Sadly, the notion that paying tax is both necessary and desirable is modern-day heresy.
If the American doctor, poet and academic Oliver Wendell Holmes (1809-94) time-travelled to Australia in 2015, all hell might break loose. Why? Because Holmes would be regarded as an enemy of the state on the question of tax. Because he once famously said: "I like to pay taxes. With them I buy civilisation."
The notion that paying tax is both necessary and desirable is modern-day heresy. The compelling case for tax – that it ensures social, political and economic success and stability – is not made by any modern Australian politician.
Taxes fund schools, universities and TAFEs. Is there anything more important to your child than a sound education? Perhaps, your child’s health? Taxes fund hospitals and visits to your GP. Taxes subsidise the cost of medicines that each of us take.
Taxes pay for the pension so that we can have an income in retirement. The pension is crucial for those of us who can’t afford to live on our superannuation savings. That’s most of us, and in particular most women in Australia, who retire with meagre savings.
Taxes fund crucial infrastructure such as public transport, roads, and the National Broadband Network. And taxes fund the safety net for those who fall between the cracks or need our help. The Newstart allowance is paid from tax. The NDIS would not exist without tax. And I haven’t mentioned our police or defence forces.
When the private sector experiences a periodic slump, governments step in to stimulate and support economic growth. Australia was one of the few developed economies in the world to avoid a recession in the wake of the global financial crisis. A government stimulus package was deployed to stoke enough business activity to keep the economy in the black. Such moves can only work with a secure tax base. In 2008, when the big four banks pleaded with treasurer Wayne Swan for help as global credit supplies dried up and the risk of a run on deposits escalated, taxes were critical to the government guarantee that shored up Australia’s banking and financial system. You all helped out by paying tax.
When people affected by natural disasters such as droughts, floods and bushfires need our help, it is provided by government. Victims of the floods that ravaged Queensland in 2011 were the beneficiaries of a tax that raised $5.6 billion. Substantial taxpayer funds also went into supporting those devastated by the 2009 Black Saturday fires in Victoria. From time to time we bail out farmers who are hit by drought or floods. Take a bow, taxpayers.
These immutable truths about paying tax are missing in our public debate or political coverage about our economy and the sort of society we aspire to. For decades the notion of paying tax has been degraded and disparaged. Politicians have subtly and not so subtly sent a message that tax exists for one purpose: to be cut. Some of the loudest voices in our political discourse are those incessantly campaigning for "tax reform" – barely disguised calls for tax cuts by captains of industry. Treasury mandarins too.
In 2010, at the same time that BHP and Rio Tinto were contributing millions of dollars for advertisements attacking the Rudd government’s mining tax, they were being investigated by the Australian Tax Office for shifting profits offshore to avoid tax. Rio Tinto, for example, paid as little as 5 per cent tax on profits shifted to Singapore.
A substantial proportion of ASX companies pay less than the 30 per cent company tax rate that they routinely campaign against – some as little as 10 per cent. Such are the extremes to which Australia’s iconic corporates have gone in cheating on their tax that a split has emerged in the Business Council of Australia. On one side are the aggressive tax avoiders such as BHP and Rio Tinto. On the other are companies such as Woodside, which does not engage in such conduct. The tax avoiders are clearly winning. The BCA is one of the loudest and most persistent voices in the tax-cut campaign. It’s always urgent.
Is there any compelling science or empirical evidence to support this tax cut fetish? No. Countries with low-tax regimes are no more likely to grow than those with high-tax regimes. Germany and Denmark have higher tax regimes and have weathered the GFC far better than low-tax countries such as Britain.
Cutting tax won’t deter the tax avoiders. American behemoths Google and Apple are not deterred from tax cheating by lower company tax rates in the United States.
As one of the wealthiest countries in the world that hasn’t experienced a recession in a quarter of a century, Australia’s government finances are straitened by a structural deficit. The budget’s health has fallen victim to our tax-cut obsession. The beneficiaries of profligate tax cuts doled out regularly in the Howard/Costello years were wealthier Australians. The mining boom was a temporary phenomenon. The tax cuts that were doled out at election time were not.
Similarly, many of the tax concessions and exemptions that have been granted in recent decades have blown sizeable holes in revenue. They have also tended to advantage the wealthiest in the community, as well as large corporates. As a director of a law firm, I am a beneficiary of this largesse. There are few voices among the top 5 per cent of income earners who speak up in favour of paying their fair share of tax or paying more tax.
The degradation of paying tax as a social good also encourages individuals to engage in a race to the bottom, finding new ways to artificially reduce our tax bills. Why is it that those who are routinely feted as the nation’s leaders are more likely than not to be involved in egregious tax minimisation schemes?
Tax cheats are lionised but space in the news can always be found to slam those said to be cheating on welfare. Yet each tax dollar that is not paid has an effect, either shifting the tax burden to someone else or requiring a cut in government expenditure.
One of Joe Hockey’s last acts as treasurer was introducing laws to crack down on multinational tax avoidance – a welcome advance. Hockey was spared the sort of backlash experienced by Swan in 2012. Swan proposed to curb unsustainable tax concessions on superannuation. His modest initiative was deplored on the front page of The Australian, replete with hammer and sickle, as "socialist redistribution" under a banner headline of "Smash the rich, save the budget".
Are we witnessing the start of the rehabilitation of paying of tax in this country?
This article originally appeared in The Age.