Steve Cox commented 2016-12-09 19:36:28 +1300 · Flag
- Hi Steve, thanks for the considered teply and to make life easier than scudding up and down Ive CnPd yours and Ill edit in my reply beginning and closing each time with *
Agreed – a Transaction Tax (TT) is a Bank TT. The only businesses required to collect this TT are the banks.
- Yes, we’re both absolutely agreed on this point and for the same reasons I think *
We disagree though on both ends of the transaction being taxed. I believe it should only apply to the “spender”. Firstly, the point Jamie raised about people trying to evade the tax. If both parties are taxed then both parties are incentivised to avoid it rather than just the payer. Secondly 1% on each leg of the transaction equals 2% on one leg only. Why double the record keeping for no gain. Thirdly – if you’re paying to a foreign bank account then the second leg wouldn’t be taxed. By catching the payer you catch the payment regardless of where they’re spending their money. That levels the playing field between overseas and local competitors.
- Not necessarily a big disagreement so far as I’m concerned. My opinion is that 1% each is easier to swallow than one party paying it all. and if it’s correct that the number would in fact be 1% then sharing becomes easier maybe on big transactions such as 500,000K for a house each party bears 5000 rather than one bears 10,000 alone.
The idea is that it’s a TRANSACTION tax, whereas many people have gotten hung (I think) on the idea that it’s some sort of a sales tax?
But the beauty (IMHO) of BTT is that it’s universal, has no exceptions and no reclaims of any kind … because it’s all of those that give rise to financial fraud which then results in high compliance costs. Sure a retailer COULD dodge a little by buying goods for his business in cash … but seriously, how many wholesalers deal in cash – to them its a costly nuisance that involves security companies for carting it and increases the risk of armed robbery on site. Maybe they’d easily see through those customers motives and actually charge an additional 1% as part of the terms of trade *
I like cash too. Where did it come from though? I withdraw cash from an ATM
and use that rather than eftpos. So I’d be paying the TT when I withdrew the cash. It is only when you’re in a situation of getting cash from elsewhere do you avoid the TT.
- Gotcha … so, say you withdraw $300 from ATM then $3 is debited to your account on the next line as BTT in the same way as a foreign currency fee is shown. This is the ONLY tax you pay – your income was only subject to 1% BTT when it entered your account and you will be paying 1% on your spending no matter whether its cash, credit card, debit card or even cheque if you still have those. You spend your 300 as 100 each cash at the butcher, baker and candle stick maker. YOU will not be paying any tax on those transactions as they are NOT BANKS, However on the day in question you were the only customer at those three outlets and they bank daily … each parts with $1 BTT . YES those are silly low figures but in reality it shows that BOTH parties will be paying equally and that there is ( as is the principle) absolutely no ‘exempt transactions’. It would be of no consequence whether you spent 300 in cash, card or internet transaction there;s NO ESCAPE and at 1% its so trivial that who would bother trying to evade it anyway ? *
- Ive inserted numbers to separate the next three points Steve *
1) Whether the rate would be 1,2, 5 or whatever % is something left to Treasury or the Reserve Bank to calculate.
- First part again we’re agreed that the % rate needs to be studied in accordance with the needs of the government of the day and others smarter I for sure would do that work *
2) There is financial activity that would continue if the rate were 1% but would disappear at a higher rate.
- No, part of the beauty and simplicity is that there would be no exemptions from BTT and keep in mind that the plan would be that it has become the ONLY the ONLY tax in play !
3) As a for instance if I had some spare funds and bought a $10,000 bond; at 2% that’s $200 in TT. If the bond is only paying 6% then in the first year my return is only going to be 4%. Should I then need some money urgently and sold the bond I would be out of pocket if that sale happened within 4 months (e.g. 10,000 × 6% x 2/12 = 100 – 200TT = a loss of $100).
- IT’s late but I think ,y head is up to some simple maths here … and you’ve used TWO % because you think the tax ought not be shared … in this case its a big difference to YOU as saver!
Yes 10000 transaction thats 200 (0r 100 my way)
IF the bond pays 6% then you receive $600 income and pay $12 or ($6 my way) BTT
on the transaction when it hits your account.
So what …even if you were a 10.5% income tax payer you’d NOW
be paying $60.50 in income tax deducted at source and if you were a 33% income tax payer you’d have pennies short of $200 deducted EVERY
Yes indeed you have a purchase BTT
of 200 (100 my way)but keep in mind that you bought it out an otherwise tax free income. Under current rules even if you only paid 105% you would have to have earned $11,050 to have that 10,000 so in every way and at every stage you ARE
better off you bean the game better off.
So under this BBT
you were $1050 better off at the beginning of the game as you had no income tax to pay and YES
sure, if you cashed in early you’d pay a second BTT
– even if as in your scenario you lose $200 for early redemption you still would be 850 UP plus between 60.50UP to $200 UP as you;d have no Income tax to pay!
against that if you kept your bond full term and bonds are intended as longer investments as they’re a traded commodity and the price of ’pre-owned bonds go up and down anyway you would each year save the income tax that you;d have lost under current scheme
Besides bonds are intended as longer term investments and if you cash in earlier theres often some penalty / gain anyway just on the market price that day … isn’t there ?
It IS late now so if there’s a flaw in my maths I’m open to having it pointed out … I think I got right but certainly with BTT
and no income tax you begin the game ahead … a current 10.5% taxpayer by 1050 ( as they would have to have earned app $11050 to have 10,000 to invest. And a 33% taxpayer by close to $5000 ( as they would have to have earned $15000 in order to have $100 to
If anyone cries thats unfair to the 10.5% tax payer – the current Inc Tax band is up to 14000 and if anyine only has $14000 pa income they probably have NOTHING
to save anyway so they still score better! *
And thank you James. This back and forth might be described as fun.
- Thank you Steve and many others who are contributing here. Personally I think a robust debate can be a great thing and yes fun too so long as ‘minds are open’ and no one is getting hyped up, defensive or is clinging tenaciously to something they have previously placed emotional investment in and so refuse to consider anything different might have merit !
Part of the problem is that we’ve had adversarial systems in place for Millenia … whats called for to create change in the present environment is CO-OPERATION
For how much longer do we have to bear the cost of RED
party lose and BLUE
party make costly ideologocal changes … the BLUE
party gets too cockly lose the election ans we waste more billions as the RED
party undo everything and install their own ideology based schemes … and then they get too cocky and lose and …. it all begins again every 8 tp 12 years … if national win I think 4 terms is a record ? Dunno how likely that is with Bill (the GreyMan ) English at the helm and Pulla benefit as his second in command and that ignore the effect that Crusher Collins will have by backstabbing and internally sabotaging ( given her stated opinion that SHE
IS THE ONLY PERSON WHO CAN TAKE NATIONAL
I can’t see her playing nicely so FATHEAD OIL
must be chuclking at all the fake news opportunities eh !!!! … Sound like a shipowner planning a wreck to you … well, looks that way to me ! *