People Paying Less Tax Than Thought - ACOSS
27 January 2015 at 11:07 am
A new report by Australia’s peak welfare organisation has found that people are paying less tax than they think.
The Tax: Are we paying our fair share? report, released by the Australian Council of Social Service (ACOSS) examined how fair Australia’s tax system is currently.
It found that the lowest income earning household pays an average of three per cent of their income compared with 20 per cent for the highest earners.
Last week Federal Treasurer Joe Hockey told media that Australians were paying nearly half their income in tax, much higher than the figures shown in the ACOSS report.
However, the taxes with no tax-free threshold such as the consumption and other indirect taxes have been found to be regressive given that they do not tax the portion of income that is saved, and high income earners save more.
Other ‘indirect’ taxes such as Payroll Tax, Stamp Duties, and Fuel Excise, which are largely passed on to consumers, raise more revenue overall than the GST and together, were found to have a greater overall impact on household expenses.
“The combined effect of income and consumption taxes – including income tax, GST and other indirect taxes – when added together is not as progressive as often believed,” the report said.
ACOSS says the report is the first in a series addressing some of the key questions about the direction that tax reform in Australia should take.
“Australia has begun a new discussion about the case for tax reform in Australia and it appears there is broad agreement that there is a real case for reform,” ACOSS said.
“The main purposes of the tax system is to raise the revenue Governments need in an equitable way to provide services, benefits and infrastructure the community needs, including to strengthen business investment and growth.
“There are several important principles that should drive reform, one of which is the principle of equity of ‘fairness’. Fairness or equity should be a key measure against which any tax system is assessed.
“The Australian public has a keen sense of fairness, as demonstrated by the strong rejection of the recent Federal Budget, which failed the fairness test in a number of important respects,” the report said.
“This paper focusses on fairness of our current personal income and consumption tax systems, which are two parts of the system which impact on the broadest segment of the Australian community.
“If we are to get consensus on reform, it is important that we have a sound understanding of how the tax system operates now,” it says.
Download the full report here.