Quote (Fund's Law):
Governments will always do the right thing - after they have exhausted
all other possibilities.
INTRODUCTION
Pauline Hanson's One Nation will introduce a new tax system based on 2%Easytax, a system conceived in 1985 and researched over 13 years - a product of Tax Reform Limited. This policy document details the implementation of that system and provides examples of the impact of the new system on wages, business, investments, goods, services and property.
To ensure fairness, equality, acceptance and understanding of the 2% Easytax,
Pauline Hanson's One Nation will consult with all stakeholders including State and local governments, unions, employer bodies, welfare groups and other interested parties before the new tax system is introduced and during a transition period.
KEY BENEFITS FOR AUSTRALIA
Australia will benefit from introduction of 2%Easytax in many ways:
The reductions in costs for Australia's primary, secondary and tertiary industries supplying commodities, goods and services will substantially lower the attraction to imported goods based on price. Many Australian producers and manufacturers will expand in their efforts to supply a growing domestic market. That same improved cost/price position will enable Australian producers and manufacturers to compete in foreign markets and improve our export capacity.
Employment growth will flow from lower employment costs, the increased domestic demand and our improved export competitiveness and capacity.
Employees and the self-employed will increase productivity willingly with the elimination of the punishing tax regime that discourages overtime, discourages the normal desire for promotion and wage increases and discourages the pursuit of increased income through increased work.
Government and the private sector will be able to access Australian investment funds which will flow from the increased capacity and incentive for Australians to save and invest in equities and investment funds without the impost of the present taxation system.
The lower taxation regime, lower cost of labour and lower cost of inputs will encourage Australians to invest in and initiate Australian manufacturing and primary industries, and will attract foreign investment and relocation of industry which had previously moved offshore.
The cost of all levels of government in Australia in administering the social and economic activities of Australians will reduce substantially, enabling further lowering of taxation, increased funding for Government employment initiatives such as infrastructure projects in regional and rural areas, rebirth of rural towns and cities and improved levels of service for elderly Australians, particularly through increased pensions for those dependent on welfare.
Australians will have an increasing capacity and desire to fund their own retirement and health cover.
Government will have increased funding for Australia's defence.
IMPLEMENTATION
Implementation of the new tax system will be over a three year transition period with the benefits flowing in the first year.
The Federal Government will identify the amount existing selling prices of all goods and services will be reduced by abolishing income (including wages, pensions, interest and dividends), company, fringe benefits, superannuation, payroll, sale of goods, withholding, provisional and capital gain taxes. Much of this information is currently provided to Government, eg through monthly tax payments and returns.
The Government will interpret the effect of the 2%Easytax on these prices net of existing taxes. Retail prices are expected to reduce by up to 40% for goods and 30% for services.
The Government will consult with all sectors of industry and with community groups to identify the sequence by which existing taxes, eg sales tax, payroll tax etc are to be abolished.
The Federal Government will control the abolition of these taxes and reduction in selling prices of all goods and services. The cost to employ a person becomes the present take home pay (gross pay less PAYE tax). Market force competition will largely control price reductions, although Government retains the input information and capability to influence retail prices if necessary.
In the initial stages of the scheme PAYE, company, sales, payroll, capital gains, fringe benefits, withholding, and provisional tax deductions will be credited to a tax account in the name of the business generating the income and collecting the tax.
Over the three year period, businesses will be credited from their tax accounts on a dollar for dollar basis as prices of goods and services are reduced. The amount of tax paid by businesses will reduce progressively in line with the reduced price of goods and services, until the amount entering the account equals the 2% tax on gross income/turnover plus 2% of the new wage structure.
Implementation of 2%Easytax for certain industry sectors such as the housing sector will be carefully timed and may be progressive to ensure the introduction of reduced prices of goods, services, rents etc does no have any short term adverse affect on key industries such as the building industry and the Australian economy overall.
The ability to project and later monitor the effect on all sectors of the community, eg the young, students, unemployed, employed, retired, etc enables implementation priorities to be determined for positive outcomes for Australia.
Tax Returns
Annual tax returns will be limited to a simple single page which can be completed without the assistance of taxation specialists.
Under 2%Easytax, public and private sector employees' take-home pay (net of existing taxes) is retained, as is the net of tax income of the self-employed and other investors.
