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80 thoughts on “Monday Message Board”
Robert Carling puts an argument equivalent to mine on the case for retaining imputation benefits. His argument is that Labor is advancing this policy because they have calculated they can get away with it. From the misunderstandings evidenced on this thread about the character of corporate taxes and the imputation system I think he is right. Its a good article.
I mean, of course franking credits should be refundable.
But do you know what? I don’t care. I think it’s an absolutely terrible policy and… like, sure, whatever. Given a choice between caring about franking credit refundability and caring about making powerstations that run on supercritical combustion of US dollar bills… it’s just not something I can bring myself to care about. The ALP’s franking policy is a terrible policy I am completely OK with.
[I suspect it’ll get dropped after the election and made up with a high-end tax hike, but if it’s not I’m still OK with it all.]
Robert Carling also here
He’s right, it’s not imputation that is being challenged it is the cash component of the refund.
Is there a principle or policy of “no double taxation”? If so, it is honoured more in the breach than in the observance. It certainly does not apply to workers. Workers pay tax on income. Then they pay tax again (GST) on their remnant income when they purchase something. This is double taxation. Also, I think (but correct me if I am wrong) that a fuel excise plus GST then equates to triple taxation.
I have nothing against double or triple taxation in principle. What counts is the final effective tax rate, not the way components are calculated and compounded in detail. What counts even more is progressive tax equity. Problems and injustice occur (IMO) when people with high wealth and income use an over-complex and illogical tax system to pay little or no tax. One key, as Piketty pointed out, is an annual tax on high wealth itself.
The point is, refundable franking credits mean that australian companies are not taxed except on dividends they could have paid but didn’t: the entire burden falls on the shareholders. This has some pretty impressive effects wrt corporate governance and it — plus super rather than pension funds — are a big driver of why australia has lower rates of corporate bankruptcy.
The chancers don’t like either of these things and would rather people (shareholders and ex-employees) were “encouraged” to leave their funds under control of management where they can use them to hide fraud longer.
The change here isn’t a huge change but it’s not a good one.
It seems a crazy brave thing that Labor have embarked on, reform from the wrong side of parliament.
Collins Street is exactly correct. The burden of corporate tax now falls on retained earnings. One rationale for this is that even though these retentions will generate dividends and capital gains in the future, they are in the future so that tax liability for shareholders is deferred.
And the dividend bit, yes, corporate tax doesn’t really exist on it. This is taxed as part of the shareholders income. It is this bit that some discussants do not seem to understand. The shareholders when they buy equity in a firm that pays corporate taxes are purchasing dividend streams from which the firm will have already deducted their tax liability up to to the corporate rate.
Rog still doesn’t get it quite right because he states “it’s not imputation that is being challenged it is the cash component of the refund”. But all imputation credits accrue to shareholders as cash refunds. What people are questioning is whether the cash refund should be paid to those not liable for other tax. Carling, in my view, gets it correct:
“It’s not that Bill Shorten and Chris Bowen haven’t attempted to justify abolishing refunds on grounds of principle, just that the principle they cite is a red herring: that there should be no tax refunds when no tax has been paid.
This has superficial appeal, but does not withstand scrutiny in the case of franking credits. The imputation system is meant to ensure shareholders pay tax on franked dividends at their marginal rate after taking into account the company tax already paid on the profits that fund those dividends. This is what the principle of ‘no double taxation’ means.
In an imputation system, company tax becomes a prepayment of the shareholder’s own tax — whether personal or super fund tax. In the case of a zero taxpaying shareholder, it means the company tax has to be refunded in order to keep their tax at zero. In the case of many taxpayers, it means they pay more tax to top up what the company tax has already paid on their behalf.”
But Carling does state that imputation is a separate issue
“Some economists say imputation has outlived its usefulness. That may or may not be the case, but it is a separate issue. For as long as the imputation system remains in place, refunds should remain as part of it.”
Yes, you are right HC, only those who pay no tax are being excluded from the refund.
Anon was me (grr).
All the Lower Darling’s fish ‘could be dead by the end of summer’ and at the bargain basement price of EIGHT & a HALF BILLIONS of yours and my taxes. Grrr in no way covers it.
Intentional irrational ignorant and what is an ‘i’ word for “because we can”. They could have waited until wentworth group published report linked below. And garned a tiny bit of positive political capital. I am astonished.
How are laws enabling them do this!? As in the financial “bound” they know no bounds.
“”All the Lower Darling’s fish ‘could be dead by the end of summer’, with flows from lakes now cutLocals are warning that all the fish in the Lower Darling could be dead within weeks after WaterNSW closed a weir supplying water into the Lower Darling “”
Minindee lakes going going gone.
Wenworth group of concerned [traumatised?] Scientists published the same day as above.
NSW Water minister and buracrats failed
40% to 60% smaller
no improvement or even a decline
is the silver lining.
“This assessment found that despite 2,016 GL of water being recovered for the environment (63% of that envisaged under the Basin Plan) at a cost of $8.5 billion, and during the relatively wet period from 2010-2018:
1. Environmental flow targets set by the Murray-Darling Basin Authority, which are required to be met to produce environmental improvements, have failed to be achieved.
