I've heard the PM say he received advice from Treasury that paying firms for payroll would be infeasible. This seems completely inconceivable to me. There is a very simple policy proposal that the government could introduce immediately that would solve the problem entirely. 1/10
Since 1 July 2019, every Australian business (even those with fewer than 20 employees) has been using "single-touch payroll" to withhold tax from employees. This means every time they do a pay run, all payroll information is transmitted to the ATO. 2/10
ato.gov.au/Business/Singl…
ato.gov.au/Business/Singl…
That means the ATO has all the information on every firm's payroll in real time. They know exactly how many employees every business had and what they were being paid leading into the crisis. It's all there. Someone at the ATO could make you a spreadsheet in an afternoon. 3/10
The approach would be very simple. Every small or medium business in Australia (maybe choose an employee threshold) gets sent an amount (ATO has all the bank details) equal to the greater of firms' payroll over the past 3 months or the Apr-Jun period in 2019 (seasonality). 4/10
Then the government imposes a new tax. In July 2020, the amount of the check you received less your *actual* payroll for April-June 2020 is taxed at a rate of 100%. You could exclude the top wage earner or wages over a certain threshold from payroll calculations if desired. 5/10
All you need is a list of all the businesses, their number of employees, their payroll amounts, and their bank details. The ATO has all of this information. The tax part is straightforward to implement. It seems to me that it could all happen quite quickly. 6/10
In effect this would be a 100% payroll subsidy, similar to in the UK, US, Denmark, Netherlands, etc. It would give firms an immediate income boost, helping them through. And it creates an incentive to retain workers (laying off workers or reducing hours saves you nothing). 7/10
Even if you were worried that this was going to take, say, a month to get up and running, simply publicly commit to the policy today and give firms the ability to access low-interest finance (as the government is already doing) so they could bridge any gap in cash flows. 8/10
The economic crisis stems from a temporary fall in revenues. As @stanveuger and I have said, if you plug that hole in a way that keeps workers whole the economic crisis disappears. This is practical and implementable. Read more in today's Fin op-ed:
afr.com/policy/economy…
9/10
afr.com/policy/economy…
9/10
If there's anything I'm missing, do let me know. Particularly any limitations to implementing this fast. This is no time to chuck things in the too-hard basket. All that's needed is some ingenuity and strong will. Millions of businesses and jobs hang in the balance. 10/10
