Australian Taxation system - Essay Example

?Australian Taxation system Research done in several Australian newspapers has testified that taxation is the backbone of the Australian economy. The country’s system of government is divided into the federal government which controls all taxations that take place in the country. There are also state governments which control taxation taking place in the several states that are in the country. The last system of government present in Australia is the local governments. According to Macfarlane in his book “Australian Monetary Policy in the Last Quarter of the Twentieth Century”, it is evident that Australia has low taxation rates (Macfarlane 1998). Despite lower taxation rates, the governments still struggle to control the taxation system. Several forms of taxation exist in Australia. These include personal income taxes, capital gains taxes, fringe benefits, taxes, customs duty taxes, corporate taxes and goods and services taxes just to name a few of all the existing forms of taxes. As testified in the sections of the Australian constitution, all individuals both working and non-working and also companies are forced to pay taxes to all the levels of government: the federal government, the state governments and the local governments. Among the national duties that the Australian government accomplishes with the income generated from taxation include the offering of services to the public and paying the public servants. The federal government often collects taxes from individuals and companies through the Australian Taxation Office which is an organization that helps the federal government collect revenue which is further paid to the various states. Australia as earlier mentioned has several forms of taxation. Moreover, the taxations are done in all the three forms of government in the country. The first form of taxation is the personal income tax. As testified in chapter four, section 81 of the constitution of Australia that talks about the sources of government revenue, “Income tax is a source of government revenue and it is imposed on individuals. It should be done at the federal level of government and not in the state governments or the local governments” (Australian Constitution Chpt 4, section 81). Income taxes are the backbone of the Australian economy since they are the most critical and important source of revenue for the federal government. Provides income tax revenue that the federal government uses to make or accomplish several important tasks. It is also important to note that income taxation in Australia is done on individuals with constant income. Thus, the individuals depending on the working generation which mostly comprises of the young children and older do not pay income tax. In the words of Cortese C and Glynn J, in his journal “Taxation and the Australian Superannuation System”, “personal income tax in Australia is done on individuals and not on groups, families, organizations or companies” (Cortese and Glynn). Another form of taxation is the goods and services tax. In this form of taxation, the federal government often imposes value added tax on goods and services offered and provided all over the country. Business people in Australia posses retail shops, wholesale shops, hardware shops and even supermarkets. In these businesses, when an individual buys goods for example clothes, food or any other stuffs, there are tax imposed on him or her. Like in other countries, small business men and women sell their goods and services directly to their customers. When the customers purchase the goods, value added tax is imposed on them. Though tax on goods and services is not much as the personal income tax, it also acts as a source of revenue for the federal government in Australia. The income got from the goods and services taxation by the local government is later distributed to the state governments which the state governments use to run their duties. Consequently, corporate tax is another form of taxation in Australia. Corporate taxes are taxes imposed on companies, corporations and business organizations. As testified by Mathew Joseph, Beatriz Joseph, Simpson Poon, Roger Brookbank's “Strategic Marketing Processes of Australian Companies”, examples of public companies in Australia include Aerosonode Limited, which is a manufacturing company. Secondly, there is Boral Limited, which is a construction company (Mathew Joseph). Thirdly, there is Becker Entertainment, which is a media company. Fourth is the Bunnings Warehouse, which is a retail company. These are only a few among the several companies that pay corporate tax to the federal government of Australia. However, it is important to note that corporate taxes imposed on companies are accompanied by rates. (Mathew Joseph). According to sections of the Australian constitution, it is demanded that companies should pay corporate taxes at a rate of 30%. Nevertheless, Henry, in his Institutional Framework of Taxation in Australia points out that, “Tax credit is provided to individuals who receive dividends to reflect the tax already paid at the corporate level” [Henry]. This is to say that corporate taxes in Australia are first imposed on companies before they are later on distributed to several employees and employers of different companies. The other form of taxation in Australia is customs duty. Australia imports such as horticultural products e.g. flowers and fruits, agricultural products like cocoa and tobacco, manufactured finished products e.g. vehicle motors, televisions and several other products. Business people in Australia import products and materials which they sell to customers in the country. Australia is not a landlocked country thus it has several ports and harbors. When heavy imported goods arrive at the harbors, there is a tax or an amount of the fee that is charged on them before they are received by their owners. This is the custom duty. Although it is not a major source of income to the federal government like personal income tax, custom duty collects revenue that is also useful in spearheading the government expenditures. In addition, property taxes are another form of taxation in Australia. Property taxes are majorly imposed on individuals, companies, corporations and organizations by both the local governments and the state governments. This is testified by a journal “Taxation and Australian Superannuation system” which points out that “Local governments and State governments in Australia are typically funded by the by the taxes they impose on land value, primary residential areas and stamp duties on land transactions” (Cortese and Glynn). The local governments of Australian councils often impose a tax on land, residential houses