The articles highlighted the use of secretive family trusts by the wealthy to reduce their tax payments. It is more evidence of how the avarice of the rich is robbing disadvantaged schools and other public services of much-needed revenue.
According to the University of NSW tax law expert, Dale Boccabella, tax avoidance through family trusts is reducing government taxation revenue by at least $2 billion a year. Almost all this goes to the richest families in Australia. Data released by the Australian Tax Office (ATO) shows that almost 90 per cent of trust assets are held by the wealthiest 20 per cent of income earners.
Boccabella said that his estimated loss of revenue of $2 billion a year is a conservative estimate of 200,000 trusts (less than one third of the total) currently saving $10,000 each per year through tax perks. He acknowledged that the loss could be much greater.
As far as we are aware, this is the first expert estimate for many years of the loss of tax revenue through family trusts. Family trusts are shrouded in secrecy. There is not even a public register of family trusts in Australia.
Transparency campaigners say the veil of secrecy around trusts in Australia is shielding tax rip offs, corruption, money laundering, even terrorism. The chief executive officer of Transparency Australian, Serena Lillywhite, said last week that the “veil of secrecy” around trusts makes it “an easy way to hide millions of dollars”.
The new estimate shows that the use of secretive family trusts is one of the major forms of tax avoidance by the rich. It adds to the billions in tax concessions for superannuation, negative gearing, and capital gains that primarily benefit the wealthy. The annual loss of revenue from just these four tax concessions amounts to about $35 billion a year. In addition, the wealthy are avoiding paying tax by rampant use of tax havens overseas to hide their assets and income.
The cost of this tax avoidance is borne by the rest of the community through inadequate government funding for schools, TAFE and universities as well as for other services such as health care, mental health, public housing, unemployment benefits and so on.
For example, the Federal Government claims that it cannot afford to fund the $7 billion planned for the last two years of the Gonski school funding plan. Yet, the Prime Minister said last week that the Governments has no plans to reform family trusts. As a report in the Fairfax press commented, “Given the potential windfalls to public coffers, failure to look to this way is puzzling”.