate. ie. 30% down to 10%.

3a. Businesses could have overseas trading accounts but they will need to get funds into those accounts to start with and that will require moving money out of Australia.
3b. If they ever want to export their locally generated revenue they will need to shift money out of Australia and be taxed. Or they could export goods and services tax free and this would be a benefit to Australia due to the creation of local jobs and produce.

One,

One of the points I was trying to make is that currency exchanges are not limited to Australia. Importer/exporters can do their exchanges in Singapore etc and not pay a cent of the FET. In fact the yield from this tax would probably not be much more than what the government spends in enforcing it, resulting in zero cuts in domestic tax.

PS, the external trading account would probably be in US$ with which they would be paid for exports and would pay for imports with virtually not FET paid.

Putting any restrictions on currency exchange inhibits free trade, and this would be viewed as a de facto import tariff by the WTO with treaty implications.

Thanks Shadow Minister

Yes businesses that both import and export can avoid a FET. No problem with that. Exports are good for the nation. But by far and away the majority of businesses either import or export and not both. And as such the importers would have a FET applied on the money leaving Australia. When I look at what we import both here
http://atlas.media.mit.edu/en/profile/country/aus/
and here
http://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/top-goods-services.aspx
It appears that the biggest importers only import and don’t export. Companies such as BMW Australia and Apple Australia for example don’t export anything. So a FET would generate a very large amount of money. Even if we caught only a fraction of the $200 to $300 billion in annual imports we could reduce personal and business taxes by $2 or $10 billion or any other number. Some of that tax savings would be spent locally to boost the Australian economy. And all of this is before we start talking about the other hundreds of billions that leaves the country every year.

None of this would inhibit free trade and it’s not a restriction on currency exchange. A FET does not hinder anyone from sending money abroad. It simply adds a cost. It will make imports more expensive and to offset that people and businesses have more money to spend through lower taxes.

I agree that it could be seen as a de facto import tariff. But if it can be demonstrated that some trade agreements and treaties are not in Australia's best interest then perhaps they should be modified.

One

Seriously, clearly the concept of overseas transactions has gone over your head.

Here's a theoretical example

Importer A buys US$1m of forex from a bank in Singapore with a credit note.

Exporter B sells US1m of forex to the same bank in Singapore and cashes the credit note in Aus.

FET = $0.

And one cannot stop it without imposing forex controls and crippling the country.

Shadow Minister. There’s no need to be rude. You made no mention of international credit notes or how you see them as working in your previous posts.

Obviously everybody tries to minimise their tax burden in any way they legally can. And that’s why taxation law is amended and updated regularly. It’s to be expected.

As for international credit notes, they’re particularly easy to deal with. Clearly instruments like that would be used to avoid a legal obligation. That’s not tax minimisation but tax avoidance and can be legislated against. Is there a foreign currency transaction? Yes. Then the FET is applicable no matter what method is used to manipulate the financial transactions.