The gender pay gap is alive and well and ‘tax bludgers’ are thriving in Australia, as the latest figures show scores of millionaires paid nothing on their income. By Chris Wallace.
Chris Wallace is a professor at the 50/50 by 2030 Foundation, University of Canberra, and the author of How to Win an Election.
How ‘tax bludgers’ are ripping off their fellow Australians
The @ ethicsinbricks Twitter account declared this week: “Philanthropy is fine. Paying taxes is better.” The latest Australian Taxation Office statistics on tax paid by individual wage and salary earners in 2019-20 brings home how optional that obligation is for some in contemporary Australia – where growing inequalities become starker by the day.
The average taxable income of our 11,779,081 individual taxpayers was $63,882 in the last full year of the Morrison government.
But the average income of the 6581 residents of Perth’s 6011 postcode, which includes leafy Peppermint Grove and seaside Cottesloe, was five times the national average: a whopping $325,343.
In Sydney’s 2027 postcode, which includes Darling Point and Point Piper, the average income of the 5910 residents, including former prime minister Malcolm Turnbull, was more than three times the national average.
In Melbourne’s 3142 postcode, which includes Toorak, the 9970 residents’ average income was nearly three times the national average.
The average net tax paid by individual wage and salary earners was $19,790. That’s an effective average tax rate of 30.9 per cent on the average $63,882 annual earnings of wage and salary earners.
Yet Australia Institute economist Matt Grudnoff identified 60 millionaires in the ATO data who paid no net income tax at all.
Entrenched gender inequality in the labour force also jumps out in the figures. Men’s average taxable income was 41 per cent higher than women’s, and their average superannuation account balance was 25 per cent higher.
It shows the economy continues “to work very well for those it was designed for, and by,” says Melbourne’s Per Capita think tank executive director, Emma Dawson. “Wealthy men.”
“If you’re a surgeon in Toorak, a mining engineer in Cottesloe or a merchant banker from Mosman, you’re doing very nicely indeed, with the tax system providing plenty of options for you to stash your wealth away from the tax collector.
“Women working in the care and services economy, on the other hand, continue to struggle: our tax system takes every cent it can find from your meagre earnings while our welfare system begrudges even the slightest support to help you keep your head above water,” Dawson says.
All genders suffer from the consequences of some people’s tax avoidance and evasion. For women, this is further compounded by a specific labour-market disadvantage.
The gender pay gap is graphically highlighted in the ATO data. Analysing the figures by occupation, economist Greg Jericho found 91 per cent of women had a lower median salary than men in the same profession.
And the gender pay gap is worst in the state that contains the postcode with the largest average income. In Western Australia, women on average earn 21.2 per cent less than men, compared to a national gap of 13.8 per cent, according to the WA government’s 2022 Women’s Report Card.
“WA is the worst place in Australia to be a woman,” one media report declared.
Another striking feature of the ATO’s release was wage and salary earners’ propensity for rental property investment. Nearly one in five owns a rental property, and more than half of investment property owners enjoy tax breaks from negative gearing.
It’s those 1.2 million Australians whose property investments are being subsidised by taxpayers who put the fear of god into politicians wanting to reform property taxation. And 90,000 of those benefiting from negative gearing tax breaks own three or more rental properties.
Why does the tax system seem, as Per Capita’s Emma Dawson says, to work better for the rich than the rest of us?
There’s an old saying in public finance circles that “an old tax is a good tax”, meaning it’s hard to change existing measures because beneficiaries are loath to lose their privileges, and those from whom more revenue is expected fight strenuously to avoid new imposts.
Recent history in Australia underlines the potential political price for wanting to reform the system.
The aspiration of Bill Shorten’s Labor opposition to change tax rules on property investment and dividend imputation on share investments contributed significantly to its 2019 election loss.
The Rudd government’s attempt to establish a resource sector super-profits tax led to a ferocious campaign by mining companies against Labor. The tax had to be diluted by the Gillard government to stop the onslaught. The times are ripe to revisit resource taxation, and it will be surprising if the Albanese government doesn’t do so in a second term, if not this one, given its current “no new tax” commitment. Another problem is the way those determined to avoid tax are so adept at getting around measures to oblige them to pay their fair share.
The window tax imposed in England during the 18th and 19th centuries is a textbook example. It was a de facto wealth tax: the bigger the house, the more windows, so the higher the tax to be paid. It was easy to assess: tax inspectors could count the number of windows from the street. What could possibly go wrong?
Homeowners began bricking up windows. There are no window taxes today.
In contemporary Australia there is an army of professionals advising people metaphorically how to brick up their windows – people like the 60 Australians revealed in the latest ATO data who are earning more than $1 million a year but paying no net tax.
This includes facilitating the use of tax havens by individuals in a way that’s legal, but indefensible from a national interest standpoint.