Investors
Those living on investments will receive the full return from their investment. The 2% tax will be paid by the institution managing the capital. Those who do not have investments have an immediate or potential opportunity to invest in a low tax environment and receive the same higher return on investment - naturally, those who are already in such circumstance reap immediate benefit.
Public Servants. Public servants will continue to receive their existing take home pay, but their PAYE taxation will be used to immediately reduce the cost of Government by $30 billion approximately or 20%.
Non-Government employees' PAYE deductions will be used to reduce the price of goods and services produced by the business generating the income.
As the three year transition period proceeds from the old taxation system to the new, take home pay will be based on the award rate less the PAYE tax paid under the present system. As productivity and profitability increases higher award rates will be open to negotiation.
Examples of a wage earner's income is at Attachment 2
Profits will no longer be taxed. Rather, the turnover or income of a business is taxed at 2%, as with any individual transaction.
Examples of a self-employed person's income model is at Attachment 3
Housing
General. Implementation of 2%Easytax for the housing sector will be carefully timed and may be progressive to ensure the introduction of reduced prices of goods, services, rents etc does not have any short term adverse affect on the building industry and the Australian economy overall.
New house prices.
Examples of the affect of 2%Easytax on new house prices is at Attachment 4.
Individuals who have gained tax advantages previously through negative gearing will no longer gain that advantage. In recognition that many Australians have taken advantage of the present system, methods are being considered to introduce a graduated response over several years to minimise any adverse affect of 2%Easytax on the income and capital investment of those who are negatively geared.
Examples of the affect of 2%Easytax on negative gearing is at Attachment 5.
Shares, when registered as bought or sold, will attract 2%Easytax. If equities are traded but the transaction is within the trading period and the trade is not registered, 2% tax will be paid on the margins only. Once the full effect of 2%Easytax is in force, dividends should increase as companies become more profitable and are taxed at 2% only.
Examples of the affect of 2%Easytax on the purchase and sale of equities is at Attachment 6.
Derivatives
When a hedged financial derivative matures and monetary value accrues, it attracts 2%Easytax, which is paid by the seller of the instrument. If there is a cost to the purchaser for writing the derivative transaction, the seller pays the 2%Easytax on that cost. In the case of a derivative instrument trade, any gain on the trading instrument (ie changes in beneficial ownership) attracts 2%Easytax.
In summary, 2%Easytax is payable on any fee for entering into a contract and on the financial outcome of the contract, with the purchaser of the contract bearing the 2%Easytax. The seller of the contract collects the 2%Easytax.
MOTOR VEHICLES
Tariffs on imported vehicles will be progressively reviewed and lowered or even eliminated as Australian manufacturers' costs drop following the affect of a simple and minimal tax system and the lower cost of materials and labour. Foreign manufacturers are likely to move their production to Australia to take advantage of the lower tax and other input costs.
Examples of the affect of 2%Easytax on new car prices is at Attachment 7.
Used Vehicles
Although the price of new cars will drop, thereby affecting the resale value of used vehicles, increased spending power of Australians will cause a move away from used vehicles as new vehicles become more affordable.
Reductions in the cost of property, goods, services and labour will reduce the cost of living for Australians by an average of 17 %.
Examples of overall change in cost of living are at Attachment 8.
The Commonwealth government will install mechanisms to ensure savings are passed on to consumers as prices for goods and services are reduced through lower production overheads and input costs.
The price of food will drop by an average of 20%. Australian grown produce will gain benefit from the drop in production costs and tax because 'cheap imports' will not have the advantage of a reduction in labour and input costs, and will not access the same tax credit available to Australians, as their tax contribution is minimal at present.
Examples of the affect of 2%Easytax on food is at Attachment 9.
Clothing
The cost of clothing will drop. Australian made products will be most advantaged. There is likely to be a move to restore Australia's manufacturing base because of this.
Health Costs
Changes to the Medicare levy will be detailed in One Nation's Health policy. Australians will be given incentives to join private health funds.
Students - Tertiary
The cost of tertiary education will be borne by the student. All students, regardless of parental income, will have access to Government study loans, details of which will be promulgated. The cost of tertiary education will be dramatically reduced as the taxation component of our tertiary institutions is reduced.
All pensioners and self-funded retirees will gain from the 17% reduction in the cost of living.
