goldstein policy discussion: taxation reform sinclair davidson
Post on 30-Dec-2015
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Economics, Finance & Marketing 4
Tax Facts
• High Income Individuals pay the bulk of personal income tax.
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Economics, Finance & Marketing 5
Tax Facts
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• Large corporations pay the bulk of company tax.
Economics, Finance & Marketing 6
Principles of Taxation
• Adam Smith.
– Proportional.
– Certain.
– Convenient.
– Economical.
• Treasury.
– Raise Revenue.
– Promote Efficiency.
– Distributional Equity.
– Competitiveness.
– Simplicity.
• Jean Baptiste Colbert.
– Pluck the goose with a minimum of hissing.
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Economics, Finance & Marketing 7
Principles of Tax Reform
• Be clear on definitions:
– Revenue = government receiving a cheque
– Expenditure = government writing a cheque
– Refunds are not expenditure
– “Tax Expenditure” is not expenditure either.
• Promote economic activity.
– Value adding activity.
– Not make work, not financial sector.
• Be Revenue Neutral.
– Offsetting tax cuts, not the money will be spent.
– Taxes abolished, not rate reduction.
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Economics, Finance & Marketing 8
Reforming the GST
• Option 1: Do nothing.
• Option 2: Expand base or Increase rate.
• Option 3: Expand base and increase rate.
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Economics, Finance & Marketing 9
Reforming the GST
• My preferred option: Do nothing.
• Expanding base?
– Education (highly subsidised).
– Health (highly subsidised).
– Fresh food.
– International transactions (legal incidence of tax, input credits, foreign sales tax).
• Increase rate?
– To what level?
– Invitation to keep raising rate.
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