Contributed by Joe Montero

If you believe that Treasurer Josh Frydenberg is going to lower taxes you must pay, you are in for a shock. Contrary to all the carry on about lowering taxes, they are being raised. That is, unless you are one of those in the top income bracket.

Photo by William West/AFP: Josh Frydenberg

When he was treasurer under Malcom Turnbull, Scott Morrison made a big deal of limiting the government’s tax bite to no more than 24.5 percent of GDP. It  will hit  25 percent in next year and set to rise further after this. This was called delivering lower taxes for the Australian community.

According to the latest data from the Department of Finance, revenue collected is already running ahead of estimates. More detail about released in mid-December about future plans.

At the time of the last budget, Frydenberg forecast tax receipts of $445.6 billion in 2021/22. This would bring about around $527.5 billion. Those who looked a little deeper understood that the numbers didn’t add up. Something was hidden to account for the gap between the tax policies made public and the estimate of what the government would collect. The extra money had to come from somewhere.

The Department of Finance figures show that the gap between the earlier estimate is a whopping 18.4 percent.

The error in the estimates is that they seem to rely on rising incomes, which means more income tax being paid. Alternatively, there is another plan. This can only be to raise other forms of taxation.

Everything sits on the premise of a quick economic recovery. This is  an illusion fuelled by the belief that the only problem is the disruption caused by the Pandemic. A quick return to the myth of success before Covid-19 hit, is assumed. Overlooked is the simple fact that the economy was  already tottering because of inherent structural problems that pushed down the real economy, fed a growing income gap, destroyed decent jobs, and led to survival on debt.

The main difference the pandemic made is that it has aggravated the above.

This takes us back to where the projected $75 billion shortfall adding to a government debt about to hit the $1 trillion mark in the next budget is going to come from.

Expect attention on indirect taxes and government charges. Will the Goods and Services Tax (GST) rise? Will there be a Medicare hike? Will the stamp duty on those taking out a mortgage increase? There is always the possibility of cutting what gets spent on government services.

Both raising taxes and expenditure cutting are politically difficult. This means that a combination of the two is the most likely.

There is an important footnote to this story. It is not just about how much tax you pay. This is conditioned by the return it gives to both the individual and to society.

Most don’t mind contributing a little more if the return is worth it. Secondly, in a society that values equality and fairness, taxation is a means for income redistribution from the better off to the worse off. Finally, taxation is necessary to provide a solid foundation for society’s economic and social well being. How the government spends the money in its hands is important.

It’s time to rethink taxation.