Self-funded retirees will have access to the same benefits as those receiving Government pensions.
Self-funded retirees will gain immediately from the lowering of taxation costs to 2%Easytax. Returns from investments will be boosted immediately the 2%Easytax is introduced.
Examples of the affect of 2%Easytax on self-funded retirees is at Attachment 10.
A public trust will be introduced for the purpose of capital expenditure on nursing homes. This trust will receive a fixed percentage of public money and will make low cost funding available to construct and expand nursing homes.
Examples of the affect of 2%Easytax on nursing homes is at Attachment 11.
Unemployed. The ever increasing tax burden has priced tax-generating jobs out of existence and made more people dependent on tax welfare which in turn expands the demand for more taxes and prices more tax- generating jobs out of existence. The implementation of 2%Easytax will result in the cost of employment being reduced by 30%. Expansion of Australian manufacturing and primary production, and business generally will create sufficient jobs to absorb our existing unemployed. Retraining of the unemployed will be a priority.
Examples of the affect of 2%Easytax on welfare recipients is at Attachment 12.
State Government outlays will reduce by the tax take of public servant wages - this will offset the abolition of payroll tax. Both State and Commonwealth Governments will benefit from the lower cost of goods and services.
Examples of the affect of 2%Easytax on Government receipts and outlays is at Attachment 13.
LOCAL GOVERNMENT
Local government costs will reduce by the tax take of council employees' wages, which must lower council charges for rates and charges as much of the cost of local government is wages and salaries.
| Cost to employ includes taxes and insurance | Take home pay includes Super and Medicare | Increase in purchasing power with lower prices of all goods and services with 2%EasyTax | ||||
| Wage per annum | Today | 2%EasyTax | Today | 2%EasyTax | Per Annum | Per Week |
| $10,000 | $11,500 | $10,161 | $9,675 | $9,780 | $1,663 | $32 |
| $20,000 | $23,000 | $19,192 | $18,270 | $18,480 | $3,142 | $60 |
| $30,000 | $34,500 | $26,872 | $25,563 | $25,878 | $4,399 | $85 |
| $40,000 | $46,000 | $34,262 | $32,578 | $32,998 | $5,610 | $108 |
| $50,000 | $57,500 | $40,903 | $38,873 | $39,398 | $6,678 | $129 |
| $60,000 | $69,000 | $47,116 | $44,768 | $45,398 | $7,718 | $148 |
| $70,000 | $80,500 | $53,339 | $50,663 | $51,398 | $8,738 | $168 |
| $80,000 | $92,000 | $59,562 | $56,558 | $57,398 | $9,758 | $188 |
| $90,000 | $103,000 | $65,540 | $62,218 | $63,163 | $10,738 | $206 |
| $100,000 | $115,000 | $72,008 | $68,348 | $69,398 | $11,798 | $227 |
Benefits to employee:
The following example demonstrates the benefits to Small Business of the full introduction of 2%EasyTax
| Today $'00s |
2%EasyTax $'00s |
|
| Car detailing and adding small accessories to motor vehicles: | 400 | 328 |
| Parts imported | 45 | 45 |
| Wholesale sales tax | 8 | |
| Parts local | 30 | 30 |
| Wholesale sales tax | 4 | |
| Labour: | ||
| Employer's contributions | 7 | 7 |
| Take home pay | 74 | 74 |
| PAYE Tax | 30 | |
| Payroll Tax | 0 | |
| Medicare | 1 | 1 |
Sub Total |
112 | 82 |
| Operating costs - Property, Transport, Communications etc | 90 | 76 |
| Interest on borrowings (Loan repayment of Au$40,000) | 16 | 16 |
Profit: |
97 | 79 |
| 2%EasyTax | 9 | |
| Income tax | 27 | |
Net profit: |
70 | 70 |
| Total tax pool | ||
| PAYE | 30 | |
| Sales Tax | 12 | |
| Profits Tax | 27 | |
Total tax pool |
69 | |
| Estimated costs of tax (Administration and compliance 10x0.5) | 5 | |
Total |
75 | |
| 2%EasyTax on Labour 82x0.02 | 1.64 | |
| 2%EasyTax on Loan Repayments 40x0.02 | 0.80 | |
| 2%EasyTax on sales 321.44 = 6.42 | 6.42 | |
Total |
8.86 |
| Today | 2%EasyTax | ||
| Land Price | $60,000 | $60,000 | See Note 1 |
| House Cost | $71,000 | $66,000 | See Note 2 |
| Total | $131,000 | $126,000 |
Note 1:
2%EasyTax abolishes Income Tax, Profits Tax and Capital Gains Tax. 2%EasyTax is applied to the sale value (eg Au$60,000 is Au$1,200). Costs of selling the house will reduce under 2%EasyTax by up to 20%. Based on selling costs of 10% the land owner/marketing agent sale price of Au$55,000 (Note: Subject to existing taxes), selling costs Au$5,000, 2% EasyTax reduction Au$1,000.
