The government has already put taxation on the political agenda for 2016. The issue of raising or broadening the base of the Goods and Services Tax (GST) has been discussed, though Prime Minister has distanced himself from this proposal from his Treasurer Scott Morrison. Despite this, many in the Liberal government support the idea of increasing the GST. What would it achieve and who would it benefit?
The main tax revenue collected by the federal government is income tax paid by workers. This represents over 70% of all tax revenue. While business profits are supposed to be taxed at 30% , in reality most businesses offset their tax bill, claim deductions through clever accounting or simply offshore their money to avoid paying tax.
Last year the Australian Tax Office revealed that one in three large businesses pay no tax at all! That’s almost 600 major Australian and international companies making billions in revenue but contributing nothing to public finances. It becomes clear just how unfair the tax system is when we consider that some average income earners pay more tax than multi-million dollar companies.
But it doesn’t stop there. After paying income tax, working class people are taxed again. And again. Our superannuation contributions are taxed. If we own a home, our properties are taxed. Almost everything we buy is taxed through GST.
Consumption taxes like the GST are considered regressive as they disproportionately burden the poor who spend a bigger percentage of their income on goods and services. Therefore, any discussion about raising the GST is a red light that the government is attempting to further shift the taxation onto working class and poor people.
Modelling has shown that an increase in the GST from 10% to 15% would cost the poorest 20% of the population 7% more. The richest 20% of the population however would only pay a mere 3% extra. Even if reductions were made to income tax rates to offset the GST increase, the extra money saved would be eroded in no time due to workers being pushed into higher tax brackets via inflation and pay increases.
Big business wants to see the taxation mix reshuffled as an increase in the GST would open the way for the corporate tax rate to be reduced from 30% to 25%. While Turnbull has said that any changes made will be hinged on the principle of “fairness” this is clearly not the case.
There is pressure coming from business for tax reform that benefits them. The global financial crisis has had many knock-on effects, including reducing revenue in many sectors of the economy. This means that companies are looking to increase their profits by reducing their tax burdens.
Meanwhile, government tax revenue has taken a hit in the crisis too. As company revenue is down and wages have flattened, the amount of tax being collected by the government is not keeping up with expenditure. After bailing out failing financial institutions governments all over the world governments are embarking on programs of austerity: slashing spending on social services in order to reduce overall spending. This proves as unpopular as raising taxes!
After the disastrous attempts made by the former Abbott government to cut public spending, Turnbull is trying a new approach. But the underlying issue of the budget deficit remains. His plan is to trick workers into paying more tax while telling us it’s simply a ‘reshuffle’ that is all very fair.
As socialists we demand that companies pay tax on their profits to fund the social services we all need, like education, healthcare and public transport. Increasing taxes on workers only further exploits those who have the least to give. We need to call on our unions to mobilise to fight against any tax increase on working people. Further to this unions should campaign for an increase to the company tax rate and demand the government collect tax from those companies who don’t pay at all. Ordinary Australians have seen almost no benefit from the mining boom because most of the companies exploiting the countries resources have paid little to no tax.
Under capitalism companies will always try to leverage their power and influence to increase their share of society’s wealth. That is why ultimately we argue for bringing the key sectors of the economy into public ownership under democratic workers control. Only then can we be assured that society’s wealth is being used to benefit all, not just the wealthy elite.