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Monday message board

September 12th, 2005

It’s time, once again for the Monday Message Board. Civilised discussion and no coarse language, please. I’m hoping to do a post looking at the four years since 11 September 2001, but in the meantime I’d be interested in your thoughts.

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  1. still working it out
    September 12th, 2005 at 09:21 | #1

    Nouriel Roubini has interesting post on the appropriate monetary policy response to asset bubbles. He is of the view that monetary policy should be used to try and control asset bubbles. I have gathered from Pr Q’s comments here and there that he tends to agree but I am not sure.


    As someone who is currently experiencing the pain of entering the housing market after our own property boom I have a lot of sympathy with this view. However it does not seem to be the convetional econocmic wisdom. I find it strange that on such an important issue which has an enormous direct impact on the hip pocket of so many people that there is so much disagreement.

  2. econwit
    September 12th, 2005 at 10:22 | #2

    An interesting article by Gittens advocating abolishing tax rorts to align the top tax rate, company tax rate and capital gains rate tax to reduce distortions in the system. This argument has merit but for different reasons than Gittens is prepared to say.


    His assumption that the change in the way Capital Gains Tax was calculated gave a concession is wrong. Prior to capital gains being taxed at 50% of the marginal rate it was averaged over 5 years and inflation was compensated. The effective capital gain rate would generally be lower than 50% of the marginal rate. It no longer was so there was less incentive to use CGT minimisation after the reforms.

    The reason we had a large increase in the number of people utilising tax minimisation was that people were reacting to increases in their real rates of taxation. (total taxation has increased 2% of GDP and the effective rate at which Average Weekly Earning is taxed also increased markedly after the introduction of the GST.) This increase in real rates of taxation occur because marginal tax rates are never properly adjusted for inflation and so real effective tax rates increased. This increase was amplified in the inflationary period caused by the introduction of the GST.

    Aligning at 33% the top tax rate, company tax rate and capital gains tax rate to reduce distortions in the system will go along way to alleviate the rort that is caused by marginal tax rates coupled with inflation.

  3. Uncle Milton
    September 12th, 2005 at 10:52 | #3

    “Aligning at 33% the top tax rate, company tax rate and capital gains tax rate to reduce distortions in the system will go along way to alleviate the rort that is caused by marginal tax rates coupled with inflation.”

    The company rate (which is 30%, not 33%) is irrelevant to this discussion. With full imputation, company taxes are just withholding taxes. People who think they are being smart by diverting their income into company structures are not being smart, because they have to pay top up tax according to their marginal personal rate, when they pay themselves dividends out of the company.

    CGT is now much more concessionary than it used to be. Cutting the rate in half more than makes up for abolishing indexation of the asset base. Only if we had much higher inflation than we have would the reverse be true.

  4. econwit
    September 12th, 2005 at 11:41 | #4


    ” because they have to pay top up tax according to their marginal personal rate, when they pay themselves dividends out of the company. ”

    If they are smart and control their shelf company the company would pay for everything and their marginal rate would be below the company rate.

    “CGT is now much more concessionary than it used to be. Cutting the rate in half more than makes up for abolishing indexation of the asset base. Only if we had much higher inflation than we have would the reverse be true.”

    CGT was averaged over 5 years by dividing the gain by 5 and then compensating the index, whether you had it for 5 years or less. Not just indexing the cost base as you are inferring. It was previously more concessionary than it is now

  5. econwit
    September 12th, 2005 at 12:15 | #5
  6. Uncle Milton
    September 12th, 2005 at 12:15 | #6

    “If they are smart and control their shelf company the company would pay for everything and their marginal rate would be below the company rate.”

    I suppose you mean they put personal expenses through the company and so lower their taxable income.

    Anybody who owns a business can do this to reduce their taxes, and many people do. But it’s got nothing to do with whether or not the business is incorporated, and so the company tax rate has nothing to do with anything. If I own a milk bar that is not incorporated, call it Uncle Milton’s Milk Bar, I will claim my peronal milk expenses as a business expense. I will also do this if the business is owned by the shelf company, which I own all the shares in, called Uncle Milton’s Milk Bar Pty Ltd.

    Incorporation is useful for many things, like limiting my personal liability when my business goes bust, but not for reducing my taxes.

    I am not a tax accountant, but there is no way that the old CGT tax worked by dividing the gain by 5. If there’s a tax accountant reasding this, please fill in the details.

  7. Uncle Milton
    September 12th, 2005 at 12:19 | #7

    Econwit, thanks for the link to the ATO. I find tax rules to be eye glazing, but I think this is relevant part.

    “Prior to the 1999-2000 income year, for an individual and in some cases trustees, the amount of tax payable on your net capital gain was generally worked out by taking the amount of tax payable on one-fifth of your gain and multiplying that amount by 5”

    Which is a lot different to just dividing by 5.

    And then they go into a lot of deail.

  8. econwit
    September 12th, 2005 at 13:05 | #8



    But it is still a major concession on par with the 50%, the additional benefit was indexing. In my view indexing is a big benefit that has been removed.

    If you had a $20,000 gain you were taxed at the marginal rate of $5000. i.e $0. The concession was too be taxed at the marginal rate of 1/5 the gain.

    My point re companies is, that now days people who would normally be on a salary are becoming consultants and contractors who minimise their tax through corporate and trust structures. This would be stopped if all the rates were aligned.

    33% would be increasing the corporate and CGT rates but reducing the top personal rate. It would also reduce compliance costs

    See here my views on marginal tax rates comment 42 i.e. inflation makes them regressive and that is why I think they should be abolished.


  9. September 12th, 2005 at 13:35 | #9

    The ongoing saga of a Federal Labor MP trying to censor my book on Israel/Palestine continues with this Green Left Weekly article:


    Furthermore, I’ve started receiving vile anti-Semitic comments on my blog. I’m monitoring the situation. Hated by the Nazis (thankfully) and disliked by the pro-Israel crowd. Mmmm…

  10. ab
    September 12th, 2005 at 16:01 | #10

    Saga? Let’s not lose our heads, Antony. Anyway, the headline from GW is: ‘ALP MP advocates ban on anti-Zionist book’. There isn’t any mention in the article about any ban, only mention of Danby’s recommendation that MUP ‘dump’ it. Has Danby actually endorsed a ban, which I take to mean some kind of legal restriction on the book’s publication? Or has the meaning of the word ‘ban’ expanded while I wasn’t paying attention?