The housing industry will have the opportunity to reduce residential land costs/prices without and reduction in the return of the owner/developer/agent/seller.
Ultimately, as a finite resource, land values are determined by supply and demand.
Note 2:
2%EasyTax abolishes PAYE and Payroll Tax on Wages, Profits Tax and Capital Gains Tax. 2%EasyTax is applied to each intermediary sale value of material supply and construction. Costs of construction of this house are expected to reduce from Au$71,000 to Au$66,000 - a saving of Au$5,000 or 7%.
The housing industry will have the opportunity to reduce house construction costs to sustain ongoing growth in this significant sector of the domestic economy.
Negative gearing provides an annual cash refund of income tax as follows based on a taxable income over $50,000 per annum.
| Negative gearing Income tax refund at 49.5% | Annual amount in the dollar includes Medicare levy and surcharge |
| $10,000 | $4,950 |
| $20,000 | $9,900 |
| $30,000 | $14,850 |
| $40,000 | $19,800 |
| $50,000 | $24,750 |
Higher income taxpayers have entered into long term negative gearing to relieve the top rate of 49.5%. Easytax does not have any deductions and to avoid these tax payers being disadvantaged the following annual cash payments are proposed to be made over three years.
| Existing negative gearing refund............. | Indicative annual negtive gearing payments |
| This only applies to wages negatively geared | year 1 | year 2 | year 3 |
| Examples: | |||
| $4,950 | $3,000 | $2,000 | $1,000 |
| $9,900 | $7,000 | $5,000 | $2,000 |
| $14,850 | $11,000 | $7,000 | $3,000 |
| $19,800 | $15,000 | $10,000 | $5,000 |
| $24,750 | $18,000 | $12,000 | $6,000 |
No annual negative gearing payment is required for negative gearing from interest and tax paid dividends because the amounts received by the investor pensioner etc. are not subject to further taxation under 2% Easytax.
In these examples the net increase in buying power of existing take-home pay is as follows for year 1.
| Existing gross pa $ | Nehative Gearing pa | Existing annual tax refund | New annual negative gearing payments | Tale home pay increase in purchasing power pa (net of negative gearing loss*) |
| 50,000 | 10,000 | 4,950 | 3,000 | 5,474 |
| 60,000 | 20,000 | 9,900 | 7,000 | 5,311 |
| 70,000 | 30,000 | 14,850 | 11,000 | 5,542 |
| 60,000 | 40,000 | 19,800 | 15,000 | 5,774 |
| 100,000 | 50,000 | 24,750 | 18,000 | 6,195 |
* note - these figures include additional increased purchasing power of take-home pay from reduced property maintenance and management costs and the new annual negative cash payment.
At the time of making an investment 2%EasyTax is paid by the buyer (2%EasyTax added in the purchase price by the Stockbroker, bank, etc.. collected from the buyer and paid to the government.
Interest Income/Dividends received are the existing amounts, eg interest paid gross and dividends paid out of taxed profits. 2%EasyTax on the interest dividend is paid to the Government by the business, etc.. making these payments.
The interest income/dividends received are not subject to further taxation assessment as at present.
In addition this income has increased purchasing power expected at 17% providing increased financial capacity to pay off borrowings (eg negative gearing, as an additional to retirement investments, provide a higher living standard, as financial assistance to family members etc)
At the time of sale of an investment 2%EasyTax is added to the sale value and paid by the buyer to the Stockbroker, bank, etc for payment to the government.
Australian stocks and equities, traded overseas, are subject to 2%EasyTax when ownership is registered in Australia.
