Response to Benmaster on taxation

Day 878, 13:19 • Published in Australia Australia • by infin

It is always refreshing to read someone's economic ideas for the country. I enjoyed reading Benmaster's alternative views about economics for it is an imprecise art and no individual is ever absolutely correct. In your article your asked for some article responses so here is one for your consideration! 🙂

I have been a vocal supporter of lower import taxes for the sole reason that the consumer should never have to pay a single dollar more for goods than is absolutely necessary. When import taxes protect a local industry it allows the local GMs to become inefficient and to sell into a smaller range of competitors. Competition in all things delivers the best result to the consumer. And the biggest single consumer in this game is the government, so indirectly competition is benefitting the taxpayer massively too through reduced expenditure. Would it be better for the government to be paying $100 per Q5 weapon or $35; $6.30 per Q1 weapon or $3.50?

This comes to the second issue concerning allocation of labour. While local manufactured companies are making easy profits through lack of compeititon, wages remain high and workers continue to pour into the manufacturing sector. What this in turn does is starve our high region raw material companies of labour and this results in wage spikes as we saw in the diamond industry in March (and continue to see today). We need to direct more labour to the raw materials industry to address this imbalance and wage rates will do that to a certain extent over a longer period of time as new players enter the game but it does not assist our case to be protecting our manufacturing industry with tarrifs so they have an inflated view of profitability in their industry.

Australia's economy is not going to the dogs, in fact it is booming, when one looks at our GDP ranking and foreign exchange market where the AUD skyrocketed from 0.018g per dollar to 0.022g per dollar. We have enjoyed an extemely strong dollar as of late. This has been detrimentally affected by the loss of WA which is just plain bad luck but you play the cards you are dealt and we still retain the high diamond NT region. Some countries have no high regions of ANYTHING! I would prefer import taxes to be 1% simply for the fact that import taxes do not make a country stronger, they make it weaker.

During the Brazil invasion of December 2009 our country ran completely out of weapons and gifts. This was due to our punitive import tax regime. At least now at 10% local GMs have a small comptitieve advantage but when they sell out and prices rises, foreign GMs can buy an export license and sell to our country.

Lower income taxation is certainly a way to assist with growing the economy but at the same time the government needs tax revenue to pay for its activities. The government is already printing massive amounts of currency (February $144k, March $90k, April $200k) but due to the buoyancy of our economy there is luckily high demand for AUD. Nevertheless it is sound to print as little money as possible to dampen inflation and income taxes play their role. I would prefer to see income taxes cut too but we must all pay our fair share for the security of our borders. Cuts to income tax will stimulate economic activity to a certain degree but there is a balancing point where further cuts will generate no further growth and erode our revenue position at the same time.

So in short, import taxes save no one. What did we do before import taxes were ever invented? Every GM needs to keep competing on the global market. I hear stories now of manufacturers who sell their items to foreign markets when the Australian market is slow. Under the old high import tax regime that could never have happened because our local costs to produce would be too high compete.

I look forward to your responses to any of my theories.