TRENDS - 14th September 2020
As we look to the reopening of the economy (hopefully), there is much talk about the economic measures required to achieve some semblance of recovery.
Economists are a bit like lawyers; they agree on nothing and can tailor their arguments to suit any proposal. But there is some consensus emerging, even amongst those practitioners of the dismal science (economists, not lawyers).
The most obvious way out is to free up business from red and green tape. We at MRH see first hand the staggering costs imposed on ordinary Australians running small to medium businesses. In trying to prevent the egregious actions of a small minority of businesses, all businesses suffer from the dead hand of bureaucracy. The result is that big business, which can to some extent afford to deal with the bureaucracy, is starting to freeze out the small agile businesses of the past. And when a small business does start to thrive but begins to hit bureaucratic growth hurdles, it is immediately bought out by a big company.
We at MRH pride ourselves on our very cost effective system which we have developed over the years to assist small and medium size companies to prepare in advance for the dreaded knock on the door by a bureaucrat. But increasingly, only very big companies can deal with the immense costs of over-regulation relating to employment, work health and safety, obtaining of finance, auditing requirements etc. Hopefully, as we come out of the COVID-19 lock-downs, there will be some consensus driving a reduction in the onerous obligations which restrict free enterprise in this country.
There is another issue I wanted to mention and that is taxation. There has been considerable pressure to reduce the company tax rate in recent years. Perhaps unusually, I think the more immediate problem lies elsewhere. I think that the more urgent problem with taxation in Australia is the staggeringly high marginal rates paid by individual taxpayers. Much as lawyers and accountants earn considerable money from advising on the incomprehensible complexities of tax law, this is not a productive benefit to the economy. In short, the difference between the company rate of tax and individual marginal rates is an immense burden on our economy.
There is an urgent need to reduce individual tax rates in this country. The result will be less unproductive tax avoidance, more entrepreneurial behaviour, more employment and more spending power in a half dead economy. To me this is so obvious that it should be an issue above politics. Even Paul Keating says that marginal individual tax rates are too high.
Most commentators agree that the real COVID-19 impact on the economy is still ahead of us. Let us hope that there will be some wisdom brought to the table as we come out of this crisis. I have not seen much evidence of it in recent years.