Goldstein Policy Discussion:Taxation Reform

Sinclair Davidson

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Tax Facts

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Tax Facts

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Tax Facts

• High Income Individuals pay the bulk of personal income tax.

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Tax Facts

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• Large corporations pay the bulk of company tax.

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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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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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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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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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Keep in contact

• I blog at Catallaxyfiles.com

• I tweet at @sincdavidson

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