Should Australia introduce any tax or GST changes Essay Example For Students

Should Australia introduce any tax or GST changes? Essay Why do we need taxes?Taxation makes up majority of our governments income. With this income the government can provide us with proper infrastructure and social services for little, if no cost at all. These include Medicare, social security and education. (These facilities are known as recurrent expenditures because it is needed time after time.) Other expenditures include transportation, lighting, recreation etc. These services are granted to us at no costs. In many 3rd world countries where taxation is low or doesnt exist, all of these services are to come out of ones own pocket. Over the many centuries, in which taxation was existent, people have cheated and avoided paying these taxes. Nowadays people with high-income put their money into trusts, superannuation, or incorporate it into businesses. Businesses would try and receive more cash transactions. This has led to a decrease in our governments revenues, thus leading to a tax reform in hope of a more effective result. What makes a good tax system?There are four elements in a successful tax system. They are effectiveness, efficiency, equitability, and simplicity. 1) Effectiveness: is the performance compared to the desired effect. E.g. the number of people who pays tax, how much tax is received. 2) Efficiency: is the cost of running the system. The system may be very effective with a million tax officers, but it would cost millions to hire so many people. 3) Equitability: is the fairness of the system. This is an impossible goal to achieve. From different peoples point of views, the system will always be unfair to them in some way. Not to mention the tax cheats. The best solution is to broaden the number of people who pay the tax, which is only fair. 4) Simplicity: A tax system should never be too complexed, it is otherwise not efficient neither understandable. The income tax Act that just started off at just 120 pages in 1936 is now over 3300 pages and has doubled in size over the last 7 years. A complex system means that those who can afford expensive tax advice minimize their tax. But those that cant, pay the full share. It is impossible to have a system where all four elements are satisfactory. Where a system may be effective and efficient it will not be equitable or simple. It is impossible to fit the whole population all under one roof. Under these circumstances the government proposed a new way of taxation- GST. What is GST?GST is a tax on the goods and services that each and everyday households consume. Tax is collected at each stage of production and distribution, but a credit is given for the GST on inputs. Refunds are given for GST on exports. Therefore, only households bear this tax. Australia currently has a WST in p lace of a GST. WST is whole sales tax this tax is levied on the whole sale price and is collected by wholesalers. A GST is in fact a VAT-value added tax. Meaning it is levied at each stage of production and distribution. Over one hundred countries in the world have a GST/VAT, but only six nations including Australia have a WST. The advantages and disadvantages of a GSTIt is hard to say whether the GST is favorable or adverse because the government hasnt yet proposed the whole system, the exemptions and the exact figures of taxation. The following is only speculation by the many supporters and those who disapprove. ADVANTAGES1) Lower taxes means business can buy and sell more competitively overseas. 2) The higher cost of prices will slow down inflation. 3) At each level of production and sale, except sale to a consumer, a rebate is claimable. The paperwork for these claims helps to enforce compliance. This would also stop tax evasion. 4) It will hit the black economy because the money earned will be used for consumption. 5) Replace existing distortional indirect taxes6) Prices on some good and services will fall instead of rising. E.g. petrol7) Less income tax gives people more incentive to work. 8) The reduction in many taxes that were of a heavy burden to businesses will be abolished thus giving the businesses more power to employ extra workers. These taxes include the WST and many other excise duties such as the taxes on many house hold goods. 10) The GST will be able to with stand tomorrows many challenges which the current system will not be able to handle. E.g. an aging population. 11) Current indirect taxes are levied on a limited array of goods, which are a declining proportion of household budgets. This problem can be solved only with a broad-based tax system such as the GST. Social Issues Essaythere should be no increase in the overall tax burdenany new taxation system should involve major reductions in personal income tax with special regard to the taxation treatment of familiesconsideration should be given to broad-based indirect tax to replace some or all of the existing indirect taxesThere should be appropriate compensation for those deserving of special consideration andReform of Commonwealth/State financial relations must be addressed. The Prime minister has indicated that before the next election, the Australian public will have a clear idea of the governments plans for modernization and reform of Australias taxation system. In all, people believe Australia should have a tax reform. The current system does have too many loopholes for cheats to fit in. A GST may be an idealistic idea but not realistic for the time being. Through the 1992 election between Mr. Keating and Dr. Hewson, it is clear that the public fears the GST. It could be that most are not sure what it really is. There is need for time and education about GST, allowing voters to understand it. Until then, its going to be a long harsh process planning and considering all the aspects of a healthy and fair taxation system.