  11. David
    September 12th, 2005 at 16:08 | #11

    Scott Parkin. Is this guy really an enemy of the state? A quick web search shows him as an anti-Halliburton organiser. Does anyone know him? I’ll defer judgement on his detention for the moment but this looks on the surface to be another “They hate our freedoms” moment.

  12. Homer Paxton
    September 12th, 2005 at 16:11 | #12

    does he have a beard and is he part of Imam Quiggin’s vile plans to blow up suncorp stadium?

  13. SJ
    September 12th, 2005 at 17:50 | #13

    If you had a $20,000 gain you were taxed at the marginal rate of $5000. i.e $0. The concession was too be taxed at the marginal rate of 1/5 the gain.

    $20,000 / 5 does not equal $5000. In any case, that wasn’t how it worked. The $4000 got added to the rest of your income, and that marginal rate was applied to the whole of the gain. If you were on the top rate of 47% already, adding the $4000 didn’t change your marginal rate, so the full capital gain was taxed at 47%. If your other income was, say $45,000 in 2000/01, your marginal rate was 30%. Adding $4000 kept you under the $50,000 threshold for the 42% rate, so you paid 30% on the whole capital gain. If this system hadn’t applied, the $20,000 capital gain would have pushed you all the way into the 47% bracket.

    There will be individual cases where the old system provided a greater concession. On average, though, the new system provided greater concessions.

  14. September 12th, 2005 at 18:56 | #14

    Scott Parkin is clearly one of those tricky ones, Homer.
    No beard. Probably doesn’t even understand footy! Reckon Amanda and Phil have everything organised, on previous form.

    David, do not know him and glad i missed out on the meetings that he ran.
    A place on Chrismas Island is probably being organised ,right now. Those folks should understand that when freedom of speach vs wealth creators happens ,J.H is the umpire.

  15. September 12th, 2005 at 19:15 | #15

    I think readers should know that I’m now receiving hate messages of the most vicious kind. Writing about Israel/Palestine can be difficult:


  16. econwit
    September 12th, 2005 at 19:17 | #16

    “Prior to the 1999-2000 income year, for an individual and in some cases trustees, the amount of tax payable on your net capital gain was generally worked out by taking the amount of tax payable on one-fifth of your gain and multiplying that amount by 5. The result was then added to the tax payable on your other income.”

    So the way it is worded in the example is ambiguous. It should read: “1/5 of the gain is added to your taxable income and it is the marginal rate of that sum that is applied to the total capital gain”.

    My interpretation was the whole capital gain was given the concession of being taxed at the marginal tax rate that applied to 1/5 of the gain. i.e. if the capital gain was $20,000/5 = $4000. margin rate on $4000 = $0 as it is below the threshold; $0 X 5 = $0 this “result was then added to the tax payable on your other income”
    Or if 1/5 the gain was in the 15% marginal rate then the total gain is taxed at 15% and 15% of the gain is your capital gain tax liability that is added to your other tax liability.

    That is how I thought it happened so I stand corrected.

  17. September 12th, 2005 at 19:38 | #17

    Antony,let it rip.
    Do not be a treated like that.
    Let these people have their say.
    No moderation.
    It informs us all!

    Art is happening on the wall and you know that there are many brave, non-zealots in Israel.

  18. September 12th, 2005 at 20:14 | #18

    Thanks Joe2. Much appreciated.
    And please, feel free to come back to my site and comment.

  19. Enough!
    September 12th, 2005 at 21:10 | #19

    Antony, your oft-repeated postings about your book are boring and annoying. You’ve made your point. Unless you have something new to add, please don’t keep re-posting your message.

  20. September 12th, 2005 at 21:38 | #20

    I hadn’t noticed that this website and its attendant community was now owned over by an anonymous person with a fondness for apostrophes.

    Speak! For! Your! Self!

  21. September 12th, 2005 at 22:33 | #21

    To “Enough! Says”, if only people who like to restrict other’s speech like you do, would actually “get it”…

    Something new: the escalation of abuse and again the calls for restricting other’s speech,etc. Anthony L. actually does go to the real trouble of writing knowledgeably about such difficult issues as Israel and Palestine. Others post unknowledgeably about everything…

    Please join the discussion meaningfully, or stop the crap.

  22. September 12th, 2005 at 23:44 | #22

    Carlos: “Enough” has a point. The postings by this antony are day after day unrelated to the thread, & are harping on the one point all the time. I had always believed it to be comment spam which had snuk in through the filters. Whoever this antony is, he needs to get his hand off it, or at least change hands.

  23. September 13th, 2005 at 03:14 | #23


    For sake of argument company tax is 30% and personal is 50%. The difference is 20%. The benefit of incorporating a company is that the company can re-invest this 20% while an individual could not.

    Effectively, by using a shell company you can use some tax money (the 20%) to invest, take the benefits, and then finally pay the 20% when you take your dividend.

  24. September 13th, 2005 at 03:59 | #24

    I don’t like Craig Emerson all that much, but it’s difficult to disagree with the title and content of his latest op-ed in The Australian:

    John Howard is a socialist


  25. Uncle Milton
    September 13th, 2005 at 09:39 | #25


    If you retain the earnings in the company and the investment gives you a return of x%, then the amount of tax you pay will also increase by x%. The net present value of the tax you pay is the same, whether you take the money out of the company now and pay personal tax now, or whether you take the money out of the company later and pay personal tax later.

  26. September 13th, 2005 at 09:52 | #26

    If you make $100 using taxpayers money, then you do not pay an extra $100 in tax. You get to keep $50 that you would not have otherwise got if you did not have an incorporated company.

    Further, you delay paying the tax… so you decrease the net present value of the tax.

