I was reading a interesting article on Institutional Economics regarding capital gains on residental and investment property
Why not abolish capital gains tax completely on all assets. It is a tax on investment.
We increase our capital stock and maybe productivity will increase as well eh?
That would kill the stagnant productivity and lack of infrastructure problems with one stone.
Of course this will never happen, similar to having a flat income tax rather than progressive. People like the idea that rich people get taxed more, and pollies pander to popular feeling.
I have always hated the idea that as I build up a business, at some point the Government is waiting in the wings (if I sell any portion) to take their cut. On the understanding of course that I am currently, presently and until I sell any portion not already being taxed so that the Government can provide the necessary public infrastructure to enable my business to grow.
You could argue if my business are almost completely of an online nature, that somehow the Government is still providing my business with "soft" infrastructure in the form of education.
When in doubt refer to the tax office reports (I noticed they are dragging the chain on releasing new statistics).
The summary, Capital Gains Tax (CGT) made the government $7 billion in 2004-2005. That
is 7% of Personal income tax. 17.% % of Company tax and about the same for GST.
What would $7.9 billion mean in terms of new investment?
In 2004-2005 $79 Billion was spent on new assets, so the CGT was 10% of that. It is not likely all the money would have gone into new assets. That would depend on the companies Return on Assets (ROA). So either it would held as cash, invested or given back as dividends.
Capital gains tax
http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=36&H36
OVERVIEW
For the 2004–05 income year:
* net capital gains totalled $25.7 billion, and were reported by 974,284 taxable individuals, 18,657 taxable companies and 75,075 taxable funds
* CGT payable on the net capital gains of taxable individuals, companies and funds was estimated to be $7.0 billion
* 461,713 taxable individuals, companies and funds declared $56.4 billion in total current year capital gains on their CGT schedules. Around 62.3% or $35.1 billion of these total capital gains were sourced from shares.
Personal income tax
http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=31&H31
OVERVIEW
For the 2004–05 income year:
* 11.2 million individuals lodged income tax returns
* individuals had total income of $447.5 billion, taxable income of $423.7 billion and net tax payable of $103.6 billion
* individuals claimed $23.8 billion in total deductions, including $11.9 billion in work-related expenses
* 7.7 million individuals were entitled to tax offsets and credits totalling $13.6 billion
* 73.0% of tax returns or 8.2 million were submitted by tax agents, and 11.6% or 1.3 million were submitted using e-tax.
Company tax
http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=32&H32
OVERVIEW
For the 2004–05 income year:
* 707,455 companies lodged returns, a 3.4% increase from 2003–04
* companies reported total income of $1,638.8 billion, a 7.3% increase from 2003–04
* total company expenses were $1,486.8 billion, a 5.8% increase from 2003–04
* companies were liable for $40.5 billion in net tax, a 16.2% increase from 2003–04.
For the 2005–06 financial year:
* petroleum resource rent tax totalled $2.0 billion.
GST
http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=39&H39
OVERVIEW
For the 2005–06 financial year:
* total net GST liabilities (including Customs collections) increased by 5.3% to $37.3 billion, up from $35.5 billion in 2004–05
* wine equalisation tax liabilities (including Customs collections) decreased by less than 0.5% from the previous year to $663.0 million
* luxury car tax liabilities (including Customs collections) increased by 7.3% to $322.4 million.
