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The Backpackers Tax - A Grab Too Far?

by Michelle W.

posted in Business

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The news that the Federal government has decided to 'crackdown' on the working holiday type occupation has been greeted with mixed feelings in many areas of the farming community.
Almost everyone welcomes the principle but the approach has caused controversy.
Abuses of the system
There have been widespread concerns over the abuse of the working holiday visa and how some employers have taken advantage of such individuals in order to offer very low pay and extremely poor working conditions.
Given that the majority of such visas are used by people working in the horticultural and agricultural industries, the finger of blame has been pointed, by implication, pretty firmly at those communities.
Although nobody doubts that there have been abuses of the system by unscrupulous employers, what is far less clear is just how large a percentage of such employment in total such cases are. Some people are arguing that it represents a relatively small minority and therefore implementing radical solutions to deal with them that affect everybody, is a question of the proverbial sledgehammer and nut.
The action adopted is controversial.
In future, backpackers and other holiday workers will be taxed from their very first dollar of earnings rather than be entitled to a taxation-free amount up to a specified threshold.
The official government figures indicate that over five years it aims to raise over $500 million through this new taxation approach.
Why people are unhappy
Some cynics are pointing out that adopting a solution that is punitive to all because of what might be a relatively small number of abuses of the system, is a case of massive overkill.
Some are also deeply suspicious of the true motivation here, given that raising taxes and putting more money into the government's coffers at best appears to be a conflict of interest. Some might argue that perhaps it would have been better to apply existing laws preventing exploitation to solve the abuses of the system rather than simply trying to deal with it by raising more money for the government.
Against a backdrop of problematic national finances and a government seemly casting around to try and cut costs and raise income, this particular measure will inevitably cause concerns about whether or not it is a matter of convenience rather than conviction.
As some parties are pointing out, the vast majority of holiday workers and their employers are hardly vastly rich individuals and companies.
So, inevitably, the argument goes that if you take money out of these relationships through taxation, you will be adding cost to the business's operations. That means less money is available for agricultural machinery purchases and investment.
As such, many employers will have little option other than to seek to recover those additional costs through their end prices in the marketplace. To put it another way, they'll need to recover the additional costs of taxation and its potential effect on wages through the end consumer.
At the present time, agriculture and horticulture may need many things but putting at risk their work force and adding cost are not two of them. This measure may yet prove to be extremely controversial and one that generates ill feeling between certain industry sectors and the government.
About the Author: Read more about latest news and updates on agriculture machinery from our blog section.
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