    Some people say that the tax is inevitable so what value is delaying it. Death is also inevitable. 🙂

  27. Uncle Milton
    September 13th, 2005 at 11:29 | #27


    If you delay paying the tax by reinvesting in the company, then it is reasonable to assume that that investment will grow the profits of the company and so when you finally pay yourself a dividend out of higher profits, you will pay more tax. Provided the discount rate at which you calculate the npv of the tax you pay is the same as the growth rate of the profits, then the npv of your tax payments is the same whether you retain the earnings or not.

    Of course, you might choose to reinvest the earnings somewhere that makes no money, like a bank account for a year that pays zero interest. Then the NPV of your tax payments would decrease, as you say. But what is the point of that? You’ve deprived yourself of the money for a year, for an effective loss to yourself, as well as depriving the government of your taxes for a year.

    So, if you are rational, and reinvest the earnings with a positive return, it all washes out and there is nothing to be gained, tax-wise through a company structure. (In fact, looking at it in detail, you actually lose money by retaining the earnings, because the franking credits lose their value over time.)

  28. lurch
    September 13th, 2005 at 11:34 | #28

    Uncle Milton
    If you structure your milkbar affairs effectively then you will only ever pay 30%. If any of your profits are retained by your milkbar company and then distributed to you as a franked dividend then the tax has been paid (provided your taxable income does not exceed the 30% threshold). This is a simplistic scenario but should be a guide to differrences in business structures and the way they are taxed. Also it may be viewed by some that claiming personal expenses as business expenses is tax evasion (think the ATO).

  29. econwit
    September 13th, 2005 at 11:35 | #29


    You assume that holding a deferred a tax liability in cash has no benefit. Insurance companies hold floats (premiums) which are the equivalent of interest free loans that they then reinvest at a profit. Deferring tax is utilising the same principle.

    Further, If you have profit sitting in a company you control with 30% tax paid you have additional flexibility to minimise my tax liability.

    (1) you can time when this is profit is distributed to a period when your marginal rate might be less than the company rate.

    (2) you could leave the retained monies in the corporation and sell the corporation at a capital gain to reflect its increased cash value, converting income into capital gain and taking advantage of the 50% marginal rate CGT discount.

  30. Uncle Milton
    September 13th, 2005 at 11:57 | #30


    if my taxable income doesn’t exceed the 30% threshold, then it is true I won’t pay any more tax after payment of company tax. But so what? That’s only because my income is so low that I’m in the 30% bracket.

    Claiming personal expenses as business expenses is tax evasion, but provided it is done on a small enough scale, is impossible to police. A lot of people have offices at home, and they claim their internet costs as business expenses. Do you think the ATO is going get them to prove how much of the time they are surfing the net is for business purposes, and how much for personal purposes?


    as a replied to JH, investing for a profit leads to you to pay more tax, not less, but in NPV terms it washes out.

    Your further point (1) is correct in principle. I don’t know how important it is in practice. Not many people have great variations in their year to year income that they move into a lower tax bracket where what you describe could occur. Those that do, like farmers, are allowed to smooth their income for tax purposes anyway.

    It is possible to do what you describe in your further point (2), but if you did that, you’d lose the franking credits.

  31. econwit
    September 13th, 2005 at 12:05 | #31

    I think franking credits can now be refunded for cash when you do your return? Not 100% certain.

  32. GDP
    September 13th, 2005 at 12:22 | #32


    Further, If you have profit sitting in a company you control with 30% tax paid you have additional flexibility to minimise my tax liability.

    That actually doesn’t help you that much. You have to compare the total tax paid. If you control the company you could presumably have paid out the profit to yourself, either as salary or in dividends, in which case you’ll be taxed at your full marginal rate – let’s assume it is the top rate of 48.5% for the sake of argument.

    Deferring dividends will help if your marginal rate is 30%, because you’ll get the franking credits for the tax already paid by the company. But the best you can hope for there is to pay out the whole of the 30% band – which is about $60,000-$120,000 I think, so $60,000 in total. So savings of 18.5% of $60,000 compared to the top rate, or about $11,000 per year. It’s a tidy sum but not exactly a huge tax dodge.

    Turning the company profits into a capital gain won’t help much because you lose the franking credits. So if you sell your company for the value of the profits it could have paid out as fully franked dividends, you’ll pay 1/2 your marginal rate on the sale (say 24.25%), in addition to the 30% already paid by the company. So you end up paying almost the same tax on that money (47% = 24.25% * 70% + 30%) than if you had paid the lot as salary or dividends.

    Needless to say, storing the money in a company is not how the pros do it. I think what they do is have a family trust that owns the shares in the company that has the profits. The proftable company pays its 30% tax and then distributes the remainder in dividends to the trust. I’m a bit vague on the details, but I believe the trust can then make interest-free loans to its members (as well as other benevolent gestures). Presto: money in your hands with only 30% sent to the idiots in Canberra for them to piss up the wall.

    Theoretically of course you have to pay those loans back at some point, but who cares if it is a family trust?

  33. September 13th, 2005 at 12:36 | #33

    For the slow ones… ASIO: Now jailing peace activists.

    Of course, nothing the mainstream media has done comes close to a decent analysis of why and what’s really going on. But do check what the SMH had to say: Orders from Washington behind deportation.

    But the best among all the media’s crap was last night’s Lateline with Pilger on Australia’s new anti-terrorism laws.

    See the full transcript, there are some very good insights there, comparing what’s going on in London and their judicial oversight v/s what our PM & Attorney General are trying to get away with here in Oz:

    JOHN PILGER: Well, I think what has happened here, the interesting difference in Britain between here and, say, September 11, was that there wasn’t that kind of panic attack. There was shock, yes. But you know, this is a country – this is a city that has been used to bombing, unfortunately. And I think there has been more examination of why, in this country, than anywhere. Certainly more than in Australia. The fact that the connection with the attack on Iraq has been made beyond all doubt, and not by the likes of me, and not even by the alleged Muslim bombers themselves, or those that came after them, but by establishment organisation. Here you have the Royal Institute for International Affairs, Chatham House, effectively saying, as indeed the intelligence agencies have said, that the reason London was bombed because Britain took part in this attack on Iraq. That’s why it happened. Now, undoubtedly there are other reasons, of course. A lot has been going on in the Middle East in my lifetime. But certainly as a principal reason, there is a general agreement, I would’ve thought, right across the board, from left to right in this country, that that’s what happened. So it’s a debate that has to – if Australia simply swallows these laws, and you have an Attorney-General – who has deserted an Australian citizen, David Hicks, in Guantanamo Bay – at the vanguard of these laws, I think that’s terribly worrying and we should be looking at what we can do about debating them properly and breaking silences and speaking about taboos.