and industrial properties. In the case of industrial properties, the taxation is in the form of provision business licenses to the industries. Thus, no company can transact any business within the premises of a particular council without a license. The state governments on the other hand also impose property taxes on land for investors that would like to invest in a particular state. The state governments also have the right of imposing property taxes on primary residences owned by them. They also enjoy an income from stamp duties which is imposed on any transaction involving land that belongs to the state governments. In spite of all the different forms of taxation in Australia discussed, like in several other countries in the world, Australia also has an organization that controls all the taxations in the federal government. Most taxes in Australia, majorly the income taxes are collected by the federal government through the Australian Taxation Office. As per the information contained in articles that discuss the taxation system in Australia, the Australian Taxation Office (ATO), has its headquarters in Canberra (Macfarlane 1998). Its functions and duties include administration of the federal taxation system of Australia. It also acts as the sole and major body in Australia that collects revenue from individuals, companies, corporations and organizations. The Australian Taxation Office is mainly involved in the collection of several forms of taxes in Australia. These include collection of income tax which is collected from working individuals, goods and services tax which is imposed on all goods and services bought and sold and other federal taxes of the government. The body also involves itself in paying the government servants. As per the legislations contained in the Income Tax Assessment Act 1997 s 15-15. Commonwealth Consolidated Acts, it is testified that the Australian Taxation Office is also responsible for the management and smooth running of all businesses in the Australian register. As testified in Justin van de Ven (2006), “The Distributional Effects of Taxation in Australia and the United Kingdom”, the taxation system in Australia has several impacts on the individuals in the country, the economy of the country and the development of the country [Justin 2006]. As per the information contained in the ACOSS Submission to Senate Economics References Committee, 2003, one of the impacts of taxation in Australia is the increase in public pressure for a reduction in the rates of income tax. Many individuals in Australia have ever since believed that the rates of income tax that the federal government imposes on individuals are very high and should be reduced despite Australia being a low- tax country that is ranked sixth lowest in terms of taxation rates among the 30 developed countries in the world. Another impact of the taxation system in Australia is that the individuals in the country have ever since received fewer benefits and poor services they pay for through taxation by the federal government. The taxation rates in Australia are very low thus the federal government has been able to collect less revenue of which has been a great challenge in sustaining the survival of its citizens. The low taxation rate has led to poor service delivery by the federal government of Australia. As testified by ACOSS paper 2003, “Submission to Senate Economics References Committee”, another impact of the Australian Taxation System is that the federal government spends less capital on the issues of national development (ACOSS paper 2003). For example, the Australian government has ever since spent less capital on social security as compared to other countries in the world. This is as a result of poor revenue collection from taxation. This has led to poor living standards for the individuals in Australia. In conclusion it is evident that the Australia Taxation System is very different from other taxation systems of countries such as the USA. The USA has high taxation rates and this has ever since helped to sustain economic development in the country unlike Australia which has low taxation rates and thus experiences challenges with its economic growth. It's also evident that the forms of taxation in Australia include personal income taxes, property taxes, custom duty, goods and services taxes and corporate taxes just to name a few. The Australian Taxation System is done through the federal government, state and local governments. However, taxation is controlled by the Australian Taxation Office. Taxation rates in Australia are very low as compared to other developed countries and this has led to negative impacts such as poor service delivery by the federal government due to the less revenue collection. However, despite lower rates of taxation, is has been testified that the citizens of Australia believe that the rate of taxation in the country is high. As a result, public pressure has increased in the country demanding for a cut in the rates of taxation. Notes Quoted in Chapter 4, Section 81 of The Australian Constitution “Sources of Government Revenue”. Quoted in Cortese C. Glynn J, “Taxation and the Australian superannuation system”. Quoted in Mathew Joseph, Beatriz Joseph, Simpson Poon, Roger Brookbank, “Strategic Marketing Processes of Australian Companies”. Quoted in Justin van de Ven [2006], “The Distributional Effects of Taxation in Australia and the United Kingdom, Emerald Group Publishing Limited”. Quoted in Income Tax Assessment Act 1997 s 15-15. Commonwealth Consolidated Acts. Retrieved on 15 September 2012. Quoted in Income Tax Assessment Act 1997 s 6-5. Commonwealth Consolidated Acts. Retrieved on 15 September 2012. Quoted in ACOSS Paper (2003), “Submission to Senate Economics Reference Committee”. Bibliography Chapter 4, Section 81 of The Australian Constitution “Sources of Government Revenue”. Macfarlane, I. J. (1998) “Australian Monetary Policy in the Last Quarter of the Twentieth Century”. Vol. 75, Issue 230, Pages 213- 224. Cortes C and Glynn J (2006), “Taxation and the Australian superannuation system” 16 (2) 77-85. (Emerald Group Publishing Limited) Mathew Joseph, Beatriz Joseph, Simpson Poon, Roger Brookbank (2001), “Strategic Marketing Processes of Australian Companies” volume 13 (4) (Emerald Group Publishing Limited) Justin van de Ven (2006) “The Distributional Effects of Taxation in Australia and the United Kingdom” (Emerald Group Publishing Limited, pp 81-122). Income Tax Assessment Act 1997 s 15-15. Commonwealth Consolidated Acts. Retrieved on 15 September. Income Tax Assessment Act 1997 s 6-5. Commonwealth Consolidated Acts. Retrieved on 15 September 2012. ACOSS Paper, (2003) “Submission to Senate Economics Reference committee”. Read More