TAXATION IN AUSTRALIA

In Australia taxes are imposed by Federal, State or Local Governments. The purpose of tax is to provide public good, to promote production which has high positive externalities {e.g. physical, public health, education}.

Any system of taxation relies on people’s propensity to voluntarily comply, and is not without risks. These include tax payers not complying because of their ignorance or because they don’t know or misunderstand their rights and obligations, or not complying because they find it difficult to comply, or because they don’t want to comply.

A tax on labor is any government charge on the producer’s of labor {workers}, or on the consumers of labor. In Australia, taxes on labor are including in the income tax of workers by the Federal government and in payroll taxes on employers by State government. Both income taxes on labor and transaction taxes on employment are direct taxes, and there are significant administrative costs to both employers and employee alike. Payroll taxes are considered to have a low compliance cost and are applied only to large employers. They take a guise of an indirect tax.

A tax on capital is any government charge on the producers of capital or in the consumers of capital. Many returns on capital come under the burden of corporate taxation. The effect of taxing capital returns is the same as taxing labor; it reduces trade and productivity. Corporate taxation in Australia is Federal, direct and flat.

An extremely damaging form of capital taxation is local council rtes on building, Taxing the value on buildings reduces the construction of the building, in particular high quality buildings.

Transaction taxes are indirect taxes paid by those who receive a good or a service. The economic effect is the same as of direct taxes on the receipts of labor or the return on capital investment. In Australia transaction tax includes tariffs on foreign imports, the Goods and Service Tax, which is levied by the Federal government, but with receipts going to State government, Stamp duty on property purchases, levied by State governments, petrol taxes nominally used to pay for roads and various so called sin-charges , such as charges on tobacco and alcohol.

The Goods and Service Tax is a value Added tax of 10% on most goods and services, excluding some food, health and education items.