  34. econwit
    September 13th, 2005 at 12:45 | #34

    Would you lose the franking credits? Not if you got the cash equivalent for them when you sold the company.

    Contractors and consultants income varies considerably from year to year, especially when they have converted income into a capital gain utilising negative gearing and then they sell or borrow against an asset.

    Anyway what about trusts for minimising tax? They can utilise income units, capital units and income splitting.

    Why do people bother with all these entities if they don’t minimise tax? To keep their accountant employed?

    The use of entities to minimise tax is pretty wide spread going by the amount of trusts and shelf companies that exist. My view is that aligning the rated would stop help curtail their use.


    I think we should do a hostage swap- Ruddock for Hicks.

  35. Roberto
    September 13th, 2005 at 13:09 | #35

    Carlos, channelling John Pilger, provided the following comment above: “…that the reason London was bombed because Britain took part in this attack on Iraq.”

    Lets accept this piece of pop-wisdom. So is murdering civilians in London therefore acceptable?

    There are plenty of people who opposed the Iraq war, but don’t murder innocents.

    In addition, what then of the insurgents in Iraq (who I guess we could say also opposed the war though have managed to get pretty good political mileage out of it), who are murdering their own countrymen.

  36. Uncle Milton
    September 13th, 2005 at 13:22 | #36

    You may be right about being able to sell franking credits, but since the value of franking credits decreases over time, they won’t be as much as if you’d used them in the first place.

    Trusts can certainly be used for income splitting, provided you can find someone to split with who is on a lower tax rate. Traditionally that has been the non-working wife, but these days, there are less of them around. The barrister whose wife is a surgeon isn’t going to save any tax by splitting his income with her. And children under 18 who get trust income are taxed at the 47% rate, apart from the first few hundred dollars, so that avenue has been closed.

    Still, income splitting through trusts does happen. But the point is, there is no additional tax advantage to having a shelf company involved. Company structures are very useful if you want to put some distance between yourself and your creditors. They are much less useful for avoiding tax. Trusts are particularly useful for keeping family assets in the control of the head of the family, and out of divorce settlements. They are also useful for minimising tax, but less useful than is commonly assumed.

  37. what the
    September 13th, 2005 at 13:37 | #37

    Tony Jones was grimacing and stammering all over the place as we were pleasantly reminded what an arrogant, hardline, unforgiving, nutter John Pilger STILL is. Like the wonderful sophist Michael Moore he makes you think that a country really doesn’t need to cultivate enemies when they can grow their own personal attack dogs just like him. Unfortunately, being rude to your interviewer or failing to pull your head in when you’re being a bit of an idiot is not enough of a reason have your views dismissed and nor should it be. Nor is having a seemingly endless string of almost unreadable books, sigh.

    Do many people in the USA/UK and Auststill believe in their heart of hearts that Iraq is NOT one of the causes of the most recent terrorist acts? Surely no. In this JP is stating the now obvious … it is.

    That some muslims in the world pursue not peaceful marches (like the so-called “west” does in spades) in defiance of this or any other war of their choosing but instead terrorise their own people and other civilians in foreign countries by blowing them to bits on the street is a mystery. That is the reason for new laws, not Iraq. That the laws are well-designed or not is another question.

    The world would have more sympathy for the apparent plight of the so-called “muslim world” if it actually put a bit more effort into its argument and stopped preying upon the Sudan, Thailand, Holland, Indonesia, even this morning in the Philippines and practically every country where they have the shits because their elites are religiously superior, economically backward, losing power and hostile to successful co-habition with other cultures.

    Just to take the philippines or Mindanao as an example, this war on citizens has been going on for decades well before iraq and the “insurgents”‘ only language is a home-made bomb. Not a brain cell nor a reasonable argument between them. Being in or pulling out of Iraq is not some amazing idea we can use to stop terrorists, it may stop them multiplying but if YOUR personal desire is to get out there and kill strangers on another country’s streets then laws are enacted to stop you or poepl like you no matter how good your reason might be for doing so. Of course, in China they probably don’t bother radical muslim separatists with new legislation so much as the very business-like implementation of brutal force.. but that’s another story of human rights.

  38. Homer Paxton
    September 13th, 2005 at 14:20 | #38

    Steve Edwards,
    it has taken you this long to realise this?

  39. econwit
    September 13th, 2005 at 14:54 | #39

    GDP & UM

    I might be mixed up on the logistics but if this is possible:

    “Presto: money in your hands with only 30% sent to the idiots in Canberra for them to piss up the wall.”

    Then all the rates (cgt,pt,ct) should be aligned at 30% with a $30k tax free theshold to make it fair on everybody.

  40. econwit
    September 13th, 2005 at 14:56 | #40


    The greens are red, the ALP are red & Johnny’s boys are red.

    Who can we vote for?

  41. GDP
    September 13th, 2005 at 16:06 | #41

    …all the rates (cgt,pt,ct) should be aligned at 30% with a $30k tax free theshold to make it fair on everybody…

    Indeed. But make it something like a $10K tax-free threshold + $10K for each dependent, and get rid of family tax benefits.

  42. September 13th, 2005 at 16:24 | #42

    I finally had an opportunity to look at Carlos’ 30A Network website, and on it, apart from condoning vandalising the Sydney Opera House and the usual undergraduate political rehtoric, the ‘network’ has as its banker…….the Commonwealth Bank!

    Now I am sure that while the ‘network’ was and remains critical of the Forbes love-in, it’s interesting that Commbank’s CEO was probably at that same event which the networkers (couldn’t find by the way).

    Irony anyone!

  43. Ros
    September 13th, 2005 at 17:14 | #43

    Don’t know exactly what JQ is thinking of, probably a consideration of economic effects and changes, thought about the question as I see it impacting on me.

