There is a 1.7% insurance rate that is taken at the same time. Companies are taxed at 30%. Sales tax (Goods and Services Tax) is 12.5%.
The system is actually more complicated than that with student loans being processed by the tax department, other special tax codes for some jobs, year to year income equalisation schemes for fluctuating income such as farmers may experience, charity donation rebates, child care rebates, family support,.... Sales tax is exempt from financial transactions, residential housing, mining precious metals, charities, and some other situations.
The proposal is to keep the tax take the same but alter the structure. Essentially the top tax rate would disappear and sales tax would increase to 15%, though there are other changes concerning property.
So what do I think? My ideas concerning tax are shaped partly by pragmatics, how does the system work in practice and what are the effects of different laws, but also on my perceptions of what is intrinsically fair. The latter takes priority. Some of these ideas are
- High tax leads to avoidance behaviour, both legal and illegal.
- High tax inhibits economic growth.
- Complex laws leave loopholes which are preferentially exploited by those who can afford accountants and lawyers.
- Exemptions for certain companies mean they pay less than others who are taxed more, yet they may still use the infrastructure tax pays for.
- People who earn more money pay more income tax anyway because tax is a percentage rate.
- Progressive tax favours both spouses working over one spouse earning all the income.
- Government should spend less and concern itself less in human affairs.
Ideally there would be no tax. If there has to be tax I think the government should slowly divest itself of many of its expenditures and concentrate on core responsibilities, though that is another post. In terms of tax, the maximum rate should be the same as the company rate and be decreased until there is a single rate for all people in all occupations and all companies. An exemption on the first $20,000 income for all would limit the effect of tax on those with low incomes. A rate of about 20% for income tax and sales tax would be a starting point with a plan to decrease both to 10% (or less) over time as economic growth increases tax take and government decreases expenditures.
Such a system would be simple, less likely to be abused by both companies and the tax department, and be generally fair with consideration for the poorer members of society. It would led to economic growth and would mean higher employment. With more take home pay the demand for pay rises may decrease in some occupations.