2. In general, excluding natural flood events, annual average flows can be up to 40% to 60% smaller than expected under the Basin Plan.
3. In general, observed flows are similar to, or less than, the baseline (pre-Basin Plan) model results, revealing that instead of an increase there has actually been no improvement or even a decline in water flows since the implementation of the Basin Plan.
Click to access MDB-flows-summary.pdf
See all Australian catchments and water storage flows, trades & aggregate data for yourself. Fact check anytime. Sort of.
Only 1,866 views. No worth or hidden or we just don’t want to know? Fancy dashboard tho. 2008 -2017 . Where is 2018? Why not live?
Activity in water market:-
Surface water allocation trade
Surface water entitlement trade
Water catchment profiles:-
Major irrigation activities,
Storage volume (GL),
Trade flows in sMDB
Southern MDB trade matrix
Australian Water Markets Dashboard 2016-17
1,866 views | Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)
“…From the misunderstandings evidenced on this thread about the character of corporate taxes and the imputation system I think he is right. Its a good article.”
A deliberately skewiff article from a senior CIS fellow published by Peter HoWARd Costello controlled Nine Entertainment Co. in an historically economic Liberal right wing rag preaching to the (small) choir. Talk about misunderstandings and character!
A good article? C’mon hc, pull the other one.
“I mean, of course franking credits should be refundable.”
Why this money for nothing? It is the company tax paid on company profit per share, if indeed such has been paid, that may be imputed as a tax credit to the shareholder and may be then available as an offset against any shareholder tax due. The shareholder aint the same entity, the same legal person, as a company. A tax refund of excess tax paid may follow the shareholder’s annual ATO assessment after an imputed company franked dividend tax credit is applied. If company taxes are “refunded” willy nilly without those conditions, why only to shareholders?
“The point is, refundable franking credits mean that australian companies are not taxed except on dividends they could have paid but didn’t: the entire burden falls on the shareholders.”
A company is a company of individual shareholders. One way or the other the taxation burden falls on a shareholder – unless, as is current per Howard/Costello changes, that due to other financial involvements a shareholder is liable to nil tax and gets a cash refund from the ATO. Then the burden of paying taxation falls on all other taxpayers mostly as a cash handout from the poor to the wealthy via the ATO.
“In an imputation system, company tax becomes a prepayment of the shareholder’s own tax — whether personal or super fund tax. In the case of a zero taxpaying shareholder, it means the company tax has to be refunded in order to keep their tax at zero. In the case of many taxpayers, it means they pay more tax to top up what the company tax has already paid on their behalf.””
Nope. In the original Australian imputation system company tax paid per share may become an imputed tax credit that may be offset against a shareholder’s own tax liability. Such company tax paid then was available as a tax credit, not necessarily a tax refund, and never simply a cash handout from the commonwealth to a shareholder. In the current skewiff Costello imputation system, yep, the company tax paid can be imputed purely as a refund necessarily available to any and all shareholders and so often a juicy handout from a distressed commonwealth to the comfortable.
“It’s also worth remembering who will pay most of the extra tax under the Labor policy [as originally proposed March 2017, before the pensioner exemption —-chrisbowen.net/media-releases/a-fairer-tax-system-dividend-imputation-reform/ ]. About 33 per cent will be paid by (mainly wealthy) individuals who own shares directly, 60 per cent will be paid by self-managed superannuation funds (typically held by wealthier retirees), and the remaining 7 per cent will be paid by super funds regulated by the Australian Prudential Regulation Authority.
The poorest half of all retirees own less than 2 per cent of all shares held directly. By contrast, the wealthiest 40 per cent of retirees own 97 per cent of all shares held directly, and the wealthiest 20 per cent alone own 86 per cent of all shares held directly.
…Generous super and other age-based tax breaks have been funded by deficits. The accumulating debt burden will disproportionately fall on younger households.
The government’s claim that abolishing refundable imputation credits will mainly hit low-income earners is deeply misleading. Taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation.”
“Grattan Institute fellow Danielle Wood said it was “misleading” to talk about taxable income instead of total income and there was no publicly available data set that provided the full picture.
However, share ownership was overwhelming skewed to the wealthy and non-working spouses in high-income households were likely to be among those featured in the low-income data, she said.
“The wealthiest 20 per cent of retirees own 86 per cent of all shares,” she said. “These are people who have average incomes of between $74,000 and $161,000.”
“…Generous super and other age-based tax breaks have been funded by deficits. The accumulating debt burden will disproportionately fall on younger households.”
Tax breaks were to encourage taxpayers to provide for their retirement and not claim the old age pension. Pensions, and other welfare, are paid from tax revenue.
SMSF tax free status for pensions are limited to $1.6M, should an account be over that the balance is taxed.
On death these tax breaks are claimed back by the ATO from the estate
Rog, those cockamamie tax breaks were a politically targeted handout by financial bumpkins Howard and Costello where the benefits mostly flowed to a select few who like Howard and Costello in government already had more money than they knew what to do with.
Where is the pushback from the current imputation scam privileged against reduced shareholder “refunds” consequent to the LNP policy of company tax cuts?
