Overtime tax Q&A

Current system is sufficient
No way. Current system is more adept at discouraging whole groups of people from seeking of emplyment than anything else. Older people, with lifetime of experience and will to work are prime example. Retraining of unemployed is hardly better than whitewash - at best, it replaces one group of workers with another "retrained" group. Only jobs it can realistically create are teaching positions at courses - pretty pathetic. What else is being done?

Overtime tax cannot work, because while there is surplus of workers in some trades there is insufficient suply in others.

Significant percentage of unemployed can start immediately if overtime is cut down. Another group can be easily retrained to slightly different trade by companies themselves. If requirements are special, industry will create its own retraining system very fast. And if there are a few jobs, with special expertise - well, we are not proposing to ban overtime... it will just become a bit more costly.

Overtime tax will be impossible to enforce
It may be difficult, especially in small companies. But:
  • to ignore it would involve tax fraud, a rather serious thing
  • many workers hate overtimes but find it difficult to refuse. If tax fraud is involved, it is much easier to say No.
  • large number of people will know - staff, their relatives, neighbours, even competitors. Lots of people with good reason to "dob in" cheats
  • If unemployment is low, employee doesn't have to participate in tax fraud cover-up to keep a job.

  • Overtime tax will force large transfers of people between regions and states

    To some degree it is inevitable. To some degree industries will move where workforce is. To some degree it can be adjusted by adjusting coefficients on regional basis, regions can be set up on basis of economy eg Riverina, Gippsland, Melbourne, That's how it should be, don't you think?

    Overtime tax will create lack of workforce and that would stifle industrial development
    You think so? Lack of workforce - that would be terrific success! But do not worry. OT will be calculated on the basis of a specific formula with coefficients updated regularly in the same way as interest rates and other financial incentives. Correct coefficients will have to be set up by Ministry after negotiation with all involved groups - employers, unions, social security etc. System will not aim for zero unemployment, it will aim for very low but realistic percentage.

    How would you calculate Overtime tax ?
    There are a few possible targets, which can be used:
  • It is desirable for Overtime tax to be equal to remaining unemployment benefits. Unfortunately, this approach is not achievable on its own and further conditions have to be used.
  • Overtime tax should push unemployment to prenegotiated level (e.g. 5%).
  • Regular research should prove, that most (90%) people who wish to participate in workforce can get position within reasonable time (3 months).
  • There are two values which will have to be set-up under Overtime tax regime. One is standard working hours, eg 7,5 per day, the second is rate of Tax itself in % of hourly wages paid to the worker concerned during his normal working hours, minimum being 150% of minimal wages existing within the industry.

    How would Overtime tax be paid?
    Tax will be paid by employer and employee will be notified directly by ATO that tax was paid, with all details (hours, rates used etc).

    Overtime tax will not work in farms or small family businesses
    No. These industries will have to be exempted.

    How would Overtime tax affect general economic and social situation?

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    Last changed: 3.6.98