Thursday, November 13, 2008

More taxes than wombats

... so says Ken Henry, federal Treasury Secretary.

In today Australian Financial Review, offline, Henry notes that there's 125 different taxes, more than the paltry number of protected northern hairy-nosed wombats, 115.

Too often NZ commentators elide over the complexities of federalism in preference for trite statements claiming Australian's have higher wages (true at least at the upper-end, but probably not in the middle) and lower taxes (next to impossible to know).

Typically, these commentaries focus only on direct income taxes to make out the advantages of working in Australia compared with New Zealand. This obscures, however, the myriad of taxes that occur outside of your pay-packet (as well as some, such as compulsory superannuation and the income-contingent health levy, that are additional to Pay As You Go). For instance, stamp duties and land taxes are major contributors to states' revenue and a significant impost on individuals in addition to income tax.

Henry observes:
An excessive level of complexity wastes resources. It diverts resources from
more valuable uses; many high-achieving tax agents could be school teachers.
The fact is that the Australian tax system is incomparably more complex than New Zealand's. Consider for instance that most salary and wage earners in New Zealand need not even file a tax return, no such exemption exists in Australia (most people have tax agents to do the work for them). Add to this the inummerable GST exemptions and it's impossible to know just how much tax any one individual pays. Makes you wonder about the $6.2 billion bailout to the car industry.


Deborah said...

All you have to do is look at the physical size of the Australian tax code compared to the physical size of the NZ tax code to see a very clear parable of the complexity of the Australian code.

backin15 said...

And yet no such consideration is factored into any of the comparisons. Just being more complex doesn't mean there is a greater incidence of tax but my frustration is with the analysis that ignores elements of Australia's tax system because they don't have a parallel in NZ's.