    Conscious of the obvious like the level of security and the shifting of the balance in civil rights. Something that was actually argued about in this household at about three in the morning of the Twin Towers nightmare.

    The older arguing it had become necessary, the younger that it wasn’t necessary and wouldn’t achieve any thing. Have no idea whether an age difference like that carries over into the general population. Also the Iraq war is such a potent force for anger and dissension amongst us that it is hard sometimes to tell which attitudes are the result of 9/11 and which are from Iraq. It seems to me that there has been a greater polarisation of positions held and much less civility, which though identified as Iraq has to be in some ways from 9/11. We are a little more frightened than we were. But maybe I just didn’t move in such vigorous circles and am now more aware of the debate via this medium.

    While considering saw this report from Amnesty International

    “Amnesty International is deeply concerned that the Hamburg Supreme Court (Hanseatisches Oberlandesgericht) decided on 14 June 2005 to accept evidence which may have been obtained through torture or other cruel, inhuman or degrading treatment (ill-treatment)�

    This I would have thought was a major change for Germany. The changes in rights however, if this sort of thing is a trend rather than an aberration, which I don’t think it is, would say that for the foreseeable future there has been a shift in the west’s and its populations views on what the human rights balance should be.

    For better or worse more knowledge of Islam and the countries in the world that are Islamic or have large Islamic populations. Perhaps more than other issues 9/11 has made Australians see a global world and learn some more about it.

    A different feeling about multiculturalism, it has become I think for all Australians something more now than food and particular suburbs. In my case, though I don’t really understand what it (the policy) is I am less bothered by it and see advantages in such a policy that I may not have considered otherwise. While it always seemed to me that a multicultural society was a vibrant and learning one because of the influx of new ideas, I now see it as a being a part of a happier society in that the learning of tolerance brought by such a policy feeds into other beliefs one holds.
    (despite the fact that I am a RWDB)

    It seems to me also that post 9/11 the gap between the UN and the USA has been steadily increasing even apart from the Iraq war. And for Australia also. And that this feeds into issues other than terrorism. While it was the case that the US Congress and Senate wouldn’t go for Kyoto under Clinton, the US has now moved along with us to its own international agreement. Has this sort of approach been accelerated by 9/11? Is the idea of international law and international institutions led by the UN becoming less attractive, certainly for such as the Australian populous.

    Which events lead to which changes are hard to pinpoint.
    The sort of changes that I would assume alter my life post 9/11 but about which I have the least knowledge are economic and financial. If in Australia as in USA there has been as Hamilton says “a significant expansion in the size and power of government,…government is more intrusive� that is not something that I am conscious of particularly either. I am being heated up slowly?


    Lee H. Hamilton, co-chair of the 9/11 commission, served in Congress from 1965-99. some of his views expressed in this article. Indy Star 11/9/05

    Nearly every private industry has been presented with new and difficult challenges. Security has become a top priority. If you own a chemical plant, you had better take precautions to guard against an attack. If you work in a large office building, you need a disaster-response and evacuation plan. If you ship cargo, you face changing regulations. If you work for a major financial institution, new rules guard against terrorist financing. No matter what the industry, you face an economic climate vulnerable to shocks from a terrorist attack, jittery markets, or energy shortages tied to global instability.�


  44. observa
    September 13th, 2005 at 17:21 | #44

    “As someone who is currently experiencing the pain of entering the housing market after our own property boom I have a lot of sympathy with this view. However it does not seem to be the conventional economic wisdom. I find it strange that on such an important issue which has an enormous direct impact on the hip pocket of so many people that there is so much disagreement.

    SWIO, try thinking about the debate over terrorism and Iraq from a short and medium term perspective. Lots of disagreement about whether or not intervention there was/is necessary and what will be the short/long term consequences. Roubini is taking the reactionary monetary interventionist path cf those who argue we shouldn’t. However, there are those who believe all this is merely arguing about the best way of treating the symptoms of a prolific disease. The organism that caused the disease was excessive money creation and hence it is the carrier of that virus that needs to be constantly controlled if you don’t want regular disease outbreaks. ‘It’s in the skeeters stoopid!’ they cry, although we may be at the stage where we haven’t invented the microscope yet. It’s an intuitive kinda thing, although obviously some empiricism can be brought to bear. You’ll get the constant drip of that ‘money matters’ argument here http://www.brookesnews.com/index.html

    So SWIO, rhetorically, do you think Oz intervention in Iraq has made us more/same/less safe from terrorism now? What about in 5 or 10 yrs time? What about our intervention in Afghanistan? What if we pulled out now? These are not simple questions and difficult to answer in isolation. National economies don’t stand still in isolation either, while you contemplate the ultimate, econometric macroscope. Indeed, some would find such a tool, conceptually laughable. Stay tuned I guess.

  45. joe2
    September 13th, 2005 at 18:10 | #45

    I thank Carlos for the link to the Pilger interview.
    He ,Pilger,is hardly a “nutter”. Indeed, makes good points about the state of civil liberties in the U.K. ,as compared to our own rapidly diminishing rights.
    Can hardly see how an organisations banking arrangements are “ironical”.
    Surely, any group, needs to run the books properly and it would be necessary to deal with a financial group of some kind.
    My regret is that many attempt to attack individuals ,rather than the argument they propose. Hope i haven’t just fallen into that trap.

  46. SJ
    September 13th, 2005 at 18:55 | #46

    GDP says:

    Turning the company profits into a capital gain won’t help much because you lose the franking credits.

    The franking credits are a distraction.

    Let’s say you’ve got $100,000 cash to invest, either in your own name or through a company. For simplicity, you’re just going to stick the money in a term deposit paying 10% annually.

    At the end of each year, you have to pay tax, either at your marginal rate of 48.5%, or at the company rate of 30%. Then you reinvest what’s left in another term deposit.

    At the end of ten years, you’d have $165,000 if you invested in your own name, or $197,000 in the company. There’s no further tax payable. You end up with an extra $32,000 via the company, and the money is accessible by simply winding the company up.

  47. SJ
    September 13th, 2005 at 19:10 | #47

    I should point out, though, that if you did the same exercise via a super fund, you could end up with as much as $337,000 after tax. That’s an extra $172,000.

