Emperor Henry Tax Review Final Report Imminent

Are you feeling rich?

I hope not. Because if you are, get ready for the Australian government to snatch that wealth from you.

Actually, even if you don’t think you’re rich, chances are the government does.

The Emperor Henry Tax Review final report is imminent. And as we’ve warned during the last year, you’re not going to like it.

Almost on cue the government has started leaking some of the possible conclusions to ‘sound out’ the reaction. News Ltd obliges the government with a typical lapdog headline “Simpler tax system that targets the rich.“

If you’re not worried by that headline, you should be. Remember, it was only ten years ago that ‘rich’ in Australia was anyone earning above $50,000 per year. Adjusted for inflation, that ‘rich’ wage is now the equivalent of $68,000.

So if you’re earning around or above the $70,000-$80,000 level make sure you’re holding firmly on to your wallet. Because one way or another the Government, the Treasury and the Tax Office is about to plunder your pay packet like a pack of wanton pirates.

But before I go any further, just a quick aside.

We were going to tackle the latest decision from the Bank of England (BoE) to increase its money printing programme.

That’s the programme that involves creating money out of thin air in order to buy back UK government bonds and therefore injecting cash back into the economy.

The bankers like to call it quantitative easing, or as Diggers & Drillers editor Dr. Alex Cowie prefers to call it, “theft!”

But once we saw the ‘taxing the rich’ news this morning I’ve decided to hold the Bank of England news over for another day.

Until then, just consider this. In 1976, the UK government went begging to the International Monetary Fund (IMF) for £2.3 billion. In today’s money that’s the equivalent of around £12.4 billion.

At the time it was labeled as an embarrassment for the UK, with claims it made the UK technically insolvent.

Well, in practical terms apart from the much bigger number, there is little difference between the £2.3 billion bailout in 1976 and yesterday’s announcement that the Bank of England will increase its money printing programme to £200 billion.

In other words, if the UK was technically insolvent in 1976 then it is actually insolvent today.

But we’ll have more on that next week…

Because today, well, I just couldn’t let the latest phase of the government tax grab pass by without comment.

Make no mistake, when the Treasurer and Treasury Secretary make seemingly off-the-cuff remarks about what the review “may” contain they aren’t playing a guessing game. They know exactly what’s in the report.

It’s just a case of figuring out how far they can go with the theft of your money.

As I say, this is something we’ve warned about since late last year when the stimulus spending started and when the tax review started to gain pace.

The tax and super review are nothing more or less than a scheme to increase taxes. All the talk about lowering company tax rates and taxing the rich really means everyone will be hammered for more tax.

Perhaps the most dangerous comment in Wayne Swan’s speech was this part as quoted in The Australian newspaper:

“It’s astounding that more than 70 per cent of Australian taxpayers pay someone else to complete their tax return – more than any other country… We shouldn’t be content with a system that is so complex that an average person with simple tax affairs feels unable to do their own tax return. That’s why I’ll be especially attentive to any recommendations that make lodging a tax return easier. In fact, given today’s technology, and the ability to pre-fill forms with data electronically, I’d like to hear how a person could complete their tax return with just a few clicks of a mouse.”

Guess what? We’d like to see the tax system made easier too.

Much easier.

How about just abolishing the whole damn thing? That would be easy. You get to keep every cent that you earn, rather than having half of it stolen from you by the government.

Unfortunately that’s not what Mr. Swan has in mind. He wants the tax system to be made easier in another way.

A way that means you shouldn’t have to complete a tax return at all. That the Tax Office will just take the money from you, and all you’ll need to do lay back and say “that’s fine” with a click of a mouse.

Of course, if there’s any chance you’ll need to claim a tax refund then we’re sure there will still be all manner of hoops for you to jump through.

We’ve always thought it’s amusing how easy the Tax Office makes it for you to pay tax.

When you start a new job you’re given a simple one page form – you fill out your name, address, tax file number, tick a few boxes, sign it and voila! It’s done.

Almost immediately the government is pilfering your pockets for cash.

Contrast that to the multi-page form, supplements, schedules and 60-plus page instruction booklet when it comes to trying to get some of your money back.

It’s no wonder 70% of Australians use a tax agent.

But any attempt to make the system simpler so that it will “save you time” should be resisted at all costs.

We don’t like governments. We don’t like their interference. And further more we don’t like them stealing your money.

However, when government starts talking about making things easier, their only real concern is to make it easier for them to take your money.

That’s why, when the Tax Office launches its new ‘simple’ tax return system you should avoid it like the plague.

No one likes filling out forms, but in this case your response to the tax office should be, “That’s ok, I think you’ve stolen too much, I’m happy to fill out all your crazy forms. And even if it turns out you need to steal more money from me then I’m still happy to still fill out your crazy forms and make you wait.”

But of course, the tax grab is just the first phase of the ‘making it simple’ plan. The big money-spinner for government is superannuation.

Once the government is done with regulating the life out of the financial services industry, the public will realize they have nowhere to go for advice, and nowhere to invest their super money.

The only option will be for the government to save the day with a ‘Super Aged Pension’ option.

Hand over your super money to the government in return for a defined benefit pension.

It’ll be a scheme offering a better outcome than the current aged pension of course, and at least you’ll never have to worry about the performance of your super fund again.

Not only that but you’ll also have the “privilege” of investing in new school buildings, a road or two, and a bridge or three. Plus anything else the government deems to be “nation building.”

Quite how a new school gym is going to provide you with an income in your retirement we haven’t figured out yet. But we’re sure they’ll bluff their way through it.

And the spend it now, spend even more later crowd will love it…

So will the managed funds, infrastructure funds and construction companies.

As usual, the big losers on the deal will be you and every other taxpayer.

Believe me, there is worse to come with this tax and superannuation reform.

Cheers.
Kris.

60-Second Market Round Up
by Shae Smith

The S&P/ASX200 closed down yesterday by 32 points to 4,508. After a positive night in the US, the ASX200 has opened much higher.

On Wall Street the Dow Jones Industrial Average had its highest point gain since July 15, up 204 points, closing at 10,005.96. News that productivity was higher than economists expected and lower unemployment claims drove 29 of the 30 stocks that make up the Dow to finish up.

In Europe the FTSE100 finished the trading day up 17 points, to 5,125.64. The gain was mostly because of the strong start in the US. However, there has been mixed reviews regarding the quantitative easing program, which is basically just printing more money.

The Nikkei lost 1.29% yesterday, falling to 9,717.44, its lowest close in a month.

Gold remains high, but didn’t move much yesterday.

The price of gold in Australian dollars is trading at $1,198.59, while in US Dollars it is trading at $1,089.88. And the price of silver in Aussie dollars is $19.13 and in US Dollars it is $17.39.

It was the same with the currency market overnight.

The Aussie dollar versus the US dollar, remained around the 91 cent mark, trading at USD$0.9102, but did show a slight gain against the Japanese Yen JPY82.58.

Crude oil closed overnight at USD$79.70.

For the biggest movers on the market yesterday click here…

Tagged as: Australian government, Bank of England, inflation, International Monetary Fund, ken henry, pay packet, quantitative easing, superannuation, tax, Tax Office, tax review, Treasury, UK government bonds, Wayne Swan, wealth