But a year after its introduction this alignment collapsed as the company tax

But a year after its introduction this alignment

This preview shows page 269 - 271 out of 311 pages.

But a year after its introduction, this alignment collapsed as the company tax rate was cut substantially to meet downward competitive pressure on company tax rates led by the Reagan and Thatcher governments and the newly industrialising economies of the Asian region. Middle income earners contrast this reduced burden on corporates and high wealth individuals with the way bracket creep has pushed more of their income into tax rates which were supposed to be the preserve of the rich. Australia is a society with an egalitarian ethos and for most of its history it has been objectively among the nations with the most egalitarian distributions of income. Unfortunately, one of the things that goes with this ethos is an uncharitable view of the rich. So if a wealthy person is revealed to be paying no income tax, most Australians tend to assume that he or she has cheated, probably broken the law and certainly bent it. The assumption is rarely the charitable one that the high wealth individual has claimed deductions or transferred losses that the law fully intends to be legitimate. When something like the HWI Taskforce is set up in response to these perceptions in middle Australia, both sides may end up perceiving themselves as victims. While low and middle income earners may perceive themselves as fools to be honest taxpayers, high wealth individuals perceive themselves as victims of a witch-hunt grounded in unfair labelling of them as tax cheats. Both perceptions are unhealthy for tax compliance. The taxi drivers rationalise not paying tax by saying
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260 Taxing Democracy that Kerry Packer (Australia’s wealthiest person) pays none; high wealth individuals rationalise not paying tax by citing the non-compliance of people such as taxi drivers who are paid in cash. It follows that a useful way of framing the compliance challenge before the government might be to ensure all participants in the economy pay a share of the tax burden that most participants would view as fairer than the present distribution, to enable all participants to have a realistic perception of that distribution and why it is that way, and thereby to eliminate inaccurate perceptions that some sectors are cheating more than they really are. Such a shift in perceptions might improve compliance in middle Australia, in the cash economy and among HWIs. If such improvements were strong enough, they might allow a reduction in tax rates for all, thereby further strengthening perceptions of fairness. It is in the context of this framing of the compliance challenge that we might take seriously the suggestion of one HWI adviser that the HWI Taskforce disclose to Parliament the aggregated accounting income of all entities controlled by HWIs, and then the aggregated adjustments listed for each reason for adjustment that reduces the accounting income to the taxable income. This means a breakdown of the reasons for the tax-gap between accounting and taxable income. His argument
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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