  48. joe2
    September 13th, 2005 at 19:37 | #48

    Free Scott Parkin.
    Just for the sake of democracy and freedom of speech.
    Even decency, for Texan visitors of all kinds.
    George 11,included.

  49. Ros
    September 13th, 2005 at 20:49 | #49

    While there is much said about the corruption and incompetence of New Orleans and Louisiana (even Al-Jazeera ran an article on the New Orleans Levee Board and the Good Ol’Boys of Louisiana, which was either stolen from the BayouBuzz or the other way around), their civic society is clearly something different. As a result of the simulation which was run by the city and state authorities and FEMA in 2004, at which the local communities were told that there was no way that the city could be evacuated by the authorities the local and state government appears to have done bugger all. FEMA seems to have just let it fade away. However the local civic society, having been told that it was up to them to set up arrangements to get people out went away and did that. If I recall right it was expected that only 60% could be got out, 80% was. Churches and other civic groups developed evacuation plans and it would appear they worked reasonably well. And a big part of that was the buddy evacuation arrangements developed within communities (that is looking after individuals within the 100,000 who didn’t have private vehicles). One parish got out over 90% through their planned buddy system. If not for the strength of their civic society how bad would it have been.

    Some individuals may have behaved appallingly, but the citizenry of New Orleans I believe has no reason to be ashamed of itself. Considering the poverty and exclusion and their abandonment they have every reason to be proud of themselves.

  50. lurch
    September 13th, 2005 at 21:04 | #50

    I’m unsure how a trust makes “interest free loans to it’s members [beneficiaries]”. Any income unaccounted for by the trust wiil be taxed to the trustee at 47% (for example – income to which no beneficiary is presently entitled, ITAA36 s 99A). On the other hand if a persons discretionary trust owns and maintains the assets to which they have full use of and the trust is able to make a distribution to a corporate beneficiary owned by the individual, then a substantial saving of tax (and expenses) can be envisaged. If his distribution can be kept to the present company tax rate of 30% (under $58,000), then I would suggest a comfortable lifestyle can be maintained.
    As for who cares if the loans are paid back, then if you are talking about directors loans then I think you might be subject to ITAA36 Pt IVA

  51. September 13th, 2005 at 22:43 | #51

    Pity the tourists had no time to form a buddy network!

    That is an interesting point Ros, though the authorities were doing what they thought was right – creating a large public awareness campaign to tell people they were on their own. The DVD was nearly finished.

    I suppose the civic society coped in the way we deal with bushfires – people had made contingency plans, they had fair warning as the hurricane flowed towards them, and hopped into their cars. They are used to the violence of nature. They had already worked out their civic networks.

    And there was no choice about staying, unlike our position with fires where you can save your home if you keep your nerve. I am still surprised so many people left their pets. And what about all those cars still in town to get washed around?

    You are putting aside the question of whether the government should have agreed to evacuate everyone. The decision created, as you say, the situation in which civic groups took up the responsibility, and there are pretty good reasons for doing that. It worked at the necessary level of detail, in a society full of cars.

    But within this framework, the big issue presumably in leaving was security. By not evacuating the people without cars, the government created a situation where the surviving property of the evacuees was at risk. In this situation its the crooks and the crazy people who stayed, as well as the simply poor.

    There are stories that AMTRAK offered trains before Katrina and were turned down. Aside from that, I suppose the rational strategy to deal with those too poor to evacuate themselves – assuming you can’t do it because there aren’t enough buses – is to make sure you have food and water dumps, and a continuing police presence.

    But by any criteria, they certainly failed badly by leaving the tourists, the sick and the old to fend for themselves. That was an unmitigated humanitarian disaster.

    I was particularly struck by some remark in the blogosphere about someone describing loading their ancient car and driving away from the city. But no-one had any cash, or viable credit cards. Broke, you see. They made it to a petrol station, and some stranger just stood there and paid for their petrol, and the next five people – all I presume low on the necessary readies.

    A lot of people in that town lived on a fine line financially. There was another moving note on the times-picayune website where someone left the position of their car and where she hid the key, once she realised the town was filling up with water. And another blogger who got out because a friend gave him the directions to the truck in his garage, and where to find the keys.

    But I think the idea of simply providing a car based escape plan and leaving it at that is completely alien here. Even in the bushfire country I know of there are well marked survival and evacuation points.

  52. September 13th, 2005 at 23:51 | #52

    Yes UM — you will pay more tax. Because you earn more money. That is a good thing.

    Consider an example.

    without company — $100 invested. 10% return. Get $10. Pay 50% tax. Get $5. Reinvest. $105 invested. 10% return. Get $10.50. Pay 50% tax. Get $5.25. Take out all profit = $10.25 after two years.

    with company — $100 invested. 10% return. Get $10. Pay 30% tax. Get $7. Reinvest. $107 invested. 10% return. Get $10.70. Pay 20% tax on old income ($2) and 50% on new money ($5.35). Take out all profit = $10.35 after two years.

    Trust me. Lots of people do this.

  53. September 13th, 2005 at 23:52 | #53

    And that tax reform 30/30 (30% tax, $30k tft) idea is brilliant… who thought of that? 🙂

  54. SJ
    September 14th, 2005 at 00:10 | #54

    John Humphreys says:

    And that tax reform 30/30 (30% tax, $30k tft) idea is brilliant… who thought of that?

    I note that your link says:

    I first wrote about this policy proposal in 2004.

    So I guess that the answer is Paul Keating, some 20 years or so before you thought of it. John Hewson, some 15 years before you thought of it would also be an acceptable answer.

  55. observa
    September 14th, 2005 at 01:53 | #55

    Nice debate about income tax guys. Defining true income, sheeting it home to the individual and then taxing that entity requires the wisdom of your maker and an awful lot of Santa’s helpers. Notice that total reliance on resource and carbon taxing does away with most of the problems. Pay as you consume and who cares whether it’s an individual, corporation, trust, religious or charitable organisation doing the consuming? The more you consume the more you pay and carbon taxing takes care of the equity bit. Has conservation benefits too. Shifts the costs of capital and labour more favourably toward the latter. No income tax and no company tax. What multinational in their right mind wouldn’t want to headquarter here if we offered them that? They could transfer price to their big heart’s content and ours too.