Dealings (eg bought and sold Stocks and Equities) within a trading period are not subject to 2%EasyTax. On settlement of dealings for the period, 2%EasyTax is paid on the margins - collected by the Exchange and paid to the Government.
2%EasyTax may provide the opportunity to the Australian Stock Exchange to review trading periods in Australia so that full advantage is taken in Australia in dealings and investments. This is a business decision for the Australian Stock Exchange, not for Government.
A small imported car, bargain priced at Au$15,000 is expected to reduce in price to Au$13,300 - or a reduction of 11% as a result of abolishing wholesale sales tax, taxes on added value and profits in Australia, and after 2%EasyTax on Australian wages (take home pay, super Medicare levy) and on the value of sales, including to the consumer.
The Wholesale Sales price remains constant in this example on the basis that this is the imported cost. The Australian added value costs have reduced by 25% as a result of the abolition of taxes on labour and profits and after adding 2% EasyTax. The overseas manufacture/importer/distributor can be expected to come under market pressure either to reduce the imported price or to shift value adding to Australia.
Benefits - Consumer:
Benefits - Dealer:
Benefits - Australian Car Industry:
| Today $pa | 2%EasyTax $pa | |
| Personal | 288 | 239 |
| Household | 174 | 137 |
| Transport | 93 | 83 |
| Miscellaneous | 47 | 42 |
| Sub-total | 602 | 501 |
| Housing Costs | 86 | 68 |
| Fuel and Power | 17 | 13 |
| Household Furniture | 40 | 31 |
| Household Services | 31 | 24 |
| Transport | 93 | 83 |
| Miscellaneous | 47 | 42 |
| Total | 916 | 762 |
| Today $pa | 2%EasyTax $pa | |
| Food | 111 | 88 |
| Alcoholic Beverage | 17 | 17 |
| Tobacco | 9 | 9 |
| Clothing | 34 | 26 |
| Medicare and Health | 27 | 22 |
| Recreation | 79 | 69 |
| Personal Care | 11 | 8 |
| Total | 288 | 239 |
| Food | Today's | 2%EasyTax |
| Potatoes (pre packed 2kg) | 3.99 | 3.32 |
| Pork leg 1kg | 5.78 | 5.27 |
| Tinned salmon | 1.65 | 1.47 |
| Milk (full cream) 2l | 2.27 | 1.96 |
| Lamb Chops 1kg | 5.20 | 4.34 |
| Flour - self raising 2kg | 2.87 | 2.23 |
| Chicken frozen 1kg | 3.44 | 2.94 |
| Butter | 1.93 | 1.54 |
| Bread (sliced white) | 1.94 | 1.40 |
| Beef Sausages 1kg | 3.57 | 2.97 |
| Baby Food (Heinz) 110g | 0.79 | 0.70 |
| Sugar (white) 2kg | 2.35 | 1.93 |
| Bananas 1kg | 1.69 | 1.50 |
| Tomatoes 1kg | 3.65 | 2.93 |
| Weet Bix | 3.84 | 3.38 |
2%EasyTax abolishes the 15% tax on contributions and income receipts of superannuation funds and only applies 2%EasyTax (eg 2cents in the dollar) to payments out of the fund so that existing superannuation contributions and income receipts accumulate at 100%.
Payments out are only taxed at 2 cents in the dollar so that 98% goes to the fund member.
Also administration costs and fees by advisers, auditors etc are reduced as a result of the abolition of the major taxes on wages, incomes and profits and the application of 2%EasyTax (eg Administration costs and fees expected to reduce by up to 19%)
Benefits - immediate financial gains:
The self-funded retiree can expect new growth in their superannuation fund with benefits paid, also having increased purchasing power expected at 17%.
Self-funded retirees with income deposits and investments will immediately benefit as the existing interest received is not subject to further income tax assessment (eg not subject to 2%EasyTax). Also this income has increased spending power of 17%.
Self-funded retirees, receiving dividends out of taxed profits, immediately financially benefit in the same way as for interest income. Also the business in which investments are held have the opportunity for growth, higher profits and increased dividend distributions only taxed at 2 cents in the dollar. Self-funded retirees can review their investments to maximise future income and capital growth.
Self-funded retirees with cash convertible investments can access these funds with an expected 17% increase in purchasing power (eg Au$100,000 today will buy Au$117,000 worth of goods and services on full implementation of 2%EasyTax.
