We have got 17 new or increased taxes. – Deputy Opposition Leader and Shadow Minister for Foreign Affairs, Tanya Plibersek, interview with David Koch on Sunrise, August 31, 2015.
When asked to name the taxes, a spokesman for Ms Plibersek sent the following list:
There is no question that people will face increased costs in doing business with the government as a result of these measures. Six tax concessions have been reduced or removed, which will increase the tax paid by people who formerly accessed those concessions.
However, there are also increases in eight user-pays charges or fees for services provided; these charges are not taxes.
What is a tax?
The definition of a tax generally adopted in Australia is based on that developed in the case of Matthews v Chicory Marketing Board:
a tax … is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.
The Australian Bureau of Statistics defines a tax as:
A tax is a compulsory levy imposed by the government, mainly to raise revenue. There is usually no clear and direct link between the payment of taxes and the provision of particular goods and services by government.
There are a number of considerations as to whether a particular impost is a tax:
- The charge is compulsory;
- It is raised by the government or other public authority;
- It is in money (for example, conscripted labour would not be a tax);
- It is enforceable at law; and
- The charge is for public purposes.
The most common definitional issue arises around fees for services rendered. To be a tax, the charge must be for public purposes, not for the benefit of a particular person paying the charge. Accordingly, “user-pays” charges are generally considered outside the scope of a tax. Licence fees are an example of a government impost that spans this divide.
The ABS deals with this on a practical level by classifying a charge as a tax depending on whether the fee for service represents the cost of providing that service, or whether the impost is set without reference to the cost of providing that service.
Going through the list
On reviewing the list of 17 items provided by Ms Plibersek’s spokesman, there are eight items that have increased fees and charges:
- Full cost recovery of superannuation activities
- Cost recovery of citizenship and visa charges
- Passport fees and Charges: reforms
- Cost recovery of licensing and import processing
- Reducing the burden of the industrial chemicals regulatory framework to industry
- Changes to agricultural production levies
- Additional cost recovery for biosecurity for international mail
- Streamlining and improving the sustainability of courts
Arguably, if these imposts are based on the costs of the services rendered and they are imposed on the user of the service, they represent an increase in user-pays charges, not a tax.
Some may say that charges have such a broad and indiscriminate application that the imposition of the charge represents a tax. Given that most Australians are members of superannuation funds, it could be argued that the increases in superannuation charges could be a tax, despite being referred to as a cost recovery measure.
The second element of the assertion is that the impositions are “new” taxes.
Six of the remaining items listed are measures that broaden the tax base by removing an existing tax concession. These include:
- GST – applying to digital products and services imported by consumers;
- Introducing a cap for salary sacrificed meal entertainment and entertainment facility leasing expenses;
- Personal income tax – better targeting the zone tax offset to exclude “fly-in-fly out” workers;
- Personal income tax – changes to tax residency rules for temporary working holiday workers;
- Personal income tax – removing an income tax exemption for government employees; and
- Personal income tax – modernising the methods used for calculating work related care expense deductions.
The removal of an existing tax expenditure does impose higher taxes on affected individuals, and to that extent it increases taxes on those people. It could be among the “increased” taxes Ms Plibersek refers to, but it’s questionable to describe these as new taxes.
Two of the measures relate specifically to reforming the foreign income tax system. These include a range of integrity measures. Again, it is a reform of an existing system and the impact must be assessed on a case by case basis.
Finally there is an increase in the rate of statutory penalties, in line with inflation. Again, it is an increase rather than a new tax: but penalties are designed to have deterrent effect.
There is a separate public policy argument over whether some of these fees, such as the cost of filing for a divorce, should in fact be charged on a cost recovery basis and the extent to which they should be subsidised by general revenue.
It is not correct to say that the government has imposed 17 new or increased taxes. Six of the changes are “increases” – they increase the tax paid by groups of people who formerly accessed tax concessions that have been reduced or removed.
There are increases in eight user-pays charges or fees for services provided; but these charges are not taxes.
This is a fair analysis. The author is correct that, legally and statistically speaking, these revenue-raisers are not new taxes. In these times of austerity, many governments have gone down the path of increased user-pays for government services, and this government is no exception. It’s questionable whether this is always more efficient and fairer than broad-based taxes to fund services. But removing some concessions and loopholes from the personal income tax and GST is likely to strengthen our most significant tax bases. These include limiting high income employee tax-free meal and entertainment benefits, and the “Netflix” digital downloads GST measure aiming for equal GST application to these services in Australia.