Taxation and social security system reform

General observations The case for reform of the taxation and social security systems, together with reform blueprints, were provided in the Henry Review released in May 2010. To the Henry Review reform proposals should be added a more comprehensive and higher rate GST, and the option of no-bars reform of the taxation of superannuation, both of which were excluded from the review’s terms of reference. A comprehensive taxation reform package could involve any one of, or a combination of, the following: A comprehensive income tax base which removes current exemptions, such as the concessions for remuneration taken as fringe benefits and superannuation, and a simple progressive tax rate schedule which is automatically indexed for inflation; Greater neutrality of the effective tax rates on different saving and investment choice options, and a low rate on the taxation of capital income to reflect the relatively high elasticity of supply of capital to Australia; Increased taxation revenue from comprehensive tax bases on the economic rent earned on land, mineral and energy deposits (to replace current royalties), and other natural resources; Greater revenue from a comprehensive GST base along the NZ model, and at a higher tax rate; Reform of special taxes on selected products to correct market failures associated with motor vehicles, alcohol, and carbon and other forms of pollution; Remove all state stamp duties; and Simplify the social security system as proposed by the Henry Review

Some Market Effects of E-Commerce.

An important characteristic of E-commerce is that it is a form of technological change. The effects of E-commerce induced reductions in business production costs and on seller to buyer transaction costs are assessed. Comparative static models for different market structures are used to assess the effects of E-commerce on prices, quantities, aggregate efficiency gains, and the distribution of benefits and costs. Ultimately consumers are the principle beneficiaries via lower prices. Competitive forces and profit incentives induce firms to adopt cost reducing E-commerce technology.TECHNOLOGICAL CHANGE ; EFFICIENCY ; COSTS ; PRODUCTION

A Tax Mix Change to Reduce Greenhouse Gas Emissions

Placing a price on greenhouse gas emissions using an emissions tax or auctioning tradable permits provide the least cost government intervention to reduce pollution. Initial effects of the charge on pollution include an increase in the relative prices of greenhouse gas intensive products and production processes to reduce pollution, and a net increase in indirect taxes with a windfall boost to government revenue. There are at least three overlapping sets of economic efficiency, equity and political acceptance reasons for returning most of the windfall revenue gains to households as compensating income tax reductions and increases in social security payments as a tax mix change package. Most of the indirect tax increases will be passed onto consumers as a higher cost of living, albeit with changes in relative prices. With a likely regressive incidence, some compensation in a close to lump sum form has both equity and political acceptability claims. With no changes in market wages and nominal interest rates, the higher cost of living will further distort the effects of existing income taxes on labour and capital market decisions and their associated efficiency costs. Or, the cost of living increase will provide a catalyst for compensating increases in market wages and nominal interest rates, with the added risk of initiating an inflationary cycle. A tax mix change package has the potential to neutralise the negative effects of the associated increase in indirect taxation. Given the expected time path of increases in the pollution charge on greenhouse gas emissions, and of the windfall increase in indirect tax revenue, the details of new tax mix change package will need to be renegotiated every few years.Resource /Energy Economics and Policy,

Tax reform and the natural resource industries

Tax reforms passed by Federal Parliament in June 1999 include rationalising indirect taxes, a tax mix change, and a smaller fiscal surplus. The impact or first‐round effects on the natural resource industries indicate large gains. Important second‐round reactions, particularly a real currency appreciation, erode most of, and in some cases more than all of, the first‐round gains. A complete assessment requires the use of general equilibrium models.Resource /Energy Economics and Policy,

Challenges in estimating soil water

[Introduction]: Most of Australia’s dryland cropping is characterised by unreliable rainfall with frequent long gaps between falls. Stored soil water is therefore essential to support crop growth during the growing season while water stored during fallows has varying importance, depending on soil type and rainfall patterns in relation to cropping periods. For example, a winter crop at Walpeup in Victoria derives 10% of its water supply from soil water at planting while a winter crop at Emerald will access 80% of its water supply from stored soil water (Thomas et al 2007). Even when dependence on stored water is small, extra water can make a valuable difference to crop yield and profitability, especially in typical dry-finish seasons (Kirkegaard et al 2014). An understanding of available water before a crop is planted can influence management decisions (area planted, fertilizer rates). Estimating plant available water (PAW) also requires an estimate of a soils ability to store water, its plant available water capacity (PAWC). This paper presents some observations of soil water from a 17-year study comparing water balances (runoff, evaporation and deep drainage) for a set of small contour bay catchments near Roma in southern Queensland. Our aim is to demonstrate some of the challenges associated with field measurement of both PAWC and PAW. This analysis is an extension of a detailed description of the development of SoilWaterApp (Freebairn et al. 2018)

Trends in regional specialisation in Australia

No Abstract

Hours of Work: A Demand Perspective

In Australia, and in other countries, we observe at any one time a wide distribution of hours worked per week. We develop a cost-minimising model to explain employer choices over the number of employees and their hours of work. An important finding is that hours of work and the number of employees are not perfect substitutes. We show that this has important implications for the way economists model labour demand and measure productivity. We show that estimates using total hours worked as the measure of labour input implicitly assumes perfect substitution of persons and hours and results, inter alia, in an overestimation of the rate of labour and multifactor productivity growth in Australia and especially in the period prior to the so called ‘productivity slow-down’.Employment, Hours, Production Function, Total Factor Productivity

Water rights for variable supplies

The relative merits of different systems of property rights to allocate water among different extractive uses are evaluated for the case where variability of supply is important. Three systems of property rights are considered. In the first, variable supply is dealt with through the use of water entitlements defined as shares of the total quantity available. In the second, there are two types of water entitlements, one for water with a high security of supply and the other a lower security right for the residual supply. The third is a system of entitlements specified as state-contingent claims. With zero transaction costs, all systems are efficient. In the realistic situation where transaction costs matter, the system based on state-contingent claims is globally optimal, and the system with high-security and lower security entitlements is preferable to the system with share entitlements.property rights, state-contingent claims, water, Resource /Energy Economics and Policy,

Generic advertising without supply control: implications of funding mechanisms for advertising intensities in competitive industries

Producer profit‐maximising rules for generic commodity advertising programs and associated funding levies are derived. Lump‐sum, per unit and ad valorem levies, and government subsidy funding arrangements are compared and contrasted. The initial single‐product competitive market model is extended to incorporate international trade, government price policies, and multiple commodity interactions.Marketing,