Role of Taxation in Australia and recent changes
Taxation has existed since the late 19th century and plays an important role in society. That governments require revenue to finance their activities is an economic fact. Without taxes a government would not be able to function properly as a government needs to raise revenue, and the most effective way of doing so is by the imposition and collection of taxes. "At the most basic level, taxes operate to redirect economic resources from the citizen to the government for use in its spending programs." In addition to its revenue raising function taxation is used as a powerful social and political engineering device. The Government can use the tax system to influence or modify aspects of society or societal behaviour. For example, the government introduced a Medicare levy surcharge on high income earners to encourage private health insurance to lessen the burden on the publicly funded health system. There are three main factors which create a need for taxation :-* The need for governments to provide social and merit goods* the need for governments to support those for whom a free market would not otherwise provide; and* the intentional use of taxation to correct other free market imperfections.
This was seen in the past when their was much tax avoidance in Australia. A tax may be described as "simple" if the costs of official administration and collection and the compliance costs are low. SimplicityA good taxation system should promote simplicity. An example of this is to fund low-cost housing for those in need. ial and Merit GoodsSocial goods relate to such items as roads and street lighting. To help fund the scheme, resident taxpayers pay a Medicare levy. This is mainly due to the fact that with "the ageing of the population, the retirement system needs to be more flexible and acceptable to the changing workplace arrangements and provide more choices. Correction of free market imperfectionsTaxation can be used to correct free market imperfections, examples of such market imperfections can include monopolies which may cause prices and supply levels to be set arbitrarily at non-optimal levels or such problems as wasteful competition, where competing companies end up operating at less than optimal capacity. Other changes have been made such as the superannuation surcharge rate, this will be reduced significantly to 7. 2004 Federal BudgetEach year the government prepares a budget which is a summary of the Federal Government's proposals for revenue and spending. Criteria for evaluating our tax systemAs can be seen in the proposals made in the 2004 Federal Budget many changes are made and each one must be evaluated to make sure that society has a good tax system. Taxation enables the government to help those persons whom a free market would not otherwise provide for. Cutting Income TaxThere have been rather large cuts made to income tax.
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30 june 2004,
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