IR Reform: Let Banks Collect P.A.Y.E. Tax
The Howard government’s industrial relations agenda attacks the wages and conditions of workers as if this were the only way to reduce the cost of hiring. What about the administrative costs imposed by government?
- If you become an employer, you must also become a tax collector and tax agent, deducting and remitting pay-as-you-earn income tax from employees, and issuing group certificates.
- If you become an employer, you must also become a superannuation agent, paying 9 percent of your employees’ wages into personal superannuation funds. You may even have to give a choice of funds — just like the independent brokers, except that you don’t get any commission!
Why should all this be done by employers? Why not by banks and other financial institutions? After all, financial institutions ought to have more knowledge of tax and super than most employers, and could do this work with greater economies of scale than even the largest employers. And unlike employers, financial institutions charge fees for their services!
So instead of deducting tax from a worker’s wages, the employer could simply deposit the gross wages into the nominated bank account, and the bank would deduct tax from all deposits made by the employer. And instead of making a super contribution on top of the worker’s wages, the employer could roll the super contribution into the gross wages, and the bank would deduct the super contribution.
If you have more than one employer, the simplification would be even greater. Instead of claiming the tax-free threshold from one employer, letting the others deduct tax at the top marginal rate, and sorting out the mess at the end of the financial year, you would tell all your employers to deposit your wages into a common bank account, and the bank would deduct tax and super from the total deposits made by those employers.
So prospective employers would no longer be deterred by the complexities of personal tax and superannuation.