Re:think (colon included) is the name of Joe Hockey's new review paper about the taxation system. I'm not sure if you could call it a discussion paper because that would imply that you have a right to reply and that most indubitably is not the case.
The name Re:think is problematic. It sounds to me as if Mr Hockey is replying to an email from one of his friends in business and we've all been accidentally CCd in. "Re" is almost always used in the context of a reply. Even though this was released on the run up to April the First, this paper is definitely no joke and is deathly serious if you happen to be on the wrong end of its policy direction.
Incidentally, the other use of the word "colon" apart from the punctuation mark which is tantalisingly hanging forlorn in the name of the paper, is that part of the intestines between the caecum and the rectum. I could make a joke about where this paper came from but you don't need a weatherman to see which way the wind blows.
The entire of taxation policy boils down to just three questions:
1. How much to collect?
2. Who to collect it from?
3. How should it be collected?
Every single taxation policy ever, in the history of the world, comes down to a combination of these three questions and how to address them. The first question fits into a broader context of fiscal policy and has other implications to do with growing or shrinking aggregate demand because taxation is a leakage from the flow of money. It also fits in with questions of fiscal prudence and whether governments run deficits or surpluses, and on future government debt and borrowings.
For the record, it seems utterly strange to me that ever since Mr Hockey became treasurer, he's been saying the phrase "Labor's debt and deficit" as though the entire federal government was going to come to a giant crashing halt tomorrow. It's almost a case of deliberate amnesia because the Labor government for the period of 2007-13 enacted every single set of tax cuts that were included in the forward estimates when the Liberal Party was in power between 2001-06. To now suggest that the previous government with its plan of tax cuts was irresponsible and to then go on an identical trajectory of more tax cuts after you've been repeating the manta of "debt and deficit" is an hypocrisy of the fiscal kind.
The last two questions though, are mainly to do with the nature of that leakage from the economy and also touch on social policy.
All three questions are in essence fighting against human nature itself because of one of the most basic qualities of mankind: selfishness. Everyone from the grandest duke, from the captains of industry, from the titans of the financial world, to the plebs, to the underclass, do not like paying tax. More generally, it is also true that no one likes paying for anything if they can get away with it. Taxation policy is then not only about fighting human nature but also about fighting human power. When you discuss questions about who to collect taxation from, invariably you're also looking at the reactions of those people from whom you happen to be collecting tax from and whether or not as a government, you think that those opinions matter and if they do, whose matter the most to you.
Re:think appears to fit in with a broader agenda of entrenching a new gilded age of entitlement for a rentier class. During the launch speech, Mr Hockey spoke about broadening the base of the GST whilst at the same time, lowering rates of income tax and company tax. These two shifts in taxation policy taken together are very much concerned with who thee government intends to collect the bulk of its taxation from.
Consumption taxes like the GST are broadly regressive in nature. That is, the burden of taxation falls more harshly on those people at the lower end of the spectrum. Poorer people tend to proportionally spend more of their income, simply in surviving. People on lower incomes generally have less of an ability to save anything and so quite often, their spending rates are pretty close to 100% of their income or sometimes even more in certain periods. This being true, by increasing consumption taxes like the GST, the overall taxation mix becomes more regressive because those people who are able to save more, do not spend their savings (by definition) and aren't faced with a consumption tax on the portion of their income they don't consume.
Income Tax and Company Tax are interesting animals. Nominally poorer people only derived their incomes from wages but people with larger stores of capital which has been parked, have access to other income streams like rent, interest and dividends. Companies are either a collective form of ownership or in the case of very small companies, vehicles to minimise tax and create a separate legal person from the owners. For people in small business and people who have the ability to create companies, there are always strategies which can be developed to minimise tax payable. It is even possible to hire people like me, accountants and financial managers, to crunch the numbers and work out what the best positions are to minimise tax and whether or not that involves paying out wages or dividends. This is simply impossible if you do not have access to the necessary capital to make this worthwhile.
There is also an acknowledgement that superannuation is being used as an upper class taxation rort of sorts and so there are some tinkering to do with the incomes generated from very large deposits from within the superannuation system but I can tell you that as soon as any law is changed that has significant effects, armies of people like me will be ready and waiting with out calculators and spreadsheets at the ready to work out what the new best positions are. For most people who do not have any sizeable funds in superannuation, the existing funds managers will continue to shift numbers around screens as they always have done. Re:think is likely to have zero effect when it comes to retail, wholesale or industry super funds.
Re:think at least on the face of it, appears to be answering questions 2 & 3 by deliberately shifting the taxation mix from the top end of the income scale to the bottom. The reason given for this is supposedly to encourage investment in Australia but given that many multinational companies already pay minimal or zero tax in Australia, I fail to see how it is possible to reduce their taxation burden further. By shifting the burden of taxation from the top to the bottom though, it does kind of address the first question of "How much to collect?" because poorer people have less of an ability to avoid the burden and certainly no ability to shift the domicile of their income in the same way that a multinational company can.
Coupled with other plans to lower penalty rates and abolish overtime rates, Re:think fits quite nicely into a broader agenda of redesigning society itself and pity you if you're at the bottom.