The Secret Broker: Taxed to death
The Secret Broker
The Secret Broker
After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
There was a bit of a kerfuffle in broking land this week when a disgruntled employee of a broking house released some private emails and recordings to the press.
The base of the story didn’t really interest me but what did, was the fact that the brokers had been using New Zealand companies as a way to avoid tax.
As New Zealand has no Capital Gains Tax (CGT), then profits from trading shares are tax free. Losses though cannot be offset but hey, who trades to make losses?
In Australia, there are not many things which are tax free and because an Australian citizen is taxed on their global income, CGT tax-free profits on home ownership is a highly protected and expected perk.
Any politician who dares to take this perk away, will be burnt alive on a stake in the grounds of Parliament House.
Gambling profits are also tax free for the average Joe Citizen, though no one has quite explained to them how the Pokies actually work and who really makes money from them.
So it is no shock to me that these two tax-free perks make Sydney and Melbourne home ownership in the top five of the world’s most expense purchases versus income index.
Or that Australians gamble away an average of $1,260 per adult per year, which puts Australian adults at the very top of the biggest losers in the world, as they chase a tax-free lotto win needed to pay off their large mortgages.
If you don’t remember John Hewson losing the un-lose-able election over GST on a birthday cake, then you probably haven’t read the ATO’s GST rules and regulations on food. It is one of the funniest bits of legislation that you will ever read.
Here is a taste from 2009:
“The word ‘refrigerated’ has been substituted for ‘fresh’ in entries for cannelloni, carbonara, lasagne, meals (complete), noodles in sauce and pasta meals in the alphabetical listing on 18 February 2009.
“These items were updated because these items are only taxable as prepared meals where refrigeration or freezing is required for their storage. While the description ‘fresh’ may imply that refrigeration is required to store the product it was decided to use the word ‘refrigeration’ to more closely reflect the legislation.”
It goes for 87 pages.
All they had to do was add GST to everything and that would have saved the million man hours spent on listing the A to Z of Australian cuisine tastes and how to tax them. Lamingtons, by the way, are taxed but a packet of lamington mix is a tax-free item.
It’s a proven fact that if you lower taxes you will receive more in, as it gives less of a reason to hire someone to reduce your obligations or to move countries quicker than Paul Hogan.
In 1972, The Rolling Stones were all individually paying a tax rate of 98 per cent (no typo!) on their income.
The UK’s Labour government decided that out of every £100 ($193) Mick earnt, £2 would be enough to keep him in his rock n roll lifestyle. That year they all moved to France and have all been tax exiles ever since, meaning the UK can’t even get tax out of a rolling stone.
Putting up taxes on alcohol and tobacco has always been a staple budget raising exercise.
The 2.5 million smokers left in Australia bring in tax revenue of $17bn, meaning this source of revenue is now literally starting to die off, as younger smokers don’t make up for the older quitters.
The same is happening with electric cars, as their green owners sail past petrol stations and avoid filling up on taxed up fuel.
To help our politicians out in looking for new ways to replace falling tax revenues, I thought they may like to go back in time and re-introduce old taxation laws, as new election winning ideas.
Window tax: In 1696 a UK window tax was introduced based on the fact that the more windows one had, the wealthier one was.
To avoid paying people just bricked up their windows, and it was only after doctors pointed out that no sunlight was affecting people’s health, that it was repealed in 1851. That is why you will see historic houses with window sills and no window.
Computer tax: Belgium came up with a computer screen tax, to raise money to pay for restoration repairs needed on their historic but pollution-damaged buildings. ‘The more computer screens a business has, the more tax they could afford to pay’, was the motto on this one.
TV licence tax: Instead of the government funding the ABC, they could introduce a yearly licence fee, like the 27 other countries in the world have. In Pakistan, for example, they add a monthly TV licence tax to your electricity bill, and in the UK you pay less if you have a black and white TV.
Cow flatulence tax: Denmark is the world leader on this one and luckily for their tax inspectors, it’s not based on a per-toot basis but a yearly fee of €67 ($109).
Beard tax: Russia invented this tax in the 1700s, and if you wore a beard you had to carry a token around with you to prove you had paid your tax. Russian women were exempted.
Baby name tax: In Sweden, you need to ask permission from the tax department before registering your newborn’s name and if you don’t, you pay a tax fine.
‘Lego’ and Google’ are acceptable names but ‘IKEA’ is not. Maybe ‘Bruce and Sheila’ could become a taxable item, whereas ‘VB’ and ‘Holden’ could be exempt.
And finally, a tax on the amount of pages printed in a newspaper. In last week’s article I pointed out the problems encountered when trying to read a broadsheet on the train. That’s why the FT was printed so, as earlier a ‘per printed page tax’ was introduced, hence the larger but less pages.
And, for those of you wondering why the FT is pink in colour, it is because unbleached paper was tax free and cheaper to use.
So, to sum up Australia’s current tax system, if you are a teetotaling vegetarian and drive an electric car, you are the actual burden on society and not the other way round.
That’s because you have left it to the beer-swilling, cigarette-smoking, pokie-playing ocker Aussies to keep the taxes going and allow you the tax-free, almond-milk-latte lifestyle you cherish so much.
Feel free to contact him with your best stock tips and ideas.