Showing posts with label Utility of taxation. Show all posts
Showing posts with label Utility of taxation. Show all posts

Monday, May 3, 2010

Unfairness of tax system

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The unfairness of the tax system. What I find particularly annoying with government is its arbitrariness. The tax that it targets certain groups because:
1. They earn more, so are judged to have more capacity to pay
2. They have less capacity to dodge the tax
3. They have less political power to lobby government because they are a minority interest

Case in point. The Australian (Rudd) government is pursuing higher taxing revenues from Australian miners because it expects commodity prices to be higher in the future. At the same time Google pays almost no tax in Australia. I have no problem with Google paying no tax because I dare say that the Australian government offers no benefits to Google that Google doesn't pay for. The problem I have is that miners have no capacity to take their business or expenses offshore like Google.
The problem is this arbitrary tax system is not fair. It is not fair because it is not based on user pays principles. Google earned revenues (estimated) of $600 million plus in the last financial year, and paid $0.7 million in income taxes. Mining companies earned revenues of $60 billion and paid $8 billion in tax.
The Australian government is going after the miners because its easier. Where is the justice in that? Frankly I would simply prefer it if the miners and Google paid for what they used, and we did the same. Those that want library services or to use a community swimming pool paid for them.
If you think principles are 'unrealistic' then I suggest you examine the implications of your arbitrary politics, because they end up in disempowering everyone, everyone jumping through hoops to clear laws, everyone creating all types of loop holes. It results in a great deal of complexity which need not exist, giving a lot of people anxieties they don't need....if not worse. Who does all this affect the most - the poor - who it was supposed to help. Yes, that is right. Income tax was first levied on the rich, and now the poor pay the highest rates, as businesses use all sorts of schemes (i.e. loopholes, legal or otherwise) to evade tax, which they would never openly display their discontent with, in the fear that they might be the subject of an audit.
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Andrew Sheldon www.sheldonthinks.com

Tuesday, September 30, 2008

Why Australians do not comply with their tax obligations

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Continuing on from our discussion based on my readings of “An examination of taxpayers’ attitudes towards the Australian tax system: Findings from a survey of tax scheme investors” (Nov 2004) by Kristina Murphy.
The tax office wants to apparently understand why taxpayers do not comply with their tax obligations. I can think of several reasons:
1. It is contrary to human nature – we have the faculty of rationality which means the capacity for choice. We take pride in exercising our choice, not in avoiding slavery (taxation). With arbitrary law, its no challenge to beat the law, and who would want to invest in such an unproductive activities. Perhaps those who really hate how the government spends the money.
2. It is not an efficient system – tax is inefficiently collected
3. It is poorly spent. Just look at the poor state of public utilities. This is because there is no accountability and poor service

Early research into tax compliance, evasion and avoidance was based upon a deterrence theory framework to explain their behaviour (refer to Jackson & Milliron, 1986; Roth, Scholz & Witte, 1989). Such theories portray people as ‘amoral profit-seekers whose actions motivated solely by rational analysis of the rewards and costs’ (Kagan & Scholz, 1984, p. 69; see also Kirchler & Maciejovsky, 2001). According to the deterrence view, people carefully assess opportunities and risks, and disobey the law when the anticipated fine and probability of being caught are small in relation to the profits to be made through non-compliance.
These assertions however assume that service to society is moral and pursuit of self-interest is necessarily at the expense of others. The capitalism concept of a small government based upon self-interest and user-pays public revenues is not ‘amoral’, its just a different ethical construct, but more importantly, it’s a logical one, and its consonant with human nature. The current system perverts taxpayers, undermining their motivation, values and thought process.
Research into tax evasion grew in the 1960s. Researchers reported an inverse correlation between the threat of legal punishment and crime (Gibbs, 1968; Jensen, 1969; Tittle, 1969). Yes, Hitler was able to embrace the same concept to its logical conclusion. One has to understand that we are not talking about ‘crime’ as defined by common (rational) law, but rather the arbitrary whim of government and the Australian Tax Office. We are talking about people who resent paying tax. I can cite a lot of reasons why the law is wrong because I have studied philosophy/ethics, but there are a lot of people who resent taxation, but they don’t have the intellectual skills to oppose it. There are still more who repress any resentment and just comply with it.
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Andrew Sheldon www.sheldonthinks.com