  56. September 14th, 2005 at 05:43 | #56

    SJ — I would be honestly fascinated to see previous 30/30 plans. Would you be so kind as to pass me some links? Pls feel free to e-mail me directly.

  57. GDP
    September 14th, 2005 at 07:16 | #57


    My memory is fuzzy but you are probably correct that there is more than one trust->company layer in there in order to get the 30%. I have heard that this kind of thing is the way many accountants/lawyers structure their affairs. I have also heard that the trust is not usually controlled by the ultimate beneficiary, but whether that is for tax or asset protection I don’t know.

    Are loans to trust beneficiaries subject to the same tax requirements as those to company directors?

    Of course all this is nuts: as has been pointed out a flat 30% across the board would fix it. And it has less to do with “efficiency” or other economic motivations and much more to do with our general sense of what is fair. Somewhere around 25%-30% marginal tax I basically don’t care what the govt does with my money – I’d rather go out and make more money than devote excessive energy to tax minimization. But start taking any more than that and I sure do care.

  58. Ros
    September 14th, 2005 at 09:31 | #58

    Professor Peter Leech was on Radio National Breakfast this morning discussing some of the economic impacts of terrorism. Two were, risky projects with high returns inhibited by terrorism and business seeking out and outsourcing to low cost locations, terrorism was affecting externalisation of activities. These effects would seem to be bad news for the developing nations.
    Also made the point, those large amounts of infrastructure that have to be protected but are very difficult to protect. With the costs going up to meet these demands expenditure in other areas is reduced, eg R & D, and this will have effects over time.

    It would seem reasonable to assume that the seminal event in making terrorism an issue of major importance was Sep 11. Don’t know how much of this happens in Australia but certainly post 9/11 US firms started training their employees travelling or working overseas on how to minimise their likelihood of being terrorist victims.

  59. Uncle Milton
    September 14th, 2005 at 09:43 | #59

    “Consider an example …”

    Without company, I get $5 income after tax in the first year and $5.25 after tax in the second year, NPV of total after tax income = $9.77

    With company, I get no income in the first year and $10.35 after tax in the second year, NPV of total after tax income = $9.41.

    I’d rather not have the company.

  60. Ros
    September 14th, 2005 at 09:50 | #60

    David those stories of decent people doing decent things, and there would be many more stories like that. And your argument that the authorities were also doing what they judged to be right and possible is a reasonable one on reflection.
    But instead of the decent people stories we are subjected to an avalanche of abuse from all seeking to blame and condemn. That the responses were insufficient inadequate and wrong, that the people of the USA have failed. What is this disaster being judged against, how do all know (with hindsight) that the horror was avoidable. I don’t wish to see the USA humbled, but some humility might cause them to look a little differently at this, that even the people of the most powerful nation in the world can be confronted with events they cannot manage (and as this was a weather event, not predict either). The first round of the game was Katrina was down to Bush and the failure to sign Kyoto (Congress and the Senate would have to be included in this). If the belief is that Kyoto is crucial and now was the time to say so, surely a more effective message would be, it is the case that the earth can throw up more than even you can manage, so consider that you may be wrong in thinking that even global warming is under your control. Or the evacuation orders came too late, you didn’t have the necessaries. That concerns re the cost of an unnecessary evacuation were without foundation (again with hindsight, now that it has happened) But Katrina was a Cat 3 until it made landfall or just before. Ha, Gotcha closes minds and allows for the learning of nothing.

    Yes many did do the right thing in authority as well. The bridge thing (police shooting over the head of evacuees trying to cross) is examined by a blogger in more detail and in the end it is hard to judge what was going on and whether the behaviour of those police was unreasonable under the circumstances. But the MSM had no problem deciding how to report it.

    So all the while the ordinary decencies, let alone the heroic behaviour, are ignored in a rush to excoriate.

    On the blogosphere you get a better sense of how the American people are rallying and helping. But even that kindness and giving is questioned. Heard one commentator saying, oh yes the people of Houston are being very generous but wait awhile and see what the impact of this influx of people from New Orleans means to them. It insulted the people of Houston and the people of New Orleans.

    The pet thing was awful. Darwin if I remember had the same problem. Don’t understand people who say listen old boy your pets aren’t relevant. We would not leave ours. Was nice to see the Guard taking out one old chap and his nine large dogs. Bet his ex neighbours who saw it wished it had been done years before.

    That the bastards were left to rape and kill and steal seems a reasonable proposition. Could they have been controlled? Sadly the image of the people of New Orleans was formed by the emphasis on these sods being temporarily enabled and empowered by the disaster.

  61. econwit
    September 14th, 2005 at 10:58 | #61


    “I should point out, though, that if you did the same exercise via a super fund, you could end up with as much as $337,000 after tax. That’s an extra $172,000”

    If you are compounding @10% annually $100k for ten years you end up with $259K assuming no tax in the equation. $337k is 13% compounded pa. How does a supa fund get 13% when we initially are investing at 10% pa?


    30% tax: idea is brilliant who cares who thought of it.

    (30% tax, $30k tft): idea is brilliant

    “But make it something like a $10K tax-free threshold + $10K for each dependent, and get rid of family tax benefits”: idea is brilliant too.

  62. GDP
    September 14th, 2005 at 13:35 | #62

    It’s well past Monday so rather late to change the subject, however I’d like to point people to a piece by Janet Albrechtsen in today’s Australian on the current state of left-wing academic publishing:


    Thoroughly enjoyable read.

  63. September 14th, 2005 at 17:56 | #63

    re: Scott Parkin – what is it with Texans trying to run the world. Bush with his cowboy hat, and this other guy with his ‘non-violent’ balaclavas.

  64. September 14th, 2005 at 17:58 | #64

    re: GDP I found the following line in the Albrechtsen article interesting: “Dennis Glover talks of the “triumph of nasty right-wing populism, which cheapens our democracy”. Well, Latham (according to the Loner bio) scribbled CRAP all over Mr Glover’s work.

