Communist Party of Australia

We acknowledge the Sovereignty of the First Nations’ Peoples.

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Issue #1521      5 October 2011


Tax reform a class issue

Taxation is the principal source of government revenue. The method by which it is raised and how it is spent is a class issue. Government income can be raised in a progressive manner, with those on higher incomes or making fatter profits paying a larger share of their income in tax or the reverse. Government spending can be used to transfer wealth in a progressive direction which helps ordinary people and the most disadvantaged by such means as the age pension, unemployment benefits, free pubic health services, public education, public housing, funding for community services, etc.

It can also be transferred to the benefit of the capitalist class by such means as huge subsidies to the corporate sector and the spending of billions of dollars on military equipment and weapons. The key issues at this week’s taxation forum will be who pays the taxes, how they are spent and who benefits.

The Business Council of Australia and other employer bodies are demanding reductions in corporate and personal tax rates, no carbon or mineral taxes and abolition of state stamp duty and insurance taxes. They are pushing for the GST to be increased from its present 10 percent to 15 or 20 percent or for the removal on existing exemptions such as on fresh food, education, health and medical services. This would compensate the states for the loss in income with the abolition of stamp duty and insurance taxes.

The GST is a flat, regressive tax which is paid at the same rate in the dollar by consumers (but not corporations) regardless of personal income. Employer demands would shift more of the burden of taxation from the corporate sector and the rich onto the backs on ordinary working people, pensioners, the unemployed, the sick, the disabled and others on low incomes – making it a far more regressive system.

The personal income tax system is relatively progressive, with higher marginal rates for those on higher incomes. But it could and should be made far more progressive with increases in the marginal rates on the very rich. This would increase government revenue for such things as expansion of community services, equal pay, public education and health.

The corporate tax rate of 30 percent is also a flat, regressive tax which taxes small, struggling businesses at the same rate as the largest corporations and banks raking in super profits. Corporate taxation could be reformed with the introduction of a super-profits tax across all industries, including mineral resources and the parasitic finance sector or the introduction of marginal rates.

Apart from paying lower taxes and increasing net profits, the private sector has another, neo-liberal agenda that eats at the heart of the present role of government and what is known as the welfare state. The net result of their demands would be a large reduction in federal government income and savage budget cutting. Sharper Axes, Lower Taxes: Big steps to a smaller state (Editor Phillip Booth) is the title of a book recently released by the Institute of Economic Affairs, a leading British “free market” think tank. (The equivalent outfit in Australia is the Centre for Independent Studies.) It sums up what big business is after.

“Sharper axes and lower taxes” would open up new profit-generating opportunities through privatisation. Lower taxes (less income) provides the “its unaffordable” excuse for governments to wind back their involvement in the provision of health, education, social welfare, community and other services. Sharper axes are the cuts (austerity measures) that open the way for the private, for-profit sector takeover.

This process of budget cutting and privatisation has been under way for some time at state and federal level. The delivery of unemployment benefits has undergone partial privatisation. The compulsory nine percent superannuation guarantee laid the basis for the winding back (privatisation by stealth) of the age pension.

The tax talkfest in Canberra this week is not expected to change government policy, it will take much more to turn around the pro-private sector, neo-liberal agenda of federal and state governments. It will require a pro-people government of a new type to implement a progressive restructuring of the taxation system and to protect social spending.

Next article – Senior UK figures call for release of Liliany Obando

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