By Peter Switzer
A potential big story today is former Labor Treasurer, Wayne Swan ripping into BHP as our worst tax dodger. Of course, he did his ripping in Parliament where you can slag anyone without legal retribution but the whole story made me think about whether rich people are as bad — tax dodging wise — as we think?
I’m not going to argue that rich people don’t work hard to find experts to minimize their tax but the statistics still say richer Aussies do pay a lot of tax compared to the less wealthy finger pointers.
Where do I get my info from? What right-wing think tank designed to cover up the truth about tax paid by the rich has influenced this story? Well, try the website called The Conversation which is the kind of body that is regularly cited, by that right-wing organisation called the ABC!
It has that brilliant FactCheck service and in 2015, then Treasurer, Joe Hockey, was pilloried for telling us that “50% of all income tax in Australia is paid by 10% of the working population,“ in an interview with the respected Fran Kelly on the ABC RN Breakfast show.
FactCheck went to Canberra’s number-crunchers, NATSEM, which has the computers to fairly verify Joe’s claims.
When they restricted the search for truth to the working age population — 18 to 65 years — and then ranked them in income groups of bottom to top 10%, it was shown that this latter group who earned more than $102,000 in 2015 paid 52% of the total tax going to Canberra. The next 10% paid 19%, the next 13%, the next 8% the next 5% and the sixth paid 2%. The first four effectively paid no tax to the total.
Now you might be asking: “Don't tax deductions linked to investments reduce the actual tax paid by the rich?”
Well, FactCheck tried an alternative method of skinning this tax cat but the result was that the top 10% paid less tax than before but it still came in at 50.5%!
This is how FactCheck concluded their study: “The Treasurer’s statement that the top 10% of incomes from working age persons pay 50% of personal income tax is correct. This reflects the progressive nature of Australia’s personal income tax system, which is applied to a society that features significant income inequality.”
Writing in The Australian in 2014, Adam Creighton looked at what taxes we paid using the ABS’s analysis of household income.
Looking at the 20% groups or quintiles, he found that only the top fifth in 2012 “…pay anything into the system net of the value of social security in cash and kind received.”
What he explained was that it’s wrong to look at what you are paid and taxed but you have to throw in benefits received, as they are like anti-taxes. When you do this, “The 1.73 million households in the middle quintile paid an average tax rate of 12.3 per cent on average incomes of $88,900,” Creighton and the ABS showed.
When you throw in things like free schools, hospitals and public transport, then by netting everything off, it “shows even ‘average’, let alone lower-income, households got back $2.70 for every $1 they paid in tax!”
That’s staggering but they are the numbers that put our whole personal tax system into perspective.
The ABS data led Creighton to conclude: “Put simply, only the top fifth of households paid any tax. The bottom 6.9 million households, while often incurring income tax liabilities and regularly paying GST, received more in cash welfare and services than they paid in.”
If you don't believe this, you could be a rare individual in your quintile but for the average taxpayer, the analysis looks sound.
It’s interesting that the top three income groups kick in 84% of all personal income tax paid to the Federal Treasury and the next election will be about whether Bill Shorten with his anti-rich policies make more appeal than the Government’s policies, which are certainly more pro-richer Australians.
Wayne Swan’s criticism of BHP links to a tax argument the company has had with the ATO for 11 years. If it loses, it could be slugged $1 billion in tax and penalties.
Mr Swan said the BHP dispute accounted for a quarter of the ATO's total $4 billion total corporate tax disputes, and accused the company of "pillaging the Australian Treasury and short-changing the Australian people, pure and simple.”
One day this will be sorted and BHP looks like they are potentially a threat to the taxpayer but, as the company points out, they have paid $66 billion in taxes over the past decade.
Rich people and rich companies might have their faults and might work hard to reduce their tax bills — like all rational taxpayers — but they do a fair bit to pay their way.
Rich people haters look like they’re not permitting facts to get in the way of a good story.
Click here to subscribe to the Switzer TV channel on YouTube and keep up to date with all of our shows.