  65. SJ
    September 14th, 2005 at 18:53 | #65

    econwit says:

    How does a supa fund get 13% when we initially are investing at 10% pa?

    It all depends on the original source of the $100k. If it comes from after-tax savings, you can do better by salary sacrifice. $100k would be difficult to do in one hit, unless your salary was pretty enormous, but the idea still works if you divide the amount by 10 or 100.

    Basically, if you’re on the top marginal rate, salary sacrificing allows you to put almost twice as much into the super fund. You start with about $175k in the super fund, as opposed to $100k if you were investing in your own name or via the company. Plus, the fund’s earnings only cop a 15% tax rate.

  66. GDP
    September 14th, 2005 at 21:52 | #66

    Elizabeth: the left does seem to have far more problems with democracy than the right. How else does one explain their loathing for Howard – now 4 times democratically elected?

    I don’t remember Keating or Hawke being treated by the right with anything like the almost universal derision Howard receives from the left.

  67. jquiggin
    September 14th, 2005 at 22:10 | #67

    “the almost universal derision Howard receives from the left.”

    GDP, since you’ve chosen to make your comment on this left-wing blog, perhaps you’d like to back it up with specific evidence.

    I don’t recall any occasion on which I’ve treated Howard personally with derision, as opposed to vigorous criticism. I’ve always regarded him (unlike most of his ministers) as a significant political figure.

    Here’s a comparison of Howard and Beazley, noting “Howard is, and always has been, a much more substantial figure than Beazley in all but the most literal of senses.”

  68. jquiggin
    September 14th, 2005 at 22:14 | #68

    “But Katrina was a Cat 3 until it made landfall or just before. ”

    Wrong. Katrina was a Category 5 until it made landfall or just before.

    Honestly, I’m stunned by the unwillingness of the Bush cheer squad in the blogosphere to face facts on this one. Bush himself has admitted it was a stuffup, and even usually compliant MSM outlets like Fox have broken ranks, but all we get from the supposed factcheckers is “Good News from New Orleans”.

  69. GDP
    September 14th, 2005 at 23:02 | #69

    “GDP, since you’ve chosen to make your comment on this left-wing blog, perhaps you’d like to back it up with specific evidence”

    Ok, start with Philip Adams.

  70. Ros
    September 14th, 2005 at 23:08 | #70

    My apologies I didn’t read this carefully enough on physicsforum

    “It was Saturday evening, 7 PM and 10 PM, when NHC announced that Katrina was Cat 3 (with sustained with winds of 115 mph), but by 1 AM Sunday Morning Aug 28, Katrina had strengthened to a Cat 4 with sustained winds of 145 mph. That was 27 hrs before landfall (not 36 hrs).
    Landfall was Monday (Aug 29) morning just after 4 am. I posted some satellite images


    Earlier on Saturday Katrina was just a Category 3.�

    The 4 am hurricane advise at that site was that it was expected that Katrina would make landfall as a Cat 4. and would move onshore at the southeastern louisiana coast just east of grand.

    Well that is what the geeks were saying, and they could disagree in a civilised manner.

    As my point was that to make the decisions (Nagin and Blanco) to require a mandatory evacuation with all the costs and dangers in an evacuation (there were reports of individuals who died as a result of the evacuation) it was a very difficult one for those two authorities to make. Hindsight makes the decision so obvious but it wasn’t that simple for them. As I said I didn’t read it carefully enough but even so up until 27 hours before Blanco and Nagin’s information would have been that it was currently a Cat 3, and then information at 1 am is difficult to implement. I would assume also that their information was that the levees could handle a Cat 3.

    Then they moved to mandatory evacuation.

    Thanks for the knee-jerk reaction and attack.. And if there is something abhorrent in finding that the people of New Orleans were not just victims or bastards rather that they showed courage and care and attacks on the local police may have been undeserved, that it is just “good news from New Orleans� well so be it.

  71. jquiggin
    September 15th, 2005 at 06:29 | #71

    Ros, apologies for picking on you. On rereading, your comments weren’t the kind of thing that I was objecting to, and I shouldn’t have criticised them in this way. I’ve just read a lot of stuff that is clearly motivated by the desire to defend Bush specifically, even in an instance where his and his Administration’s performance was clearly indefensible.

  72. September 15th, 2005 at 18:04 | #72

    This may amuse readers around here.

  73. what the
    September 15th, 2005 at 20:54 | #73

    so beazley stopped the interview.

  74. John
    September 15th, 2005 at 21:10 | #74

    UM… in my example the person re-invested their profits. As I have always claimed the benefit of a company is that it allows you to re-invest what is effectively `tax` money it makes no sense to use an example when people aren`t re-investing.

    So in my example — you are better off with a company.

    I agree that if you aren`t re-investing then there is little value in a company. But sometimes people re-invest, and so companies are a useful structure given our tax system.

    And if you don`t want to re-invest in one particular year, you can always have your company pay you an income. Well, directors fees are better because then you dont have to pay yourself super.

    Like I said — trust me. People do this. Agreed? Agreed. Good.

  75. craigm
    September 15th, 2005 at 22:36 | #75

    Tampa, children overboard, general panic over spike in refugee numbers coming by boat, Iraq, backing of government ministers and other liberal members found rorting the system. I can’t think of any reason why Mr. Howard should cop flack from the left.

  76. September 15th, 2005 at 23:49 | #76

    If Andrew Peacock was given eleven goes at a breathalyser, why? Were they seeing if it would come right, and if it had, would matters have proceeded? How many attempts do other people get?

  77. SJ
    September 16th, 2005 at 03:06 | #77

    I think you may be misinterpreting what happened:

    “The accused was asked to supply a sample of his breath 11 times, however failed to do so,” the statement said.

    Mr Peacock said he was unable to comply because he suffered diabetes and had undergone open-heart surgery several times.

    “On the 12th occasion, the accused was given a Form of Demand, and supplied a sufficient sample.”

  78. Ian Gould
    September 16th, 2005 at 21:31 | #78

    >I don’t remember Keating or Hawke being treated by the right with anything like the almost universal derision Howard receives from the left.

    True, I remember them being treated with hatred, endless abuse and accusations of treason.

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