The Australian Treasury published a number of reports after having examined our current tax system. Tucked away in a corner is the amazing statistic that we currently have 125 different taxes that affect Australians.

Research

Below are some web sites that provide basic information around the Debit Tax:

	National Debit Tax concept - by the Debt Tax Council
	National Debit Tax. An American view.
	The Australian Tax Reform Group Inc
	Debit Tax the Only Fair, Equitable Taxation System for Australia and Australians

Below is an explanation of how the Debit Tax works, and how it will affect your bank balance and shopping habits.

How does a Debit Tax work

The mechanism of the debit tax is incredibly simple. It works as follows:

• If you credit your bank account - there is no tax effect.
• If you debit your bank account - there is a tax of 0.7% that has to be paid.

In plain English:

• Any deposit of money into your account (be it your wage or anything else) - is free of tax.
• Any withdrawal/payment from your account (for whatever reason) - will result in a tax of 0.7%.

You will no longer pay any tax on your income - but only on withdrawals/payments from your account. Also, the concept of "deductions" to minimise your tax becomes completely irrelevant.

How does this affect your grocery shopping

Let's have a look at a trolley of groceries that you buy on a monthly basis. At the moment GST is charged on most items in the store - except for "food for human consumption".

Let's make 2 quick assumptions:

• Your monthly grocery shopping bill is $1,200.
• 2/3^rds of the items you buy are food (i.e. $800).

The Debit Tax results in less tax paid than GST.

How the tax is actually paid

The payment of the Debit Tax is very similar to the process that is used to pay GST - except that it will be the bank that makes the payment to the ATO instead of the company selling the good/service. Below is an example that will clarify the situation:

In our example a TV is purchased for $1,000 (the ticket price). When the bank account of the buyer is debited (i.e. the amount is paid), it will be for an amount of $1,007. The bank will then credit JB HiFi with $1,000 and also credit the ATO with $7. This process is executed by the bank - which will obviously receive a service fee from the ATO (i.e. the government).