The monetary cost of World War II was ten times the cost of World War I. Raising revenue via taxation became a vital part of Australia’s war effort.
This is the accessible text transcript for The story of tax.
The idea of tax has been around since ancient times.
Soon after people stopped living as nomads and started to settle in large communities, it became clear that funds would be needed to obtain the things that everyone needed, but no one could achieve on their own.
Things like bridges, roads and fresh water.
That's essentially what taxation is – money collected by the leaders of a community to pay for goods and services the whole community needs.
Although societies have become more complex since ancient times, the basic idea of tax has stayed pretty much the same. In Australia, the first taxes were raised in Colonial times to help pay for a Sydney gaol and to provide for the colony's orphans.
Today, tax is collected by three levels of government; local, state and federal. The money – called revenue – is then used to fund public goods and services, like schools and student loans, age pensions, defence force personnel and equipment, fresh water, roads and bridges. Also national parks and sports facilities, rescue services, medicine and emergency health care.
Some things you might never have imagined are paid for with taxation revenue. Like bush regeneration, music and arts festivals and even the fireworks on New Year's Eve.
As humans settled into communities and began to develop complex societies, it became clear that large groups living together create a wide range of needs, roles and opportunities – well beyond deciding who does the dishes or takes out the garbage!
To pay for the things people need, things that no one person can provide, taxes are levied so everyone can contribute something for the greater good. Taxes help provide infrastructure such as roads, bridges and legal tender, and public services such as police, hospitals and schools.
Taxes have been part of the conversation for longer than you may think.
Consider the following quotes:
- 'And the silver and the gold [he] gave to Pharaoh. Only he taxed the land … according to each one's individual tax rate he exacted the silver and the gold.' (2 Kings 23:35) circa 608 BC
- 'But in this world nothing can be said to be certain, except death and taxes.' (Benjamin Franklin 1789)
- 'Australians value their tax and superannuation systems as community assets, where willing participation is recognised as good citizenship.' (Michael D'Ascenzo, Australian Commissioner of Taxation, 2010)
Tax is the 'contribution to government revenue compulsorily levied on individuals, property, businesses, goods, etc'. In modern taxation systems, taxes are paid with money, but this has not always been the case. Some communities used the unpaid labour of their citizens as a way of creating community services or infrastructure.
In Australia, tax is collected from individuals and businesses, and the amount of tax levied is generally based on the amount spent on certain items or the level of income or profit.
Throughout history, tax has been levied on some very diverse items including drinking water, beehives, beards (feudal Russia), cooking oil (ancient Egypt) and the flushing of toilets (Maryland, USA, 2004).
Tax over time
When the first taxes were levied in communities, it could be argued that their main purpose was to raise revenue to provide services for those communities. The system could be said to reflect the values of that community when deciding who pays taxes, how much they will pay and how those taxes will be spent.
Over time, these communal values shift. For example, in feudal times the warrior nobility were supported by the labour and food of the poor; modern social security systems are intended to support those in need. Some societies have also used 'sin taxes' to affect individual behaviour. Examples of this include levying higher taxes on alcohol and cigarettes to discourage excessive drinking and smoking.
However, the main aim of taxation systems in countries such as Australia remains the provision of goods and services for the benefit of the community.
Tax in early Australia
Customs and excise duties formed the basis of taxes raised in Australia's colonies, with duties placed on major export products such as timber, wool, seal and whale oil, and seal skins. These duties were easy to collect because of the limited number of wharves in existence. The revenue was spent on things likely to garner support from the public such as an orphanage, hospital equipment and building works in Sydney.
The gold rush, which began in Australia in 1851, made demands on infrastructure as thousands poured into the colonies and also offered a new opportunity for governments to raise revenue, as many individuals found gold. However, the implementation of a miner's licence was regarded as a form of taxation without representation and this led to the Eureka Stockade and significant changes in Australian history.
One of the main points of debate prior to Federation centred on the imposition of tariffs. The colonies of Victoria and Western Australia relied heavily on customs duties and tariffs, whereas New South Wales proudly declared itself a free-trade colony. While Federation in 1901 ended the need for customs booths on the borders of each colony in Australia, this economic debate had a strong influence in the early years of the new nation.
The Commonwealth of Australia Constitution Act established a federal system of government when it created the nation of Australia in 1901. The Act distributes lawmaking powers between the national government and the states and territories.
Each level of government imposes different types of taxes and charges. During World War II the Commonwealth Government took over all responsibilities for income tax and this has remained the major source of federal tax revenue ever since.
Australians expect their governments to provide certain goods and services. Each of the three levels of government has responsibility for providing some of these goods and services. For example, the Australian Government has responsibility for defence and immigration, the state or territory governments are responsible for water, electricity and the police, and local governments take significant responsibility for waste management and local community services.
Tax funds what?
The scope of what taxation revenue supports is wide and varied. We expect governments to provide health care, education, roads and bridges, and a legal system as basic necessities. But in recent years, taxation revenue has also supported:
- $3.8 million for visitor facilities in Wilsons Promontory National Park
- $250,000 to develop a business case for sporting hubs
- $1 million for a facility for high-tech businesses on the Gold Coast
- $2.1 million to the Australian Institute for Commercialisation's TechFast program to help small and medium enterprises improve business performance and remain competitive
- $137,000 for the Moreton Bay Community Seagrass Watch Program
- $13,545 towards the purchase of equipment for the Argentine Tango dancing community in Perth
- $2.1 million under the Regional Electrical Access Program (REAP) to boost the power supply for businesses in Gippsland.
The proportion of taxable income that is paid as tax. The income tax rate is expressed as a percentage or in cents-per-dollar. Companies have a set tax rate, unlike individuals, whose tax rate increases as the amount of taxable income increases.read more glossary terms