A big opportunity to challenge and reframe individuals’ use of tax havens was missed during Coalition prime minister Malcolm Turnbull’s time in office. His use of tax havens was known but not pursued by the Shorten opposition for reasons that remain mysterious – especially since Labor at the time was otherwise prosecuting a general case against “the big end of town”.
In contrast, the Bill Hayden-led Labor opposition in the early 1980s mounted a successful crusade against so-called “bottom of the harbour” tax schemes that flourished during John Howard’s time as treasurer in the Fraser government. Labor’s election win under Bob Hawke at the end of that parliamentary term showed political campaigns can be set up and won against dodgy tax dealings.
The Hawke government survived a massive media attack on its imposition of an assets test to circumvent wealthy older Australians arranging their affairs to get aged pension benefits to which they were not otherwise entitled.
Hawke called and won the 1984 election over it. So fights to make the system fairer are not always losing ones, but they’re easier to win with the resources of government rather than from opposition. Either way, basing them on persuasive equity arguments is crucial.
The notorious term “dole bludger” is widely known. Not so “tax bludger”. Why?
A paper by Monash University’s Philip Mendes at the poverty and blame workshop at Macquarie University last month sheds light on the reasons.
Mendes locates the “high point of Australian poverty research and policy discourse” to the Commonwealth Commission of Inquiry into Poverty, chaired by Ronald Henderson and established by the Whitlam government in the early 1970s – poverty has been relegated steadily to the political margins ever since.
One of the key reasons for this relative silence, Mendes said, has been the “concerted campaign by neoliberal forces” based in think tanks such as the Centre for Independent Studies and Institute of Public Affairs, media corporations such as News Corp, business advocacy groups and political parties. They aim to “reframe poverty as an individual character deficit – that is, the result of individual behaviour and failures rather than economic or social structures, what is called ‘welfare dependency’.
“That term, which aims to blame and stigmatise those living in poverty, has been used to legitimise forms of welfare conditionality such as the Work for the Dole scheme and the cashless debit card that erode the social citizenship rights of many Australians.”
Pushback against the Morrison government’s outrageous Indue cashless debit card, and the Albanese government’s cancellation of it after winning office, symbolises a potential turning of the tide in stigmatisation of the poor.
The new government’s rhetoric overall is strikingly inclusive, and the direction of policy aligns with that rhetoric.
To counter the long-term efforts of the coalition identified by Philip Mendes to stigmatise poverty, an explicit message is required. And reversing permissive attitudes toward the scores of millionaires in Australia who pay no net tax is going to take a strong campaign shaping public opinion against “tax bludgers” ripping off their fellow Australians.
Since some are doing so legally, it demands changes in the law too.
Accounting partner avoids prison sentence over lies to Tax Office
A former senior tax partner has avoided a prison sentence after pleading guilty to two federal dishonesty-related offences that helped a client avoid tax.
Jennifer Lee Nairne, 64, of Milsons Point in Sydney, was sentenced to a two-year intensive correction order and ordered to carry out 150 hours of community service work after pleading guilty to knowingly lying and providing forged evidence to the Australian Taxation Office.
Nairne had knowingly falsified and backdated documents related to a tax minimisation scheme instead of being honest with the Tax Office, Judge John Pickering said during his sentencing remarks in the NSW District Court on Thursday morning.
Judge Pickering said there had to be a “significant general deterrence” to make it clear that the tax system could not be misled by accounting professionals.
However, he said a prison sentence was not appropriate in the circumstances and opted for an intensive correct order that could be served in the community. Nairne was also given a 10 per cent discount to her sentence because of her guilty plea.
The former accountant, dressed in a dark suit and wearing a necklace, sat quietly in the court dock during the sentence.
Judge Pickering accepted that Nairne did not receive any direct financial benefit from the crime and indicated that one motivation for her actions might have been a sense of loyalty to her client.
He also said he had taken into account that Nairne’s career had been devastated by her actions, and he accepted that she was remorseful over her conduct.
Nairne committed the crimes while working at the east coast practice of mid-tier firm PKF between 2007 and 2010. That PKF practice was purchased by BDO in 2012. In 2016, she moved to boutique accounting and wealth firm Fordham Group, but is no longer a partner at the firm.
The investigation into the case was carried out by the Serious Financial Crime Taskforce, an ATO-led joint agency operation targeting complex financial crime. The criminal investigation was carried out by the Australian Federal Police and the case was prosecuted by the Commonwealth Director of Public Prosecutions.
AFP acting detective superintendent Darren Latimore warned that the taskforce could now access data from a range of agencies and even overseas authorities when investigating financial crime.
“We can access AUSTRAC financial intelligence and the data that the ATO hold,” he said. “Services Australia, which runs the Centrelink program, is a partner agency, so we can look at the material they hold as well.”
He said the AFP could also tap “information through our international liaison network and our offshore partners as well”.
