It is pre-budget silly season again. You know, the time of year when we get to hear all of the good -reasons why government should spend more money.
It is also when we get to hear why government should tax more. To hear some people tell it, the power of taxation is quite astonishing – it can solve any and every social ill.
If only negative gearing were abolished or the capital gains discount -removed housing affordability would improve. If only the government introduced a new tax on internet sales, Australian retailers would face an even-playing field. If only big business would pay more tax, life would be fairer for the rest of us. Not to mention “the rich” who seem to hardly pay tax at all. If only life were so simple. There is a lot of nonsense that gets sprouted about taxation. But every year there is a reality check in the form of the Australian Taxation Office’s annual Taxation Statistics.
Recently the ATO released the data for the 2014-15 financial year. As always it makes for interesting analysis. Did you know that “the 1 per cent” paid more in personal net income tax than the bottom 50 per cent of personal income tax payers? The top 5 per cent of net personal income tax payers (earning above $167,348) paid over 33 per cent of net personal -income tax while only earning 21 per cent of taxable income.
If people are worried about -inequality, they should look no further than our personal tax system.
The company tax system is little different. In 2014-15 just over half of 1 per cent of all companies had a net taxable income of over $1 million. That small number of companies paid 74.78 per cent of the $68.4 billion in net company tax collected that year. When we look at the actual tax distribution for Australia – official data from the ATO – it becomes very clear that the Australian government, with all its spending, is very highly reliant on the hard work and efforts of a small number of taxpayers.
It gets worse. When you drill down into the company tax data, it quickly becomes apparent that two industries prop up the revenue: financial and -insurance services, and mining. The two industries many Australians love to hate.
The mining industry in particular punches well above its weight. Mining companies make up less than 1 per cent of the total number of companies in Australia, yet they pay over 14 per cent of the net company tax with an -effective tax rate of 26 per cent. That figure excludes any royalties paid to the state governments – strictly speaking royalties are not taxes, but they still contribute to the public purse. Financial services and insurance pay nearly 36 per cent of net company tax with an effective tax rate of 21.4 per cent.
Notions that “the rich” or “the big end of town” aren’t paying their fair share are simply not supported by data from the ATO.
On budget night, rather than talking about toughening up, or improved integrity measures, or new tax -increases, it would be nice if Treasurer Scott Morrison thanked the hardworking taxpayers of Australia and congratulated them for their excellent performance.