The storm created by ex-Treasurer Wayne Swan, accusing corporate executives of being overpaid and suggesting that companies that do so should face steeper taxes, has been ridiculed by pay industry experts. What I found interesting was one tweet-reply where the response was: “Maybe some of them need to start paying tax.”
This got me thinking and researching to see if there’s data to show what average tax certain income brackets pay. Using my trusty search engine, however, I came up with a blank.
Tax stats don’t single out CEOs so we’re flying blind on this, but we know what various professions get from the 2015-16 numbers.
Surgeons averaged: $393,467
Medicine Specialists: $291,140
Financial Dealers: $263,309
Medical Practitioners: $199,590
Judicial/legal Pro’s: $198,219
Mining engineers: $166,557
Managing Directors: $158,249
Engineer Managers: $148,852
We don’t know what successful small and medium-sized business owners get paid and we don’t know what tax they pay. What someone pays in tax depends on their desire to reduce their tax bill. That said, the option to do so is open to everyone. Obviously, the more income you earn, the greater is the cost-incentive to pay for help to bring that tax bill down.
I recall working with former ABC radio personality, Clive Robertson, who used to host the very successful Seven Network’s Newsworld, which used to air at 10pm. Robbo became famous as a newsreader who would poke fun, in a high-brow way, at stuffy and silly politicians, fool celebrities and sportspeople who should have known better!
He rated well and was paid fabulously well, but he delighted in telling me that he refused to go to an accountant to reduce his tax bill. I told him he was “foolish” but he took great delight in filling out his own tax return and leaving little notes boasting at his refusal to legally whittle down his tax bill!
Those more rational than Robbo do use accountants who know tax law to make decisions around borrowing, creating businesses, going on income-related courses, paying for career or business development to ultimately earn more income and then pay more tax! Or else, pay even more for more advice to bring down their new overall tax bill.
As Kerry Packer, the former owner of the Nine Network told politicians at a parliamentary inquiry on paying tax in 1991, anyone who didn’t do everything legal to reduce their tax bill “wanted their head read because I don’t think you’re spending it that well that I should be donating extra.”
Everyone from a retail assistant to a CEO has the right to legally reduce their tax bill, so singling out CEOs as non-tax payers is unfair discrimination driven by nothing more than jealousy. That’s not to say that some CEOs and other executives have been overpaid.
The executives at Telstra and the banks, who have masterminded their share price slumps, clearly have been overpaid for doing a job not well done. However this happens everywhere in this world. Who hasn’t pondered a plumber’s and a builder’s bill, and what about medical bills when you’ve had the misfortune to spend time in a private hospital?!
Today the AFR showed that the Australian Council of Superannuation Investors found that fixed pay for the top 100 CEOs is the same as it was nine years ago.
“And research by consultants Egan Associates has found that top 100 CEO fixed pay has fallen from $1.74 million in 2007 to $1.54 million last year, while market capitalisation has risen from 11.6 billion to almost 17 billion,” the AFR revealed. “Last year Egan found that the 25 new chief executives appointed to top-200 companies received an average 25 per cent pay cut from their predecessors.”
Of course, these pay rates still look unbelievably high to normal people but there are only 200 CEOs in the S&P/ASX 200 group of companies and there would be many of them under this average figure.
In reality, a future Labor Government has better economic policies to pursue that just having a witch hunt against bankers and overpaid executives. All governments should be pursuing policies to create economic growth and jobs because that’s how people get ahead.
We need a positive economic environment where businesses want to invest to make profits and along the way employment and promotion opportunities grow. And guess what? We collectively pay more tax, even with good accountants!
I know there’s an old saying “divide and rule” but I’m sure it was advice from a complete arsehole!
I believe Bob Hawke had it right when he saw political success in consensus and it helped him become the longest-serving Labor PM ever.