Tuesday, September 9, 2008

Politicians are good for nothing

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Its hard not to have a go at politicians, though I have to admit its a bit of a foul sweep to lump them in the same basket. They are not all inept. I will speak glowingly of the Federal Finance Minister Peter Costello. Pity no one liked him because as leaders go he conveyed a lot of competency across the complete portfolio range. By contrast, when I listen to Kevin Rudd, I don't get the sense that he understands how the economy works because he seems only too pleased to take the blame for the weakness in the global economy.
The following article by the Sydney Morning Herald Online describes how quite a number of politicians end up directors of failed companies, and involved in dodgy deals. Is anyone surprised. Certainly not me. In politics, perceptions are everything. So it does not surprise me that a politician in the corporate world would reappraise property assets to boost earnings, to the extent that the whole earnings earnings was an asset re-write. I am reminded of the various state governments that used this accounting trick to take assets and liabilities off balance sheet by running JVs with private enterprise. Nor am I reminded of the unfavourable terms that politicians negotiated to build the various expressways around Sydney. The government also had to pay out a significant amount of money when a few of these road contracts were privatised. Oh, then their is the privatisation of power assets. Firstly we had Victoria selling off its power assets. The problem was that it included in those contracts a hidden tax by creating vested contracts for power supply, so that the government could collect higher tax revenues in future. No doubt their corporate advisers helped them originate that trick. But does anyone remember the problems the NSW utilities got into when they entered into derivative contracts for long term power sales. They lost a lot of money. Nope?
Well we have governments controlling 33% of the Australian economy (at least in terms of tax receipts). I just don't think they deserve our trust to spend this money. The historical record shows me that they are unethical, incompetent, unaccountable and deluded. Critics might argue that these are the exceptions, but they are not. Its too common, and we should not forget that these politicians are organised under and protected by their political parties.
The structure of politics is terribly wrong.
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Andrew Sheldon www.sheldonthinks.com

Tuesday, May 20, 2008

Who is tax helping?

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I want to ask who is tax helping? Tax was initially established to finance wars. Money was expropriated to fight wars to protect the monarch or expand his territories abroad. The British Empire was better than most, but it was unjust too. Consider the history of the East India Company. Eventually tax as a post-war phenomena was intended to finance reconstruction of destitute countries - because of war again. Well we are not at war now, but tax persists. In the post-war period the justification was to help the poor. It was an easy argument for governments to win because the poor were the majority, so the rich just had to suck up. Right? Wrong. The wealthy had greater capital mobility, lawyers to fight issues in court. The tax administrators didn't have time for that. So what did they do? They promised welfare programs in perpetuity but also wanted to tax the poor. So today the poor are taxed. But now they are talking about winding back the welfare state by allowing benefits from later in life. You are working longer.

The paradox is that the public service has expanded 4x, its benefits have ballooned. Some such as judges and military servicemen even get tax-free income. That's bargaining power for you. Rest assured the poor are no better off, not because of government. The number of welfare recipients under the welfare state has also ballooned. Why? Because government creates problems. I'll end up welfare. No desire to contribute to this system. Wish I could laugh. I can't even say this system is for public servants. I dont even think it serves them. It was designed by politicians, but I dont think you can fake reality. I think they just dont know how to live a meaningful, efficacious life, and they are taking everyone down with them. People more goal-driven, and less intellectual will argue they are doing better. But they should just wait. It will take them down a peg too. Ethically they are less than they were. Maybe they will be caught for insider trading, drift in anguish after a failed marriage, grow up to see their kids on drugs. Tell me society is not getting sicker. Oh yeh they are making money. Thats become so thoughtless. Even scientific discoveries are made by accident today. It takes an energy crisis to find a new energy solution. In between crisis there is very little that passes for valid science. This is not a new topic. Ayn Rand wrote as much about the decline or stagnation of society in 'Atlas Shrugged' (see My Amazon Books).

Wednesday, December 19, 2007

What are the justifications for paying tax?

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The justifications that people have for paying tax are:
1. Its the moral thing to do: There are those who would argue that its moral to help those who are less fortunate. Well that is the communist-socialist creed, so its a rather strange argument given that the West has been fighting communists from Libya to Vietnam to Cuba. Why is their communism any less legitimate than theirs? Well, they might claim that their collectivist has the sanction of the public. Hmm... Castro and Hitler had popular support too though. And since when does it matter how many thieves or despots raid your house. But yes, altruism is consistent with religion, which preaches self-sacrifice for the sake of others. I just have no stomach for the notion of being a slave to a state that does not represent me.
2. Essential services have to be financed: This is a lame argument because essential services are precisely the type of services that dont require expropriation because people will willingly pay for them because they need them. Afterall thats how taxation was conceived - to fight Britain's enemies at sea. But look where money is being spent by governments. Libraries, daycare, even subsidies to encourage people to give birth, foreign aid. Are these essential?
3. There is a price to be paid for living in a prosperous society: Yes, but who decides how much should be paid and for what. We are no more prosperous for having taxation, as generally governments are very poor at allocating funds.

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