The Australian workers subsidise the wealthy through our Tax System

September 18, 2009

Unions and welfare groups are right to be concerned that the Henry review may have been hearing more from business than the wider community (''Concern looms over tax review'', September 17). Britain has just ordered an inquiry into why the poor pay the highest percentage of tax. There are many ways that our system also favours the wealthy.

As a commercial lawyer with a large firm I was constantly required by wealthy corporate and personal clients to ''minimise'' (read ''avoid'') tax as part of every transaction. I dropped out of the system when I could no longer tolerate this mentality. I always felt that if these companies and people paid tax in the same way the average person has to, the country would be much better off financially and consequently more able to support those less fortunate.

Historically, two of the most obvious ways for the wealthy to avoid tax have been family companies and trusts, designed to spread income at lower rates and exploit often dubious ''business deductions''. Quite often the taxable income is reduced to nil. Poorer people with no access to the resources to set up these vehicles usually pay full rates of tax with few deductions. Any decrease in company tax rates will only make this evasion more popular.

More recently there is superannuation. A person can have a large sum in a super fund and draw a quite adequate income from it to live on. No tax is payable on this income. I know the rationale is to encourage self-sufficiency in retirement, but again this unfairly favours the wealthy. Poorer people who cannot afford to set up such super funds just try to save what they can or invest in a few shares, and have to pay tax on the income generated by savings or dividends.

How governments can continually turn their backs on these legal rorts is a source of constant amazement. Will the Henry review address them? Noises have been made in the past to do so, but nothing ever happens. Could it be that most politicians themselves have these vehicles in place? You bet.

Capitalism does not work while it is based on greed. We must begin to dismantle this mentality, and ridding the tax system of these devices that feed the greed would be a good start.

Phil Robertson Peregian Beach (Qld)