Self-funded retirees with owned property investments (see separate paper re negative gearing) will benefit from lower maintenance and management costs (eg down by 15%. On property sales 2%EasyTax applies to the sale value but there is no capital gains tax.
The full implementation of 2%EasyTax is expected to reduce Nursing Home fees by 14% from the abolition of PAYE and PAYROLL TAX on wages and the application of 2%EasyTax on take-home pay of all staff and contractors.
The cost of Capital Works is expected to reduce by 7% and property maintenance costs by up to 15%
Existing Property Funds held by the Nursing Home will have increased purchasing power @ 7% - Au$50,000 becomes Au$53,500 or @ 15% Au$57.500
Benefits to patients:
Benefits to care staff:
Benefits to Owners/Developers:
The budget Estimate of Social Security and Welfare for 1998-99 is (Budget paper No 1 98-99)
| Assistance to: | $ Billion |
| Aged | 15.7 |
| Veterans and dependents | 4.6 |
| People with disabilities | 6.7 |
| Families with children | 14.8 |
| Unemployed and sick | 5.8 |
| Young people | 2.0 |
| Other | 3.8 |
| Total | 53.4 |
The full implementation of 2%EasyTax is expected to reduce living costs funded by 90% (net of tax) of this assistance by 17% or Au$8.1 billion pa.
The Tax Reform Formula has taken into account Au$5 billion on the basis that Government can maintain adequate purchasing power of existing assistance at a lower cost. Instead of passing on Au$8.1 billion in increased purchasing power, reduce this to Au$3.1 billion - a 6% increase in the 97-98 level of assistance - from Au$50.4 billion to Au$53.5 billion, and at the same level as that provided by the Government in 98-99 Estimates Au$53.4 billion.
It is Urgent/Important to keep in mind that if these shifts in Outlay to the Private sector require to be spread over an extended time period to gain Electorate support, this is achieved by delaying the abolition of the major taxes 1998/99 Tax Reform Formula Au$104 billion, whilst applying 2%EasyTax to broad based turnover, including that not presently equitably taxed.
| 1998-99 | 1999-00 | 2000-01 | 2001-02 | |
| Total current revenue of Commonwealth Government | 152 | 159 | 169 | 180 |
| Seven major taxes on income, profit, benefits, capital gains (deduct) | 104 | 127 | 146 | 156 |
Sub-Total |
48 (1) | 32 | 23 | 24 |
| 2%EasyTax Revenue | 57 | 57 | 57 | 57 |
| Increase in revenue as a consequence of increased economic activity | (2) | (2) | ||
Total adjusted revenue: |
105 | 89 | 80 | 81 |
| (1) | Includes revenue from: | |
| Excise | Au$17 billion | |
| Other | Au$3 billion | |
| Non taxable revenues (dividends etc) | Au$6 billion | |
| Company tax | Au$22 billion | |
| Company tax is progressively removed over subsequent years |
(2) No provision is made for highly likely increased revenue as a consequence of increased economic activity.
| 1998-99 | 1999-00 | 2000-01 | 2001-02 | |
| Total current projected outlays of Commonwealth Government | 149 | 154 | 160 | 165 |
| PAYE tax component (public servants) (deduct) | 30 | 31 | 32 | 33 |
Sub Total |
119 | 123 | 128 | 132 |
| 2%EasyTax | 3 | 3 | 3 | 3 |
Sub Total |
122 | 126 | 131 | 135 |
| Deductions | ||||
| Compliance Costs (admin) | 1 | 1 | 1 | |
| Lower outlays to reflect lower operating Costs of education, health etc | 15 | 21 | 27 | 32 |
| Lower outlays to reflect lower cost of living for social security recipients
(eg Au$53.4 billion will be reduced by Au$8.1 billion if full affect of 17% lower cost of living is passed on by reducing benefits - but use Au$3.1 billion thereby providing a 6% increase in 1997/98 levels of assistance.) |
5 | 15 | 30 | 35 |
| Reduced interest as budget surplus used to reduce public debt | 2 | 2 | 2 | |
Sub Total |
20 | 39 | 60 | 70 |
Total Outlays |
102 | 87 | 71 | 65 |
| 1998-99 | 1999-00 | 2000-01 | 2001-02 | |
| Budget surplus | 3 | 2 | 9 | 18 |