Philanthropy should be a condition of tax relief

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Prime Minister Julia Gillard ruled it out last week, but there's no denying that the Federal Government would like to reduce tax concessions for the wealthy when they access their superannuation. Last year the concessions cost $30 billion in forgone revenue, and Treasury estimates the figure will increase to $45 billion by 2015–16.

The concessions are designed to encourage more Australians to fund their own retirement, and not burden the public purse by taking the age pension. But in reality, it would be much more cost effective to remove the means test from the age pension and have the rich receive the same $712 per fortnight as the poor. 

Australia Institute research fellow David Richardson says that in his last six budgets, former treasurer Peter Costello took the cost of super tax concessions from 1.3 per cent of GDP to 3.3 per cent. Meanwhile, the cost of the age pension was at just over 2 per cent of GDP. In 2009, the Australia Institute produced a report titled The great superannuation tax concession rort, which showed how the concessions redistribute scarce resources away from low-income earners towards the secure and privileged well-off. 

The scarce resources are required to fund important but expensive projects such as the National Disability Insurance Scheme, which will improve the lives of countless needy Australians. By contrast, the concessions secure the sometimes obscene lifestyles of wealthy Australians, who believe they are entitled to tax relief.

Business Council of Australia president Tony Shepherd told a round table meeting last Thursday: 'Philosophically, I object to the term 'concessions' ... We go to work, we get paid. The money is ours.'

Shepherd speaks on behalf of a section of the population whose members have often worked hard to get where they are. They feel it is unfair that they are expected to share their reward with those who may not have worked as hard, or been as lucky in the lottery of life.

Such an attitude belongs more to the USA, the land of the self-made man, and not to the Commonwealth of Australia, where we have always been more mindful of the common good. 

But it has to be noted that respectable self-made men in the US give generously to their favourite charities and foundations. In Australia, respectable citizens pay their taxes, and welfare and other public needs tend to be government funded. Philanthropy has never taken root. This was confirmed in an Australian Council for Educational Research survey reported in the media today.

The case for tax concessions for wealthy Australians would be more convincing if there was evidence of large-scale philanthropy here. If philanthropists funded welfare and other public service organisations, governments would not need to raise taxes for this purpose. If wealthy Australians would like tax relief, they should think about emulating the self-made men of the USA.


Michael MullinsMichael Mullins is editor of Eureka Street.

 

Topic tags: Michael Mullins, philanthropy, superannuation, taxation, Gillard

 

 

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Existing comments

$30b eh? That's the same amount as the estimated annual income the religion industry avoids any scrutiny of here in Australia. Time to tax religion, which is an industry these days, as well as the other rorts the wealthy have. Tax and philanthropy should not be mixed. Anyone can give their own money away if they choose to, and should not get a tax benefit from doing so. That would be a test for those who like to be seen to be funding community items, while we all pay with our higher taxes as a result of their write-offs. The ability to accumulate massive amounts of money might indicate tax being avoided, as well as inadequate tax levels being in place. Let's not start to compare Australia with the USA. They have a totally different view of how a society should orgaise itself, and would rather have a house load of guns and ammo than a half decent health system, all because they think they need the guns to fight their own government, and they hate paying any form of taxes, even to help their own sick. A cheapskate, violent and meanspirited nation.
janice wallace | 11 February 2013


IDEA -Benevolence-Tax is a tax on great wealth in which the payer can stipulate the benevolent use to be made of it, from a published list of purposes and organizations which would like to receive. This super-tax is extracted from the rich taxpayer by the Tax Office and forwarded by them to the purpose or organization, to prevent any funny business. The payoff for the Benevolent Taxpayer is honor and glory. The tax is based on gross assets without loopholes. The Tax Office provides newspapers annually with a list to publish on their front pages of the Benevolence Taxes paid by those with incomes over say $ OAP 15 (15 times the income of an old-age pensioner) in order to reduce them to that maximum income. Plaques are put on whatever his/her money pays for, and their name is immortalised. Some institutions could have Honour Boards in their lobbies, to list Benevolent Taxpayers as they benefit from them. A sporting event could have the Benevolent Taxpayer's name emblazoned on the fence where advertisements usually go, and listed on the programs - he/she could share in trophy awarding. A mended road could have (Another 400 words on this are available.)
valerie yule | 11 February 2013


Thank you Michael. How do the wealthy become wealthy??? They are not the only ones who work hard.Profit is about minimising costs, often at the expense of a low paid very hard working workforce.The wealthy owe it to their community to strengthen and secure the vulnerable.Wealth depends on social stability.and we are all affected by quests of the greedy as well as the poor, sick,uneducated, those who lack good support networks and perhaps go on to choose overt violence.Wealth is by nature violent; it is exploitative, manipulative, very powerful, both visible and invisible depending on the measure required. Extreme wealth leads somewhere else ..to extreme poverty."Self-made" is a misnomer. We still live in colonial times,and perhaps medieval times as Gina ...heir to a 'self-made' fortune has nothing stopping her plunder. A Fairy tale and we none the wiser.
Catherine | 11 February 2013


My understanding is that in the USA if you consistently earn over $600,000 annually it is s requirement that you set up a charitable foundation (Something George Bush tried to dismantle.) Since i came by this info some time ago, perhaps it's not so now. As for the hubris that only the rich work hard.........!!!!!!! And not everybody is able to treat other people as a means to an end, they actually have concern for their fellow travellers.
hilary | 11 February 2013


I have a philosophical objection to this suggestion, whicc is not an uncommon suggestion. Why should the wealthy determine expenditure (=priorities) in society? Allocation/distribution should be a social responsibility, in our case through our representatives who are Parliament and effectively, government. Accepting deductions as alternatives to tax collections is allowing the wealthy to determine the social priorities. They have enough influence as it is. This is essentially undemocratic.
Eric Pozza | 12 February 2013


Yes, we need to change current age pension and superannuation laws. If we compare two people with the same earnings and then we look what they get, we see massive discrimination. The first one spends most of his money on take-away food, booze and weekly trips to the football. The other pays a little bit extra into his superannuation fund and saves to buy a home. When both of them retire, the first person is rewarded for having spent all his earnings. He is even getting extra money because he is still renting. The second person is punished by the Government by getting a lower pension then his spend-it all friend. I find it interesting that the call for more taxes comes from people with a tax free status.
Beat Odermatt | 15 February 2013


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