Rog – “Tax breaks were to encourage taxpayers to provide for their retirement and not claim the old age pension. Pensions, and other welfare, are paid from tax revenue.” – So it is spun, yet I’ll bet that you, like me, have heard many times claims that such “tax breaks” costs to revenue are in the same order of magnitude or even larger than those of pensions and other welfare expenditure which in turn are spread thinly over more people. Where is the equity in that?
Some employers deserve summary execution. An example is the manager of a company that has six McDonalds franchises, who wrote to his workforce:
We need strong unions more than ever.
It is about time. Gig economy workers should have the same entitlements as award covered employees. My understanding is that once you factor in fines, vehicle depreciation, repair and maintenance costs, many Uber drivers are making no more than $10 to $15 and in some cases, nothing at all.
Sorry, that should be “$10 to $15 *an hour*”
“Dividend Franking Credit Refunds:principle vs revenue” – more polemics by old CIS mate Robert Carling drawn from a submission made November last to the Tim and Geoff Wilson show aka the current House of Representatives Standing Economics Committee with few if any principles on show all round:
https :// www. cis.org.au/app/uploads/2019/02/pp16.pdf
https :// www. theguardian.com/australia-news/2019/feb/13/labor-pushes-to-refer-tim-wilson-to-privileges-committee
US coal collspse update: the TVA board has just voted to go ahead with the closure of the uneconomic Paradise 3 coal generator. (****.greentechmedia.com/articles/read/tva-votes-to-close-coal-plant-despite-trumps-republicans-objections)
One decision among many, but noteworthy because :TVA is a public sector corporation; the closure was opposed by establishment Republican politicians including McConnell as well as the coal stooges in the Trump administration; the coal supplier is Murray; and the vote was 5 to 2. This mirrors the rejection by the Republican-dominated FERC ladt year of Trump’s coal bailout plan. It’s now clear that business Republicans as a class have no stomach for Trump’s coal rescue and the price hikes on ratepayers it would entail.
Grattan study into super finds it not so super.
“In both the short and long term, though, superannuation costs the budget more than it saves, because the tax breaks cost the government more than the pension savings.”
Adani’s response to the report into the black throated finch is to go for the jugular;
“Professor Wintle’s…personal endorsement of anti-coal propaganda demonstrates that he lacked the necessary impartiality to conduct the review fairly.”
Judging by comments on Adanis fb page it seems there is a strong MAGA sentiment in FNQ.
rog, I have seen the Black-throated finch in parts of northern Queensland while birdwatching there. Mainly in the area west of Mount Carbine. It is scarce and hard to find. But I hardly think its survival prospects will hinge on Adani. There are other issues that will determine that – it seems reasonably adapted to living on cleared pastureland with some woodland and a water supply.
Adani can be opposed on many grounds – general environmental damage and climate change impacts are among them – but I don’t think that, reasonably, conservation of the Black-throated finch is one.
I think conservationists should be scrupulously accurate.
“I think conservationists should be scrupulously accurate.”
I say “people with a personal anecdote and minimal domain knowledge should be scrupulously accrate”
And even worse -anti-science…
“The electoral law may compel us to turn out to vote, but it can’t make us vote rationally. The government is counting on it. ”
Peter Hartcher today.”
The government is counting on you hc.
Here is some accuracy.
1) The mining lease on your property. Because ‘we’ have already removed from your use hc, 88% of your life space, we are now going to offset you to “adapted to living on cleared pastureland with some woodland and a water supply.” Of 12%. Sound fair?
Science – How to send finch to extinction…
“Only one out of the 775 projects – a housing development near Townsville – was refused because of an unacceptable impact on the finch.
“All of these proposed projects for the finch’s habitat were assessed independently, so the cumulative impact is not properly considered – it’s death by a thousand cuts.
“And an additional 500,000 hectares of likely finch habitat was cleared without referral to the Federal Government.”
The research is published in Environmental Science and Policy (DOI: 10.1016/j.envsci.2019.01.005).
“Australia and Queensland have laws to protect threatened species, but they’re failing to do just that.” … “Only one out of the 775 projects – a housing development near Townsville – was refused because of an unacceptable impact on the finch.”
KT2, OK a reasonable rap on the knuckles. The Menkhorst et al, Australian Bird Guide describes the BTF as “locally common in in Qld” and the Atlas of Australian Birds shows an extensive range across that area. The greatest concentration of the species is well south of Carmichael. Yes, it is scarce, but you have a good chance of seeing it in much of n Queensland below Cape York.
Your personal observations does not mean that the bird is not in danger or that the study group is unable to properly assess the risk or that the study itself is flawed.
Its a bit like Trump going outside on cold day and using that observation to justify pulling out of the Paris Agreement.
That’s true Rog and my mea culpa above confirms that I accept this. The ICN classify the Black-throated finch as a species of “least concern” when it comes to conservation. The southern sub-species has a contracting range but I think it isn’t affected by Carmichael. I am all for conservation – a strong supporter of the conservation movement. But I also think we should concentrate on the pressing issues and not trot out a species conservation concern when we have some other objective in mind.