Companies tax to reduce, individuals' to increase
Taxes fell in the global financial crisis (GFC) due to the collapse of many businesses worldwide.
Prior to the GFC, companies paid 5% of GDP in taxes. Due to globalisation and profit shifting this has fallen to 4.6% of GDP.
The GFC clearly put pressure on business and its reaction was to shift profits worldwide to reduce tax. Small business never had this opportunity.
On the other hand, tax on individuals has increased by 2.2% as government goes after an easy target.
The population are told the Medicare Levy is increasing to help finance the National Disability Insurance Scheme as an example how easy it is to raise taxes. Along with this, Living Away From Home Allowance and Medical Rebate claim deductions are slashed. As a result, this creates billions of dollars for government by hitting individuals.
Roger Brake, head of the Treasury’s tax division thinks this trend will probably accelerate and falling revenue from tobacco and beer consumption will have to be recovered. Individuals are the likely target.
Let’s hope all individuals contribute not just some.
Terry Murphy CPA BBus DFP, Director of TaxAssist Accountants