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Oh, joy, the rest of the year is in our pockets

Published in The Newcastle Herald, 23 April 2009 (PDF)

But the government’s hand is there, too, writes Oliver Marc Hartwich.

HAPPY Tax Freedom Day! A tax is “a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered”.

At least that is the way the High Court defined it way back in 1938. To put it simply: a tax is something you must pay to the government; what you get in return is another matter.

In all other areas of life, when we pay someone we would like to see what it is for.

With taxes, it is not that easy. Your hard-earned money that goes to the government may be used to pay firefighters in the country or fix potholes in your street.

It may fund the Government’s broadband network or morph into your neighbour’s $900 cash bonus.

Even more strangely, your money could well return to you as your own cash bonus (minus the costs of administering this redistribution).

With so little control over the use of our money, it is little wonder that nobody likes paying taxes. That’s the reason governments have become very good at concealing them.

Imagine if you physically had to write a “tax cheque” to the treasurer every time you refilled your car, did your shopping, or received your salary. No doubt it would keep reminding you just how much money you pay the state.

But because we don’t write such cheques, most of us are blissfully unaware how much of our money goes to the government.

Last year, the average Australian paid a total of $16,401 to the tax authorities – the equivalent of a small car.

It is also quite a lot compared to the average income – 30.8 per cent to be precise. It means that average taxpayers need to work the first 112 days of the year just to pay taxes to the government.

Only on April 23 do they actually start earning money for themselves to spend and save as they please.

If things seem bad, there may be some consolation in the fact that Australia is by no means the most taxing country.

In other places, people have to work even longer for their governments: the Belgians celebrate theirs on June 10, the Germans on July 8, and the French still another week later on July 16.

One of the reasons for the Europeans’ late tax freedom days is, obviously, that their governments spend more than ours. But another reason is that they have been doing so for decades and are now burdened with large public debts.

In Germany, for example, 15 per cent of the federal budget is just paid on interest for yesteryear’s debt. No wonder they need to collect much higher taxes.

Yet there is no need for Australians to feel smug. Our Federal Government has increased spending financed on high deficits.

So today, celebrate your Tax Freedom Day for 2009. Youwill be free from the taxman for the rest of the year. But enjoy it while you can: The Government is working hard to push your Tax Freedom Day well into May next year.

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