Taxes: Robbing Peter to Pay…Peter?

A government with the policy to rob Peter to pay Paul can be assured of the support of Paul.’

George Bernard Shaw

Ah taxes. Can’t live with them. Can’t…well, maybe we could live without them. Who knows? It hasn’t been tried for millennia. But we won’t squander your time daydreaming about what will never be.

Tomorrow marks the end of another financial year. And if you’re like us, you’ve probably got taxes on the brain. And you likely have a ballpark idea of how much money you owe the government…or are due to get back.

Depending on income level, capital gains or losses, and a host of other factors, most Aussies fork over 25–35% of their hard-earned cash to the government. And that doesn’t include the 10% goods and services tax (GST) you pay on the majority of your purchases.

Of course, 10% sounds pretty good when you’re at the petrol station. For every litre of fuel you buy, the government takes 40.1 cents. At today’s petrol prices, that’s a hefty 30% levy.

That, in turn, seems a bargain when you buy ‘full strength’ packaged beer…taxed at 46 cents per ‘standard drink’. You can pick up a slab for $40, with each bottle considered 1.4 standard drinks. Meaning the government considers your 24-bottle case to contain 33.6 drinks, and slugs you for $15.45. That’s a 38% slice of the pie…taken from your ‘after tax’ income.

Now, Aussie smokers would leap at the offer of a measly 38% tax. But we’ll leave the ever-ballooning tobacco taxes — and emerging billion-dollar black market they’re fuelling — for another day.

Let’s turn our attention instead to two new government cash grabs…erm…taxes you may well be paying with what’s left of your pay cheque next year.

First up…the bank tax.

In May, Treasurer Scott Morrison announced the government would place a levy on the big four banks, plus Macquarie Bank [ASX:MQG]. The government hopes the new tax will ‘raise’ $6.2 billion over the next four years.

South Australia recently jumped on the gravy train with a similar levy it hopes will ‘generate’ $307 million over the same timeframe. Over on the west coast, bureaucrats in Perth are salivating over their own yet-to-be-announced plan.

Now, we put ‘raise’ and ‘generate’ in quote marks for a reason. Because taxes do not generate a single dollar. Ever. They simply move money from one wallet to another. And on the way, plenty of happy, taxpayer-funded officials clip the ticket. All before a single cent of whatever remains of your tax dollar is redeployed back into another wallet.

In the case of the bank tax, the mere announcement destroyed far more wealth in a matter of weeks than the government hoped to raise in four years. That’s right — more than $40 billion has been wiped from the sector since the end of April.

Westpac Banking Corp [ASX:WBC] alone has lost more than $15 billion in value.

How’s that for a brilliant plan to ‘raise’ revenue?

But the revenue-generating pundits aren’t done yet…

Robbing Peter to pay…Peter?

We’re sure you’ve heard the saying, ‘Robbing Peter to pay Paul’. Apparently, it dates all the way back to the 1400s. According to Stack Exchange:

The expression refers to times before the Reformation when Church taxes had to be paid to St. Paul’s church in London and to St. Peter’s church in Rome; originally it referred to neglecting the Peter tax in order to have money to pay the Paul tax.

Like it or not, taking from one group to give to another is as old as society itself. But many existing taxes — and several proposed new ones —take from one group only to give it back to the same group. Less, of course, all the bureaucratic fees clipped off during the process.

One proposal that refuses to die is the much-bandied sugar tax. Brilliantly combining higher taxes while ramping up nanny state regulations…what’s not to love? (Full disclosure — we’re drinking a can of Coke as we write.)

If you read the mainstream, it’s easy to believe a sugar tax is the silver bullet that our ever more obese nation needs.

We’re subjected to headlines like ‘Taxing sugary drinks would boost productivity, not just health’, from The Conversation.

Or the more conspiracy-oriented angle, like this headline from The Sydney Morning Herald: ‘The not-so-sweet link between Big Sugar and the peak body for dietitians’.

Everything you read goes on to say how more than half of Aussies are obese. It’s costing lives, jobs, and is on the verge of destroying society as we know it.

From The Conversation (my emphasis):

Obesity has also been estimated to cost Australia about A$8.6 billion a year or more. Not only does obesity drive up health-care costs, by causing illness and premature death, it also reduces people’s ability to work and contribute to the economy.

Added sugar contributes energy to the diet, but no useful nutrients. Increasingly, health experts suggest we should be treating sugar, and in particular sugar in soft drinks, as we do tobacco or alcohol, by taxing it to reduce consumption and so reduce obesity rates.’

That’s right. Let’s treat sugar like tobacco and alcohol.

Confectionary shops will demand ID to prove you’re over 18 before selling you a donut. And the donut, now priced at $10, will come in a plain brown bag, showing a frighteningly obese individual, along with the words ‘Obesity causes illness and premature death’.

Enjoy your donut.

And just as the excessive alcohol tax has put an end to the Aussie drinking culture (right?), the sugar tax will soon turn us into a nation of productive, healthy athletes.

Not only that, it will raise revenue!

From The Age (my emphasis):

A sugar tax, as proposed by the Grattan Institute, would raise $500 million a year, which could be used to increase the $60 million a year the federal government already spends on anti-obesity programs.

Well there you have it.

Let’s ‘raise’ $500 million from the nation’s overweight sugar addicts…so we can give it back to them in the form of treatment programs. And line the pockets of hundreds of new administrators along the way.

As we said, what’s not to love?

Cheers,

Bernd Struben,
For Markets & Money


Bernd Struben is a contribution Editor of Markets & Money. He holds a degree in Economics and is a published novelist. Bernd’s career spans multiple countries on four continents. With his diverse background, he brings unique business insight and a libertarian twist to his columns and analysis in Markets & Money.


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