The Goods & Services Tax in Australia (GST) is double taxation of income

By Andrew Mackinnon

The Goods & Services Tax in Australia (GST) is double taxation of income on which income tax has already been paid.  The government wasn’t satisfied with the income tax that citizens paid on their earnings.  It wanted more.  So, on 1st July, 2000, it introduced the GST to tax the income that the citizenry have left after they’ve already paid income tax.  This is an attack on the property rights of the citizenry over the income that they earn.  The citizenry earn income and are obligated to pay income tax to the government to fund their common needs.  One would hope that they have property rights over their remaining income, but no!  The government wants more and the citizenry are on the hook for 1/11 in GST of all of the goods and services they purchase with their after-tax income.

Life is too short for tawdry complexity, such as multiple taxes on the citizenry – income tax, GST, CGT (Capital Gains Tax), company tax and fuel tax.  There should just be one tax – income tax.

Capital gains tax is in direct opposition to property rights.  If somebody saves up some money and then invests it in shares (or anything for that matter), they quite obviously don’t have full property rights to it because if they later sell it for more than they paid for it, the government wants a cut of the gain via capital gains tax.  If they had full property rights to it, they could sell it and keep the full amount they receive for it without paying any capital gains tax.

Company tax should be abolished.  There should be no tax whatsoever on business profits (ie. sole traders, partnerships, companies, corporations et cetera).  Distributions made to owners of the business out of business profits (ie. proprietors, partners, shareholders et cetera) should be taxed as income of those owners of the business.

Fuel tax should be abolished, despite that it’s an effective means of funding road construction and maintenance.  Everybody in society benefits from roads and the transport of goods that they make possible, including those who don’t drive vehicles, so roads should be paid for out of income tax.  Just like the GST, fuel tax is double taxation of income since it’s paid for by the citizenry out of their after-tax income.

Who wants to work more than one day out of five to support the needs of the nation via income taxation?  It’s not necessary.  There should be a flat rate of income taxation of no more than 20% on all income earned above the tax-free threshold.  That’s even progressive.  With a tax-free threshold of $18,200 per year, somebody earning $40,000 per year pays 10.9% of their income in income tax, whereas somebody earning $90,000 per year pays 16.0% of their income in income tax.  As somebody else has well said, there should be no deductions allowed from income.

If anybody wonders how we could possibly fund our common needs with a flat rate of income tax of 20% on all income above the tax-free threshold, I’ll tell you.  Don’t provide the entities responsible for delivering government projects with super profits, such as the $50 billion that the federal government committed for a fleet of twelve submarines earlier this year.  Start looking at the largest amounts to find waste in government spending and work your way down – all the way down.  Government spending could easily be reduced by 60% with no reduction in the quality of government services provided.

Banking, water, electricity, gas, telecommunications and the postal service should all be publicly owned and charged to the end-user citizenry at cost so that no income tax would be required to fund the operating costs of these essential services.

In the case of banking, no interest would be charged on lending for any purpose, however a rate of less than 1% would be required on all lending to cover the incidence of defaulting loans.  The operating costs of what would be the “Australian Federal Bank” could be covered by transaction fees which would be restricted to the actual costs incurred by the bank to process the transactions of the citizenry.

Half of the funding for hospitals should come from income tax.  The other half should come from the end-users at cost – the patients.  Similarly, half of the funding for schools, TAFE (Technical and Further Education) and universities should come from income tax.  The other half should come from the end-users at cost – the parents of the students and the students themselves.  Other government services like the legal system, the police force and defence would be funded via income tax.  Following is the full list of government services, together with the sources of their funding that I propose.  It’s probably not exhaustive.

> Local Government – Local Government Rates

> Local Parks – Local Government Rates

> Local Waste & Recycling Collection – Local Government Rates

> Federal Airports (Currently privatised) – User Pays – ?

> Federal Banking System (Currently privatised) – User Pays – Transaction Fees

> Federal Buses – User Pays – Ticket Cost

> Federal Department of Maritime Vessels – User Pays – Maritime Vessel Registration

> Federal Department of Motor Vehicles – Federal – User Pays – Motor Vehicle Registration

> Federal Electricity (Currently privatised) – User Pays – Electricity Bill

> Federal National Parks – User Pays – Entry Cost

> Federal Ports (Currently privatised) – User Pays – ?

> Federal Postal System – User Pays – Postage Cost

> Federal Railways – User Pays – Ticket Cost

> Federal Telecommunications (Currently privatised) – User Pays – Telephone Bill

> Federal Water & Sewerage – User Pays – Water Bill

> Federal Hospitals – Half Income Tax, Half User Pays

> Federal Schools – Half Income Tax, Half User Pays

> Federal TAFE – Half Income Tax, Half User Pays

> Federal Universities – Half Income Tax, Half User Pays

> Federal Border Patrol – Income Tax

> Federal Customs – Income Tax

> Federal Defence – Income Tax

> Federal Department of Foreign Affairs – Income Tax

> Federal Parliament – Income Tax

> Federal Treasury – Income Tax

> Federal Fire Service – Income Tax

> Federal Legal System – Income Tax

> Federal Police – Income Tax

> Federal Prisons – Income Tax

> Federal Roads – Income Tax

> Federal Welfare – Pensions – Income Tax

> Federal Welfare – Unemployment Benefits – Income Tax

We don’t need state government.  We only need federal government and local government.  The Australian Capital Territory has already had its shot at hosting the federal government.  The results have been disheartening, to say the least.  The location of the federal government should be moved to somewhere more uplifting like the Sunshine Coast, provided the locals actually approve.  They should get a say.

The only way I can think of paying off the current gargantuan government debt to bondholders is “monetising the debt”, whereby the federal government simply creates the money needed to pay it off.  I believe that this enormous debt is a trap which has been deliberately set for the citizenry over the past three decades and longer.  Perhaps this monetisation could occur in many stages to stagger its inflationary effect due to the associated increase in the money supply.

Economic policy in Australia has been dysfunctional for decades – driven by opportunistic expediency instead of sound reasoning governed by a sound set of principles.  Nevertheless, it’s not too late to fix the desperate mess this country is in.